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This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees, customers, local community and the suppliers (Freeman 1984 pp. 409–421). Hence, the stakeholders which are described as those who are affected by the organisation performance ,actions and duties and those actions includes employees, clients, local community and investors as well. The theory of stakeholders also suggests that it is the responsibility of firm to make sure no rights of stakeholders are dishonoured and make decisions in the interest of stakeholders which is also the purpose of stakeholder theory to make more profit and balancing it while considering its stakeholders (Freeman 2008 pp. 162-165). In the other words organisation must also operates in a more socially accountable approach by carrying out corporate social responsibility as (CSR) activities. In contrast , the shareholder theory organisations or organisation's decision-makers only have the responsibility to their shareholders by increasing the organisation profits and should only make the decisions to increase as much as possib... ... middle of paper ... ...rcourt Brace Jovanovich. Gallagher, S. A. 2005. Strategic response to Friedman’s critique of business ethics. Journal of Business Strategy, 26(6), 55-60. Shum, P. K., & Yam, S. L. 2011. Ethics and law: Guiding the invisible hand to correct corporate social responsibility externalities. Journal of Business Ethics, 98, 549-571. Sollars, G. C. 2001. An appraisal of shareholder proportional liability. Journal of Business Ethics, 32(4), 329-345. Wagner-Tsukamoto, S. 2007. Moral agency, profits and the firm: Economic revisions to the Friedman theorem. Journal of Business Ethics, 70, 209–220. Wolff, J. 2006. Libertarianism, utility, and economic competition. Virginia Law Review, 92(7), 1605-1623. Friedman, M. 1973. Interview. Playboy Magazine, February. In M. Friedman. Bright promises, dismal performance. An economist's protest. Harcourt Brace Jovanovich. 1983, 9-59.
Verschoor, CMA, Curtis C. "Ethics: Do The Right Thing." Strategic Finance (2006). Retrieved on 18 September 2006 .
Trevino, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. New York: John Wiley.
Trevino, L., & Nelson, K. (2011). Managing business ethics - straight talk about how to
Seawell, Buie 2010, ‘The Content and Practice of Business Ethics’, Good Business, pp. 2-18, viewed 22 October 2013, .
Ciulla, J. B., Martin, C. W., & Solomon, R. C. (2007). Is "The Social Responsibility of Business... to Increase Its Profits"? Social Responsibility and Stakeholder Theory. Honest work: a business ethics reader (pp. 217-253). New York: Oxford University Press.
In recent years, companies are becoming socially responsible and now stakeholders almost expect a company to have CSR policies. Therefore, in twentieth century, corporate social responsibility (CSR) became an important development in public life (Barnett, ND).Corporate social responsibility is defined as “the ways in which an organisation exceeds the minimum obligations to stakeholders specified through regulation and corporate governance” (Johnson, Schools and Whittington, N.D cited in March, 2012). Stakeholders can be defined as “those individuals or groups who depend on the organisation to fulfil their own goals and on whom, in turn, the organisation depends” (Johnson, Schools and Whittington, N.D cited in March, 2012). There are many purposes for this essay, the first purpose is to descried the key principles of corporate social responsibility and explain their importance for stakeholders. Secondly, is to show how far this company follows those principles in order to be accountable to at least three of its stakeholders. In this essay, three stakeholders, environment, customers and employees will be evaluated respectively and the key principles of the stakeholders will be examined.
Norman, W., & MacDonald, C. (2004). Getting to the bottom of the "triple bottom line". Business Ethics Quarterly, 14(2), 243-262. http://dx.doi.org/10.5840/beq200414211
Ostapski, S.A. & Pressley, D.G. (1992). Moral Audit for Diabco Corporation. Journal of Business Ethics, 11(1), 71-80.
Lazonick, W., & O'Sullivan, M. (2000). Maximizing shareholder value: a new ideology for corporate governance. Economy and Society, 29(1), 13-35. Retrieved from http://www.uml.edu/centers/cic/Research/Lazonick_Research/Older_Research/Business_Institutions/maximizing shareholder value.pdf
Treviño, L. K., & Nelson, K. A. (2007). Managing business ethics: Straight talk about how to do it right Fourth ed., Retrieved on July 30, 2010 from www.ecampus.phoenix.edu
Business organizations regularly run into demands from various stakeholders groups when conducting day-to-day business. These demands are generated from employees, customers, suppliers, community groups, governments, and shareholders. Thus, according to Goodpaster, any person or group of people that can shape or can be shaped by attainment of the objectives by an organization is considered a stakeholder. Most business organizations recognize and understand their responsibilities to these groups and endeavor to honor and fulfill them. These responsibilities are often communicated to the public by a statement of principles or beliefs. For many business organizations, corporate social responsibility (CSR) has become an essential and integral part of their business. Thus, this paper discusses the two CSR views: the classical view and the stakeholder view. Furthermore, I believe that the stakeholder view has brought ethical concerns to the forefront of businesses, and an argument shall be made that businesses would improve both socially and economically if CSR, guided by God’s love, was integrated into their strategic planning.
A consequences of focusing on organization or company’s stakeholder is that the shareholder value itself can be enhanced and improved when a wider stakeholder group-such as employees, provider or credit, customers, suppliers government and the local community is taken into account (Mallin, 2011). This theory also related to the organization management and business ethics that uphold moral and values in managing a company as it will covers the benefits to the society and other external parties as a whole rather than just for the internal parties.
Friedman, M. “A Friedman Doctrine – The Social Responsibility of Business is to increase Its Profits”, The New York Times Publications, September 13, 1970
Stakeholders refer to individuals or groups of people that have an interest in a business. Management argues that as long as there is wealth for shareholders, then anything is done in a responsible manner and things should be done to promote the interest of other stakeholders.
Examples of Stakeholder’s could be: managers, directors, employees etc. It is based upon a conceptual framework approach in which it provides moral and ethical values to a business organisation. When in practice, majority of organisations are mainly going to focus on corporate social responsibility. The reason for this is because CSR is seen to have a big impact on the firm as many people are recognising that there is a increasing number of businesses that are both socially and environmentally friendly. On the other hand, if the government doesn’t intervene with companies in terms of both regulation and legislation, this means that firms will only be concentrating on the accounting figures. If companies are primarily focusing on the accounting figures, this indicates that businesses are not taking in the social and environmental impact of the activities within the organisation. In (Liu, Fellows and Tuuli, 2011), it refers to corporate citizenship values in which it considers and identifies the different demands of the stakeholder groups to see where the overall value of the company comes from taking into thought the environment and