Distinguish Between Shareholder and Stakeholder in a Business Context. Comment on the Influence of Shareholders on the Management of a Company and Its Allocation of Rewards.

Firstly Stakeholder is an individual or a group who has an interest in the success of a business I delivering high results and maintaining the viability of the business’s products and services.There are internal and external

In cooperate governance, stakeholders are the people who have got some interests in the business and these include shareholders, creditors, suppliers, employees, customers, communities and environment. Stakeholder debate has been there since business has been around and the question in this debate is to determine ‘for whose benefit does the company exists?’ Different theories such as the shareholder value theory, the stakeholder theory and the enlightened shareholder value theory have all been developed to address this question. These approaches (theories) have got some strengths and some weakness which are going to be conversed below.

a. Managers have often viewed shareholders as one of the “Stakeholders” of the firm, others being employees, customers, suppliers, banks, and so forth.

Stakeholders can affect or be affected by the organization 's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies),

The interests of shareholders were always the primary objective of the corporations, and the management primary duty was to maximise their financial profit. According to Milton Friedman (1970), a corporate executive’s only social responsibility is to create wealth for the shareholder and to conduct the business in accordance with their desire. This perspective has been strongly challenged and modified due to the negative impact of the shareholder theory. The global scandals and crises which have been caused by the extreme interpretation of the shareholder theory have led to the rising of the stakeholder theory where the interests of the employees, the customers, and the local communities were taken into consideration and not been ignored as previously.

• Identify some of the more important rights that come with stock ownership and define the following terms: proxy, proxy fight, takeover, and preemptive right.

There is no doubt that the shareholder and stakeholder theories are both dominant theories of corporate governance. Having already discussed the pros and cons of each theory, it is now important to analyse the debate arising to be able to determine which of the two will enable better corporate governance. First of all, it is important to highlight that this debate has emerged over the last decade and has always been a concern for most advocates of good corporate governance.

During the late twentieth century, different ideas became popular about how best to manage a firm. The first theory which emerged was Stockholder theory, which encouraged managers to act as agents for the company’s legal owners: it’s stockholders. This theory held that it was the function of a firm to act in the best interests of its owners by focusing on maximizing profits. Ensuring that the stockholders’ investments paid off was the fiduciary duty of the managers of this firm. However, some managers did not feel this style of management was best for their firms. There were other kinds of value that a firm could want to maximize, not just profits. A new theory emerged, called Stakeholder Theory, which completely altered how managers did business. Stakeholders were those who affect or are affected by a firm, and they fall into two categories: market stakeholders, who exchange money like employees or customers and nonmarket, like the environment. It can be challenging for managers to decide which stakeholders to prioritize, but a firm which uses Stakeholder Theory can effectively earn profits as well as generate a positive value to the community and environment in which it resides.

This principle recognizes that shareholders are property owners, and as owners of a legally recognized and divided share of a corporation, they have the right to hold or convey their interest in the corporation. For example: Rules that regulate transactions by corporate insiders and impose trust-related obligations on directors, managers and controlling shareholders and mechanisms to enforce those rules (For example, the ability of shareholders to bring claim on behalf of the corporation in certain circumstances). • Corporate Transparency. The corporate governance framework should ensure that timely and accurate disclosure is made on all

The last criterion for taking responsibility is for corporations to operate in the best interests of their stakeholders. The traditional definition for a stakeholder would be the shareholders of the firm to whom corporations maintain they owe a fiduciary duty to, or in other words, to make a profit for. However, the stakeholders of a firm consist of many internal and external groups, all of whom are necessary to the firm and ensure that the firm is able to make money. As mentioned by Edward Freeman in his article, A Stakeholder Theory of the Modern Corporation, “For whose benefit and at whose expense should the firm be managed?” (Freeman, 1994) Traditionally the questions would be answered as the firm should be managed by its shareholders. However, with a changing of times stakeholders encompass numerous different groups ranging from beginning of the supply chain (suppliers) to that of the final consumers and the community within which the firm operates. In addition, the firm has a larger fiduciary relationship to its employees. The majority of stock holders diversify their portfolios and even more of them do not

Chapter 1. This chapter discusses how shareholders have become more dominant than the stakeholders in the corporate and industrial businesses. Managers are now focusing on appealing shareholders because study shows that it creates better business, especially when companies are going through an unattractive phase regarding shareholders. Chapter 2. Managing value is discussed throughout the chapter and how it is important in developing business strategies. Three steps which are vital in managing value are recognizing restricting opportunities, acting on these opportunities, and establishing a value creation philosophy in the corporation. Managers must develop strategic plans in order to create value for the business. Chapter 3. Fundamental

This paper examines "Rights and Protection of the Interest of the Minority Shareholders" I will discuss the recent development, issues and legal practices in the subject in Bangladesh perspective as well as international. Rights of Minority Shareholder and protection of their rights is now talked topics as new problems are emerging regarding the issues. A few initiatives have taken by national level and problems are gradually increasing, therefore some recommendation has been prescribed in the paper.

Thus, from the point of view of the stakeholder theory, concern should go beyond the traditional management–shareholder relationship to include all other stakeholders such as mentioned above. The stakeholder theory has undergone some refinements in the work of Jensen (2001), who presents what he terms the “enlightened stakeholder theory”. For him, the traditional stakeholder theory encourages managers to be servants of many masters, with no clear guidance whenever trade-offs (or indeed, conflicts) occur, as they often do. He argues that the absence of any criterion for choice in cases of trade-offs (or conflicts) tends to give managers some discretionary powers to serve the master of their own choice. As we will see in a subsequent section, Jensen proposes a single criterion – addition to the long-term value of the firm – for managers to pursue so that the interests of all key stakeholders can be served. This is based on the idea that changes in the long-term value of the firm would be difficult to materialize if the interest of a key stakeholder were not protected.

All that said, overall, including stakeholder governance as one of the pillars of good corporate governance framework can result in a more comprehensive understanding of corporate risk and opportunity, drive learning, innovation and performance while contributing to a strong reputation and prosperity over time. In fact, it is said that stakeholder governance has the potential to turn ‘distrustful opponents into critical friends ’.

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