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6.1 Shareholder vs Stakeholder Theory - Coggle Diagram
6.1
Shareholder vs Stakeholder Theory
Shareholder and Stakeholders Theory
Milton Friedman Shareholder View
maximise profits within the law.
Friedman believes shareholders generally want to make as much profit as possible whilst observing the law; increasing profits increases share prices/dividends and makes the shareholders richer. Therefore, he argues that the company directors have a responsibility to maximise profits within the law.
Friedman considers himself to be making a moral argument and believes it is immoral for company directors to donate to charity or spend more on pollution than is required by law. In his view, it is an illegitimate use of shareholder money and a betrayal of their trust.
A proponent of Shareholders Theory
Shareholders (Stockholders) are the owners of an enterprise
Edward Freeman Criticism
Freeman argues that it is wrong to focus solely on the rights and interests of shareholders and that a company must consider the rights and interests of all its stakeholders.
An advocate of the Stakeholders Theory
Stakeholders might be:
Suppliers
Government
Employees
Local community
Customers
Shareholders
a company has moral responsibilities to all its stakeholders and not just its shareholders.
Freeman also argues that the primary responsibility of the company director is to create as much value as possible for all these stakeholders.
ISO 26000
This standard provides guidelines for companies wishing to be socially responsible and the guidelines cover the following key areas:
Human rights
Governance
Employment and labour rights
The environment
Economic aspects
Consumer rights
Corporate citizenship
Science and technology
ISO 26000 consists of guidelines rather than requirements’