Is Maximising Shareholder Wealth a Superior Objective to Stakeholder Interest

Is Maximising Shareholder Wealth a Superior Objective to Stakeholder Interest

  • Submitted By: baahmmm
  • Date Submitted: 10/22/2013 2:41 AM
  • Category: Business
  • Words: 3585
  • Page: 15
  • Views: 66

Is maximising shareholder wealth a superior objective to stakeholder interest
Until now, the discussion between shareholder value perspective and stakeholder perspective has still been argued critically. Some people think that stakeholder interest should be superior over shareholder wealth maximisation , but others argue that shareholder wealth maximisation should be the prime concern. However, it is obvious to realize that shareholder wealth maximisationis the objective of a firm and shareholder wealth maximisation should be superior over satkeholder interest in the concern of the both shareholder interest and stakeholder interest.
Firstly, it is necessary to understand some definitions of shareholder , stakeholder and the theory of shareholder and of stakeholder . Why there has been many debates between two theories ?
Stakeholder are groups and individuals who get benefit from or are harmed by, or whose rights are contravened or regarded by, corporate actions . The list of stakeholder commonly includes customers, employees, suppliers and the community like shareholders and other investors.
As stated by Frederick R.Post , shareholder theory supports that management is allowed to ignore the interest of the the other constituencies while pursuing the interest of the shareholder owners. Moreover, in the perspective of finance, shareholder wealth maximisation is accepted as being obvious logically ( Anant K. Sundaram , Andrew C. Inkpen, 2004) .
The stakeholder theory has initial root in the research involving business , society and ethics. The first argument is supported to this theory by Freeman (1984). The stakeholder theory says that managers should pay attention to all stakeholders in a company , including not only financial claimants, customers, communities, governmental officials but also under the environment, terrorists or even blackmailers ( Michael C. Jensen , 2001). According to Thomas L. Carson, corporation should be operated for all stakeholders,...

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