When Frederick Winslow Taylor practiced his idea of scientific management, owners where the only stakeholders, who ever counted. Till way passed the two world wars, the situation did not change. Managers were obligated to pursue owners’ interests, which were merely making money. Employees had to work hard and were badly compensated, consequences for the environment were not known, and customers bought what they could get. When the markets became maturated, customers started to gain bargaining power and companies had to take their interests and needs into account. Strategic marketing of goods implied advertising and customer orientation. This trend accelerated and globalization, workers’ unions, environmental concern, and supplier relationships are just a few of many crucial external influences, a business has to face in today’s world. As Daft (2001: 11) states “Organizations get into trouble when they fail to pay attention to ethical issues in the blind pursuit of making money.” But how far does this attention really go? Many companies still pursue the ir only goal, namely maximizing shareholder value, and react to the needs of the other stakeholders only when great pressure is exercised. If those enterprises still survive, are stakeholders’ concerns of any importance? Or to phrase it differently: Which approach should today’s companies follow, the stockholder theory or the stakeholder approach? To answer this question, this paper will proceed with following sub-points. Firstly, a definition and explanation of the above mentioned theories will be provided. The stakeholder theory will be further underlined by the description of the normative grounds, which it is based on. The paper will clarify also, whether companies do have a social responsibility. The attributes, which separate stakeholders from non-stakeholders will be outlined next. Continuing, different views on those theories will be disclosed and examples for both approaches described, before the paper will end with some thoughts of mine and a conclusion.
Inhaltsverzeichnis (Table of Contents)
- 1. Introduction
- 2. Stockholder Theory
- 3. Stakeholders and Their Theory
- 4. Normative Grounds on Stakeholder Justification (the Theory of Property)
- 5. What turns a group or an individual into a stakeholder?
- 6. Different Views on Stakeholder and Stockholder Theories.
- 6.1 Literature
- 6.2 The Body Shop and Du Pont: Real Life Examples of the Theories
- 6.3 Some annotations of my own opinion
- 7. Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to analyze and compare the stockholder theory and the stakeholder approach in business management. It explores the historical context of shareholder primacy, examines the theoretical underpinnings of stakeholder theory, and investigates the factors that determine stakeholder status. The paper also considers different perspectives on these theories and provides real-world examples to illustrate their application.
- The evolution of business management theories from shareholder primacy to stakeholder considerations.
- A comparison of stockholder theory and stakeholder theory, highlighting their strengths and weaknesses.
- The identification and analysis of key stakeholder groups and their interests.
- The role of social responsibility in business decision-making.
- Real-world examples illustrating the practical application of both theories.
Zusammenfassung der Kapitel (Chapter Summaries)
1. Introduction: This introductory chapter sets the stage for the paper by outlining the historical shift in business management from a sole focus on shareholder value maximization to a more inclusive approach that considers the interests of various stakeholders. It introduces the central question: should companies prioritize stockholder theory or the stakeholder approach? The chapter also provides a roadmap for the subsequent sections, outlining the key topics that will be addressed.
2. Stockholder Theory: This chapter delves into the core tenets of stockholder theory, which centers on the idea that managers are agents of shareholders and their primary responsibility is to maximize shareholder value. The chapter discusses the potential conflicts of interest between managers and shareholders (agency costs), and it also analyzes the limitations of this approach, such as neglecting external factors and potentially damaging the company's social reputation. Despite these shortcomings, the chapter also acknowledges the potential benefits of a well-managed stockholder approach, including financial strength and competitiveness, particularly in simpler business environments.
3. Stakeholders and Their Theory: This chapter provides a detailed explanation of stakeholder theory, presenting various definitions and highlighting the wide range of stakeholders involved in a typical organization. It discusses the key stakeholder groups – owners, employees, customers, creditors, community, suppliers, and government – elaborating on their respective interests and their relationship to the firm. The chapter emphasizes that the definition of "stakeholder" can be broad, encompassing those who can affect or be affected by the organization's objectives, as well as those placed at risk by a firm's activities. It also briefly touches on the differences in stakeholder importance and power across different countries and contexts.
Schlüsselwörter (Keywords)
Stockholder theory, stakeholder theory, corporate social responsibility, shareholder value maximization, stakeholder management, agency costs, business ethics, corporate governance, stakeholder interests, social responsibility, The Body Shop, Du Pont.
Frequently Asked Questions: A Comparative Analysis of Stockholder and Stakeholder Theories
What is the main focus of this paper?
This paper analyzes and compares stockholder theory and stakeholder theory in business management. It explores their historical context, theoretical underpinnings, and practical applications, considering the strengths and weaknesses of each approach.
What are the key themes explored in the paper?
The paper examines the evolution of business management theories from shareholder primacy to stakeholder considerations; compares stockholder and stakeholder theories; identifies and analyzes key stakeholder groups and their interests; explores the role of social responsibility in business decision-making; and provides real-world examples illustrating the practical application of both theories.
What is stockholder theory?
Stockholder theory centers on the idea that managers are agents of shareholders and their primary responsibility is to maximize shareholder value. It acknowledges potential conflicts of interest (agency costs) and limitations, such as neglecting external factors and potential damage to the company's social reputation. However, it also recognizes the potential benefits, including financial strength and competitiveness, especially in simpler business environments.
What is stakeholder theory?
Stakeholder theory emphasizes a broader approach, considering the interests of various stakeholders—owners, employees, customers, creditors, community, suppliers, and government—who can affect or be affected by the organization's objectives. It recognizes the varying importance and power of stakeholders across different contexts.
What are the key differences between stockholder and stakeholder theories?
Stockholder theory prioritizes shareholder value maximization, while stakeholder theory advocates for considering the interests of all stakeholders affected by the organization. Stockholder theory can be criticized for neglecting external factors and social responsibility, while stakeholder theory can be challenging to implement due to the diverse and potentially conflicting interests of stakeholders.
What real-world examples are used to illustrate these theories?
The paper uses The Body Shop and Du Pont as real-life examples to illustrate the application of stockholder and stakeholder theories in practice.
What are the chapter summaries?
The paper includes chapter summaries covering an introduction outlining the shift from shareholder value maximization to stakeholder considerations; a detailed explanation of stockholder theory; an in-depth analysis of stakeholder theory; and a conclusion.
What are the objectives of the paper?
The paper aims to provide a comprehensive comparison of stockholder and stakeholder theories, exploring their theoretical foundations and practical implications. It seeks to highlight the strengths and weaknesses of each approach and illustrate their applications with real-world examples.
What keywords are associated with this paper?
Keywords include stockholder theory, stakeholder theory, corporate social responsibility, shareholder value maximization, stakeholder management, agency costs, business ethics, corporate governance, stakeholder interests, social responsibility, The Body Shop, and Du Pont.
- Quote paper
- Maria Kimme (Author), 2001, The Battle Between Stakeholders and Stockholders, Munich, GRIN Verlag, https://www.grin.com/document/34943
