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Stockholder management versus stakeholder management Essay Example

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Stockholder management versus stakeholder management

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Company pays its dues to the society by paying taxes and whatever societal ills and deficiencies there are; it is the responsibility of a government.In Edward Freeman (1999) criticizes Friedman and his school’s arguments that a corporation must only take into consideration the profit of the stockholders because they own the company. His most important point is that the stockholder is not the only party who has a stake in the company and, hence, placing these other parties’ interest subordinate to those of the stockholders’ is unethical and a bad management practice. This was called the stakeholder concept where a company stakeholder is not only confined to those who have financial stakes on the organization but cover those groups and individuals who “benefit from or harmed by; and whose rights are violated or respected by corporate actions.Although Freeman acknowledges that the classic view on management - the stockholder management - is sound and that it has shaped the US corporations in previous years, it pointed to the changing business landscape that calls for a transformation on the traditional perspective. According to the author, managerial capitalism can be revitalized “by replacing the notion that managers have a duty to stockholders with the concept that managers bear a fiduciary relationship to stakeholders.” (Freeman p.Basically, Freeman is in agreement with Friedman’s views in the context of his treatment of the stockholders as a stakeholder in the company. For instance, he did not assail the basic idea of managerial capitalism where the management vigorously pursues the interest of stockholders, because he also believes that the management must advance the interest of the stakeholders. Claiming that his views are just a modification of the classical management practice, Freeman supports Friedman’s basic assumption that the management must look after the health of the corporation which is the primary interest of its owners.Moreover, in the words of Freeman, himself, he outlined similarities between his stakeholder concept and the stockholder management. According to him, they both either explicitly or implicitly recognize the preeminent moral value of individual consent. For instance, in the stockholder theory, the ethical obligation is derived from the voluntary agreement that a manager makes on accepting his position to use the stockholder’s resources. For the

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References

Freeman, E. (1999). A Stakeholder Theory of the Modern Corporation. In Tom L. Beauchamp and Norman E. Bowie (Eds.) Ethical Theory in Business (56-64). Prentice Hall College Div

Friedman, M. (1999). The Social Responsibility of Business is to Increase its Profits. In Tom L. Beauchamp and Norman E. Bowie (Eds.) Ethical Theory in Business (50-55). Prentice Hall College Div

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preview essay on Stockholder management versus stakeholder management
  • Pages: 6 (1500 words)
  • Document Type: Essay
  • Subject: Unsorted
  • Level: Ph.D.
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