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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. On the other hand, Shareholder theory thinks that not only the market will be sound, permanent, and viable, but also the ethical issues and concerns are resolved just because they attending to the interests of shareholders. When making choices between Stakeholders and Shareholders are like right-versus-right.
However, stakeholder management is considered to be a better management strategy than the one only focused on shareholders. Because of these four reasons: it fixes the demand of modern society; it is in line with the new law; it is ethical; it is more effective.
Stakeholder theory considers different groups of people, shareholders, employees, customers, etc. In the case McDonald’s vs. PETA, McDonald didn’t satisfy the needs of environment and company’s animal welfare standards, it leads McDonald ran into court with PETA, which can conclude that McDonald had failed to consider PETA which is the interest group as a stakeholder.
In the stakeholder theory, decision maker will consider cases from different groups of people, it just like looking through a prism, we can turn the prism different ways and arrive at different answers. Nevertheless, it may impossible to make all of the stakeholders happy, so that we have to determine which of those stakes are more important or relevant, which we assess them in terms of their legitimacy, power and urgency.
In conclusion, the shareholder theory predicates that promote capital managers to shareholders, the company’s funds should be spent only in the manner authorized by the shareholder. Moreover, stakeholder theory is that the responsibility of the managers of the company’s shareholders and contributions, whether voluntary or involuntarily, is the ability to create wealth and activities of individuals and groups, and therefore its potential beneficiaries and risk takers. Furthermore, stakeholder management can also be a useful tool for ongoing management by the moral company. From Charles Handy’s words, “making profit was fine, but that it should be a means to a nobler end.” For a long term business, we should not let our ethical standards of business have to decline.
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