Stockholder vs. Stakeholder
1 Introduction
Decisions in companies are often made by the management and influence not only the profit of a company, but also they influence the employees, many people outside of the company such as the supplier as well as the environment in the surrounding area of a company. Against this background, the question how a manager should act with regards to the owner of a company and the employees of a company is quite important. A possible answer to this question can be discussed in the stockholder vs. stakeholder debate. Although there are reasonable arguments for both – the stockholder and the stakeholder theory - I will use this paper to show that the stakeholder approach is superior and should be used for business in companies.
To reach my conclusion, I structured the paper in the following way: The second Chapter should explain the basic idea and the basic concept of the stockholder and the stakeholder theory. Based on this explanation the following third chapter will discuss arguments in favor of the Stockholder Theory. In the second section of the third chapter I try to invalidate these arguments and I will present arguments supporting the Stakeholder Theory. The final chapter four contains the conclusion of my paper.
2 Explanation of the Basic Concepts
2.1 Stockholder Theory
The stockholder theory, which is also known as “Friedman Doctrine” and is a model most often associated with the Noble Prize winning economic theorist Milton Friedman, defines a manager as an agent for the stockholders (Bowie and Werhane, 2005, p 21). A “stockholder” is a person, who has a monetary investment in a business or company. Many business schools follow the orthodox view that according to the stockholder theory, the unique purpose of the manager is to increase the profits of the company. Consequently, a manager should try to maximize the wealth of the shareholders. Milton Friedman summarizes the theory by saying that
“there is one and only one social
Decisions in companies are often made by the management and influence not only the profit of a company, but also they influence the employees, many people outside of the company such as the supplier as well as the environment in the surrounding area of a company. Against this background, the question how a manager should act with regards to the owner of a company and the employees of a company is quite important. A possible answer to this question can be discussed in the stockholder vs. stakeholder debate. Although there are reasonable arguments for both – the stockholder and the stakeholder theory - I will use this paper to show that the stakeholder approach is superior and should be used for business in companies.
To reach my conclusion, I structured the paper in the following way: The second Chapter should explain the basic idea and the basic concept of the stockholder and the stakeholder theory. Based on this explanation the following third chapter will discuss arguments in favor of the Stockholder Theory. In the second section of the third chapter I try to invalidate these arguments and I will present arguments supporting the Stakeholder Theory. The final chapter four contains the conclusion of my paper.
2 Explanation of the Basic Concepts
2.1 Stockholder Theory
The stockholder theory, which is also known as “Friedman Doctrine” and is a model most often associated with the Noble Prize winning economic theorist Milton Friedman, defines a manager as an agent for the stockholders (Bowie and Werhane, 2005, p 21). A “stockholder” is a person, who has a monetary investment in a business or company. Many business schools follow the orthodox view that according to the stockholder theory, the unique purpose of the manager is to increase the profits of the company. Consequently, a manager should try to maximize the wealth of the shareholders. Milton Friedman summarizes the theory by saying that
“there is one and only one social
Bibliography: Beauchamp, T.L., Bowie, N.E. & Arnold, D.G. 2008. Ethical Theory and Business, Pearson/Prentice Hall. Bowie, N.E. & Werhane, P.H. 2005. Management Ethics, John Wiley & Sons. Kenneth, Arrow J. 1963. Uncertainty and the Welfare Economies of Medical Care, The American Econmic Review, Volume 53, Number 5. Nozick, Robert. 1974. Anarchy, State and Utopia, Basic Books. Sandel, Michael J. 2009 Justice – What`s the right thing to do?, Farrar, Straus and Giroux