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Stakeholders Theory - Case Study Example

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 ideas of the two schools of thought. It makes allowance for moral and social obligations and at the same time retains the director's fiduciary duties and holds them responsible to the shareholders. The conflicting grounds of the normative and instrumental approaches are blurred in this theory. The traditional profit-maximizing objective of the shareholders theory is maintained, while incorporating the corporate social responsibilities as well, therefore it is consistent with moral duty.

c) I find the stakeholders theory rather convincing. The recognition of commercial pursuits and social obligations appeal to me. The stakeholder's theory can justifiably claim to be superior because it upholds the interests of the owners without neglecting social welfare. If a company is profitable but its employees are a harassed lot, or its suppliers are bleeding dry because of the constant pressure of cutting costs, it defeats the purpose of corporate social responsibility. Singular motive of wealth creation can be ruthless if fair distribution and social welfare are neglected. A company owes responsibility towards it's employee's for improving their quality of life as much as it owes to it's customers for rendering quality at reasonable prices.
.Wal-Mart is a case in point. This example demonstrates that commercial quests should not be divorced from social responsibilities.Wal Mart is the largest retailer in the world with a 20% market share in America and a formidable presence in retail in most parts of the world. It has gone overboard in its attempts to cut costs and increase profit margins. Recently exposed practices include locking overnight workers in its stores, allowing Wal-Mart maintaince contractors to use illegal immigrants as janitors. It is also known ...Show more


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…
Author : nicolasmackenzi
Stakeholders Theory
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