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b) Stakeholders theory has been established on the premise of corporate social responsibility and social responsivess, thereby acknowledging the corporation's broader responsibilities towards all those who are involved with it. This is marginally different and encompasses greater responsibility than the traditional 'profit maximizing' rationale contained in the shareholders theory.
Basis of determining business relationships: As per the shareholder's theory, corporate relationships are determined by legal or implied contracts. Thus, it recognizes accountability towards those parties with whom an explicit legal agreement has been entered into. This vastly limits the scope of accountibility.On the other hand the stakeholders' school of thought
Escalation in value of shareholding: the shareholders theory endorses the objective of generating higher returns to the investment of the shareholders. Whereas the stakeholders' take is that, the corporation should strive to yield higher social returns to all the parties involved with it.
Objective of wealth creation: escalation in the value of shareholding will result in greater wealth creation; therefore, it is consistent with the traditional corporate objective of profit maximization. The proponents of the shareholders theory maintain this. However, the other view is that, when the interest of the stakeholders is taken into consideration then there shall be fairer distribution in addition to wealth creation, which will promote the general welfare of society.
The Tinged Shareholders theory contains a reconciliation of the main ide ...
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