The Battle Between Stakeholders and Stockholders

Intermediate Diploma Thesis from the year 2001 in the subject Business economics - Investment and Finance, grade: 1.3, Maastricht University, course: 2nd year paper, 22 entries in the bibliography, language: English, abstract: When Frederick Winslow Taylor practiced his idea of scientific management, owners where the only stakeholders, who ever counted. Till way passed the two world wars, the situation did not change. Managers were obligated to pursue owners' interests, which were merely making money. Employees had to work hard and were badly compensated, consequences for the environment were not known, and customers bought what they could get. When the markets became maturated, customers started to gain bargaining power and companies had to take their interests and needs into account. Strategic marketing of goods implied advertising and customer orientation. This trend accelerated and globalization, workers' unions, environmental concern, and supplier relationships are just a few of many crucial external influences, a business has to face in today's world. As Daft (2001: 11) states 'Organizations get into trouble when they fail to pay attention to ethical issues in the blind pursuit of making money.' But how far does this attention really go? Many companies still pursue the ir only goal, namely maximizing shareholder value, and react to the needs of the other stakeholders only when great pressure is exercised. If those enterprises still survive, are stakeholders' concerns of any importance? Or to phrase it differently: Which approach should today's companies follow, the stockholder theory or the stakeholder approach? To answer this question, this paper will proceed with following sub-points. Firstly, a definition and explanation of the above mentioned theories will be provided. The stakeholder theory will be further underlined by the description of the normative grounds, which it is based on. The paper will clarify also, whether companies do have a social responsibility. The attributes, which separate stakeholders from non-stakeholders will be outlined next. Continuing, different views on those theories will be disclosed and examples for both approaches described, before the paper will end with some thoughts of mine and a conclusion.