The pros and cons of ranking shareholders over employees and other stakeholders

Therefore, the dispute seems to be with us for the time being and the suggestions that recent financial scandals prove the failure of the shareholder theory deserve careful scrutiny before they can be accepted.

In this context, we can see that the dispute between the shareholder and stakeholder theories in the United States, in which it appeared for several years that the shareholder theory was emerging as a victor, is now best viewed as a standoff.

In his tenure, he failed to protect societal assets or avoid harm to the environment. Despite the passing of this Law, GE failed to comply with it.

Corporate social responsibility

Well, both of them were the kinds to make money and make it well. This led to an entire mile stretch of Hudson River turning into a superfund site in the nation.

Although GE has had a long history in the global marketplace, Jack Welch was able to create a name for himself because of his strong performance. Since society deems these behaviors reprehensible and since it is suggested that the shareholder theory drove executives to behave that way, these commentators conclude that the theory is bankrupt and must be jettisoned.

Sign up Please enter a valid email address Thank you for signing up Privacy Policy To be sure, many would prefer that the shareholder-stakeholder dispute simply go away. Note, however, that Post, Preston and Sachs, who take a more instrumental than normative view of stakeholder theory, embrace a wider enumeration of stakeholders, including regulatory authorities, governments and unions.

GE actions led to calls for it to clean its mess. GE was much more socially responsible in the Immelt aftermath.

Welch Case Study

Scandals at Enron, Global Crossing, ImClone, Tyco International and WorldCom, concerns about the independence of accountants who are charged with auditing financial statements, and questions about the incentive schema and investor recommendations at Credit Suisse First Boston and Merrill Lynch have all provided rich fodder for those who question the premise of shareholder supremacy.

Civil regulation is regulation by nonstate actors based on social norms or standards enforced by social or market sanctions. These actions show how the company under Welch applied social responsibility in a manner that favored its business while affecting some sections of the society.

What are the pros and cons of ranking shareholders over employees and other stakeholders. A standard that arises over time and is enforces by social sanction or law. Many of the more strident critics of shareholder theory seem to claim that as executives are charged with maximizing shareholder value and are given large incentives to do so through stock options or other schema, they will respond by embracing whatever manipulations are necessary to achieve that goal.

What are the pros and cons of ranking shareholders over employees and other stakeholders.

Advantages and Disadvantages of Stakeholders

The Immelt era offered more benefits to society. Ranking shareholders over other stakeholders empowers the former to have more control of the organization. That argument is more compelling. Rightly or wrongly, the theory is being tarnished by association.

This is one reason that some small businesses owners bring an accountant or an attorney onto the board of directors so that the accountant or attorney might be able to foresee potential legal or financial issues.

A value chain is explained as the sequence of coordinated actions that add value to a product or service. I think otherwise GE under Welch was a well brought out organization.

External cost is a production cost not paid by a firm or its customers, but by members of society. In fact, however, the shareholder theory supports those efforts — insofar as those initiatives are, in the end, the best investments of capital that are available. Thus, the strident line of argument does not appear terribly compelling, since it seems to misinterpret the shareholder theory even as it indicts the theory.

To be sure, most U. The stakeholder theory demands that stakeholder interests be considered as an end in themselves. I think they did a good job at keeping their company within the competitive status along with being strong. These actions show how the company under Welch applied social responsibility in a manner that favored its business while affecting some sections of the society.

In GE Welsh did not practice an intermediate circle of responsibility because it did not exercise its economic function with a sensitive awareness of changing values and priorities, especially in relation to environmental damage.

University of Chicago Press,In order to avoid penalties for violating Superfund Law, GE contested this law on the courts with an aim of stopping its implementation. Harvard Business School Press,7—8. Sunday, March 6, Chapter 5 Corporate social responsibility is defined in Chapter 5 as the corporate duty to create wealth by using means that avoid harm to, protect, or enhance societal assets.

Advantages and Disadvantages of Stakeholders

Our Guarantees Corporate social responsibility General Electric under the stewardship of Jack Welch became one of the most valuable companies in the world. In an organization, ranking and evaluation system can have serious repercussions on how the different stakeholders relate with each other.

Corporate social responsibility

Mar 06,  · What are the pros and cons of ranking shareholders over employees and other stakeholders? Is it wrong to see employees as costs of production? Should GE have rebalanced its priorities? I think the pros of ranking them higher than employees and other stakeholders is that they invested more into a company, shareholders have part ownership in a company so of course they.

Answer to What are the pros and cons of ranking shareholders over employees and other stakeholders? Is it wrong to see employees. Although the definition of stakeholders is quite broad, there are five types of stakeholders that have been accepted widely, namely, shareholders, customers, employees, suppliers and the local community.

Traditionally, the law has not given a voice to non-shareholder stakeholders in corporations. What are the pros and cons of ranking shareholders over employees and other stakeholders? Is it wrong to see employees as costs of production?

Should GE have rebalanced its priorities? The pros were that ranking shareholders would mean more money and the cons would evidently mean that because shareholders were put first, the employees would be discouraged and would not want to work for that.

Pros And Cons Of Ranking Shareholders Over Employees And Other Stakeholder  Shareholder and Stakeholder Over the last decade, with the rapid development of business management, the Shareholders who are the effective owners of the company invest money into the business and want as much profit as possible as a return for their investment.

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The pros and cons of ranking shareholders over employees and other stakeholders
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