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Write 6 page essay on the topic Stockholder management versus stakeholder management.Here, stockholders shell out the capital that the managers could use in order to realize specific goals. Friedman s
Write 6 page essay on the topic Stockholder management versus stakeholder management.
Here, stockholders shell out the capital that the managers could use in order to realize specific goals. Friedman supports his arguments by certain important points. First, is that this classical view of stockholder management is in consonance with the free-enterprise system where a corporate executive is an employee of the stockholders and has responsibility “to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society.” (Friedman, p. 52) He stressed that a businessman who supports “social responsibility” in business is a mere rhetoric since it equates to an unadulterated form of socialism and against the concept of free-enterprise. Another salient point that Friedman elaborated on is that the managers of a corporation are just agents of the owners. “They are empowered to manage the money advanced by the stockholders, but are bound by their agency relationship to do so exclusively for the purposes delineated by their stockholder principals.” (p. 66)
Friedman’s essay is a treatise that discussed why it would be wrong for a particular managerial team to undertake social responsibility activities for the company since it is against the interest of the stockholders. The author underscored the fact that the company pays its dues to the society by paying taxes and whatever societal ills and deficiencies there are. it is the responsibility of a government.
In A Stakeholder Theory of the Modern Corporation, Edward Freeman (1999) criticizes Friedman and his school’s arguments that a corporation must only take into consideration the profit of the stockholders because they own the company. His most important point is that the stockholder is not the only party who has a stake in the company and, hence, placing these other parties’ interest subordinate to
