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    Stakeholder vs. Shareholder

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    Safal Verma
    The document discusses the stakeholder theory and shareholder theory as two approaches for achieving a firm's objective of value maximization. The stakeholder theory argues that managers should consider the interests of all stakeholders, such as customers and suppliers. In contrast, the shareholder theory views profit maximization as the sole objective. However, shareholder theory has been criticized for failing to provide a clear objective function. The enlightened stakeholder theory proposes that long-term value maximization of the firm can be achieved by balancing the interests of all stakeholders.

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    Stakeholder vs. Shareholder

    Uploaded by

    Safal Verma
    169 views1 page
    The document discusses the stakeholder theory and shareholder theory as two approaches for achieving a firm's objective of value maximization. The stakeholder theory argues that managers should consider the interests of all stakeholders, such as customers and suppliers. In contrast, the shareholder theory views profit maximization as the sole objective. However, shareholder theory has been criticized for failing to provide a clear objective function. The enlightened stakeholder theory proposes that long-term value maximization of the firm can be achieved by balancing the interests of all stakeholders.

    Original Description:

    Describes About difference between Shareholder and Stake Holder.

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    The document discusses the stakeholder theory and shareholder theory as two approaches for achieving a firm's objective of value maximization. The stakeholder theory argues that managers should consider the interests of all stakeholders, such as customers and suppliers. In contrast, the shareholder theory views profit maximization as the sole objective. However, shareholder theory has been criticized for failing to provide a clear objective function. The enlightened stakeholder theory proposes that long-term value maximization of the firm can be achieved by balancing the interests of all stakeholders.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    169 views1 page

    Stakeholder vs. Shareholder

    Uploaded by

    Safal Verma
    The document discusses the stakeholder theory and shareholder theory as two approaches for achieving a firm's objective of value maximization. The stakeholder theory argues that managers should consider the interests of all stakeholders, such as customers and suppliers. In contrast, the shareholder theory views profit maximization as the sole objective. However, shareholder theory has been criticized for failing to provide a clear objective function. The enlightened stakeholder theory proposes that long-term value maximization of the firm can be achieved by balancing the interests of all stakeholders.

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    © All Rights Reserved
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    STAKEHOLDER vs.

    SHAREHOLDER

    The central objective of the firm and its managers is making optimal tradeoffs and that of value
    maximization, i.e. maximizing total market value of the firm. There are two theories proposed to achieve the
    firms objective which are the Stakeholder Theory and Shareholder Theory.
    Stakeholder Theory assumes that values are necessarily and explicitly a part of doing business and the
    manager needs to take into account the interest of all the stakeholders while taking decisions on the other
    hand the view that businesses do not have any moral obligations or social responsibilities at all, other than to
    maximize their own profit is the objective of Shareholder theory.
    Shareholder theory has been criticized by many, stating that its not the right way towards value
    maximization as it fails to provide an objective function.
    Separation thesis is rejected and argued over the fact that profits are a critical part of business, but concern
    for profits is the result rather than the driver in the process of value creation. Its also known that
    shareholders are a part of shareholders. In shareholders view, the managers have more resources and greater
    deal of challenge, as they offer not only financial rewards, but language and action to show that they value
    relationship. The theory also says that the process of creating value for shareholders along with stakeholders
    by not only relying on shareholder but also customers and suppliers. Some examples of successful
    implications of stakeholder theory are J&J, eBay; Google etc. provide compelling examples of how
    managers understand the core insights of stakeholder theory and use them to create outstanding business.
    Enlightened value maximization theory given by Jenson which was similar to enlightened stakeholder
    theory which uses the structure of stakeholder theory but accepts maximization of long-run value of the firm
    as the criterion for making the requisite tradeoffs among its stakeholders. Enlightened stakeholder theory,
    main objective is long-term value maximization of the firm. Hence it solves the multiple objective problems
    arising from the traditional stakeholder theory. Hence we can conclude that long term market value
    maximization of a firm is not possible if we ignore any important constituent and the vision of enlightened
    value maximization is not the vision or purpose but the scorecard of the firm.

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