Pros And Cons Of Shareholder Primacy

Both the stakeholder model and shareholder primacy provide views into the important question as to whose interests businesses should act in. When the interests of shareholders and that of a different stakeholder group are in conflict it is imperative for the business to know where they stand surrounding the issue of which group’s interests they should support. This essay presents the reasons behind taking a position in favour of the stakeholder model and argues that acting in the interests of the group which has the most merit surrounding the conflict, as this model suggests, is most appropriate. This is done by critically evaluating the arguments for shareholder primacy that state that by prioritising shareholders’ interests will ultimately benefit everyone and the argument that claims that shareholders are the owners of the business and their interests should thus be favoured. It also presents and critiques the argument in favour of the stakeholder model that claims that contributions are made by all stakeholders and therefore businesses should act in everyone’s interest. It demonstrates the flaws and strengths surrounding each argument and ultimately establishes the more favourable model and through this answers the questions as to in whose interest to act when faced with a conflict of interest.

The first argument in favour of Shareholder Primacy claims that businesses that seek profit above all else, businesses that prioritise the interests of its shareholders, benefit