Value Maximization And Stakeholder Theory Compatible Or Not Pdf

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Social Responsibility and Sustainability pp Cite as.

What Is Stakeholder Theory and How Does It Impact an Organization?

Jensen in the introduction to his recent working paper: "What are we trying to accomplish? Or, put even more simply: When all is said and done, how do we measure better versus worse? Even more simply, How do we keep score? Or, even more simply, How do we want the firms in our economy to measure better versus worse? It's tempting to consider value simply as a matter of maximizing the short-term financial performance of the organization, says Jensen. Contending with that value maximization approach is "stakeholder theory" which says that managers should make decisions so as to take into account all of the interests of all stakeholders in a firm.

Topics 1 and 2 consider these questions by looking at the firm from a number of alternate perspectives, namely:. In topics 1 and 2 , we look at each of these four views, consider the implications for business conduct, and look at some practical situations where the issues we cover can be seen in a real-world setting. Topic 1 covers the shareholder and stakeholder approaches. Topic 2 covers the triple-bottom-line and corporate social responsibility views. For this topic, we look at two ways in which the nature of the firm is conceived: the shareholder approach , and the stakeholder approach. The s hareholder approach sees the firm as existing principally or exclusively for the benefit of its shareholders and the role of the Board and managers is to maximise shareholder value. This view has a strong grounding in the notion of private property rights with shareholders seen as the owners of a firm and in this sense, having rights attached to that ownership that see shareholders as the party for whose benefit the firm exists.

Value Maximisation, Stakeholder Theory, and the Corporate Objective Function

This paper aims to present a vital strand that is part and parcel of an informed discussion towards the adoption of labour-friendly practices LFP. The study was conducted on top and middle-level management personnel in several companies across the United Arab Emirates UAE. A total of 1, questionnaires was distributed personally and via email of which usable responses were analysed using confirmatory factor analysis and structural equation modelling SEM. The results reinforce the premise that LFP positively and significantly influences value maximization. This paper affirmed that what is good for the employees or other stakeholders is also good for shareholders, but within the constraints of an ideal context, where the shareholders subscribe to strict ethical principles and the stakeholders act with their moral agency intact. Thus, the discussion of LFP comprises not just about what is satisfying for the employees but also what is conducive for optimal value creation.

Labour-friendly practices and value maximization: a SEM approach

Stakeholder theory was first described by Dr. We will also look at how individual projects may have an impact on a variety of types of stakeholders. That view is in opposition to the long-held shareholder theory proposed by economist Milton Friedman that in capitalism, the only stakeholders a company should care about are its shareholders - and thus, its bottom line.

Frank T. A shareholder theory of firm and a stakeholder theory of firm may differ in their respective evaluation method of firm performance. Both theories however recognize the importance of value creation as the economic role of firms as institutions. The New Institutional Economics NIE emphasizes incentives alignment, while also viewing stakeholder engagements as methods to expand the boundaries of firms.

Economics Research International

In this article, we review the major uses and adaptations of stakeholder theory across a broad array of disciplines such as business ethics, corporate strategy, finance, accounting, management, and marketing. We also evaluate and suggest future directions in which research on stakeholder theory can continue to provide useful insights into the practice of sustainable and ethical value creation. Learn About the New eReader. Downloaded times in the past 12 months. Published online 31 October Published in print 1 January

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Value Maximization and Stakeholder Theory

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2 Response
  1. Veronique G.

    There are two main views on what should constitute the principal goal of the firm. Most economists tend to endorse value maximization—that is, maximization of the value of the firm's debt plus equity—or a version of value maximization known as “value‐based management” (VBM) that aims to maximize shareholder value.

  2. Scarlett T.

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