The Business World Of 21st Century

1488 Words6 Pages
As Waldkirch (2008) stated the political problem which underlies the discussion of the principles for managing corporations has existed for only about 150 years. Chandler (1977) emphasised that during this period of time, society has witnessed the appearance and the spreading of organisations. In traditional view, the shareholders were the main stakeholders in the company. This traditional view has started to be challenged in the late 20th century. Freeman (2010) stated that ‘the business world of 21st century has undergone dramatic change’. In corporate governance theory, there are mainly two kinds of arguments. The first one is that a firm should focus on the shareholder wealth maximisation, which is called theory of shareholder. This one might be considered as the traditional approach. The other one is that a company should focus on not only the interest of shareholders, but also employees, suppliers, government and local communities, which is called theory of stakeholder. The origins of the ideas shaping shareholder theory might be more than 200 years old, with roots in Adam Smith’s The Wealth of Nations (1776). In general, shareholder theory encompasses the idea that the main purpose of business lies in generating profits and increasing shareholder wealth. According to the theory of shareholder, the main goal might be stated as the ‘the primary responsibility of a company is to maximise the wealth of its shareholders’ (Friedman, 1962). As Zhang (2011) stated that the
Open Document