The general public is one such external stakeholder now considered under CSR governance. Stakes in a company are also characterized by longevity, that is, that one cannot easily and quickly decide to remove their stake in a company.
It is to this version of the normative stakeholder theory that the following description refers. That investor can then invest their money in any other company, then becoming a shareholder in a perhaps completely unrelated and separate enterprise.
Bowie Englewood Cliffs, New Jersey: Prentice-Hall,97— Note that I am considering only the normative version of the theory, which states how managers ought to behave. Although each theory has its roots in business ethics, the foundation of the two theories differs greatly.
Shareholders are always stakeholders in a corporation, but stakeholders are not always shareholders. According to the theory, which was first introduced by Milton Friedman in the s, a corporation is primarily responsible to its stockholders due to the cyclical nature of business hierarchy.
Misconceptions surround the stakeholder theory, as well. Corporate Social Responsibility The field of corporate social responsibility CSR has encouraged companies to take the interests of all stakeholders into consideration during their decision-making processes, instead of making choices based solely upon the interests of shareholders.
Free Press,30— The shareholder can then sell of their stock in that company for a profit, and move on to their next investment. What is the difference between a shareholder and a stakeholder? Stakeholders, however, are often not shareholders at all.
Therefore, CSR creates a climate for corporations to make choices that protect social welfare, often using methods that reach far beyond legal and regulatory requirements.
Contact him at jeff. Shareholders, then, are investors in a company, and can be anyone from active mega-investors who hope to influence the actions of the company they are investing in to passive investors who are throwing a few weeks salary into a company in preparation for retirement.
Oxford University Press,3— Perhaps the most important aspect of shareholders is that their investment in the company is liquid, and often temporary.
University of Chicago Press, According to this theory, a company must consider the interests of all stakeholders when making business decisions. Cite this Article A tool to create a citation to reference this article Cite this Article.
When a company carries out operations that could increase environmental pollution or take away a green space within a community, for example, the public at large is affected. Harvard Business School Press,7—8.
Some authors — for example, see J. There are also descriptive versions of the stakeholder theory, which describe actual behavior of managers, and instrumental versions, which predict outcomes for example, higher profits if managers behave a certain way. Additionally, many understand the stockholder theory to prohibit charitable giving altogether.Stockholder vs Stakeholder Essay then have declared it was preparing the insurance company to file for regular bankruptcy.
This would put creditors on notice: they faced a long and expensive legal tangle in which they were unlikely to get everything they wanted.
Stakeholder versus Shareholder Stakeholder theory thinks that the enterprise is a series of contracts with various stakeholders to form various stakeholder consultations, the outcome of a transaction, whether investors, managers, employees, customers, suppliers, or government departments, community, etc., they are enterprise-specific investments and bear the risks.
A shareholder owns part of a public company through shares of stock (hence the name), while a stakeholder has an interest in the performance of a company for reasons other than stock performance. A stockholder will always be a stakeholder because if one owns stock in company there will always be an interest in making sure the company does well to increase stock value.
Specifically, an employee may own stock in his company and be a stakeholder by employment. Read this essay on Stakeholder vs Stockholder Theory.
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Published: 23rd March, Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. Spence () writes that the Stakeholder Theory has emerged as an alternative for the Shareholder.Download