ipl-logo

Pros And Cons Of The Shareholder And Stakeholder Debate

1371 Words6 Pages
5. CRITICAL ANALYSIS AND RECOMMENDATIONS
5.2 The Shareholder-Stakeholder debate
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.
Globalisation of capital markets, greater shareholder activism, rise of institutional investors and profitability and wealth maximization as the main objectives of corporation have always lead to the acceptance of the shareholder theory as an effective theory of corporate governance. Indeed, one of the perceived strengths of this theory is that it is workable and practicable. This is because of the fixed objective of managers which is to take into account the interests of the shareholders only and failure to do so might result into derivative actions being taken against them. Nevertheless, most of the arguments proposed in favour of this theory fail to sustain it. Under corporate law, more specifically the separate legal personality principle, the company is considered to be a separate person from its shareholders. Thus, at no point can the shareholders claim to be owners of the company. Because of the same reasoning,

More about Pros And Cons Of The Shareholder And Stakeholder Debate

Open Document