Management Theories: Shareholding and Stakeholding

By claiming that stakeholders are involved in an exchange relationship, the authors mean that they are both affected by companies and have an impact on the companies, as stakeholder groups provide the companies with certain contributions and expect to receive the bonuses they need in return. For example, the general public can be considered as a stakeholder who pays taxes and support the national infrastructure. In exchange, it expects enhancement of their quality of life.

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The companies who are serious about their responsibilities face the dilemma related to the decision whether to adopt agency theory or stakeholder. The first one leads to building the strategy based on the self-interest. The second one supposes the strategy build on duties and social responsibility. Therefore, the firms face the dilemma of whether to adopt any of these theories, and the effective solution seems to lie in the adoption of the business case employing ethics as a strategic management tool rather than pure ethics case.

Stakeholder and agency theory can be reconciled in case managers effectively use an approach of corporate social responsibility to grow the shareholders’ revenues. Therefore, it appears that ethics needs to be profitable to be accepted by the companies, as ignoring stakeholders’ interests leads to low financial performance and possible failure.

The principal-agent or finance model suggests that the markets provide the most efficacious restraints on managerial discretion and, therefore, corporate governance can be improved by removing restrictions on factor markets and strengthening the incentive system.

The myopic market model considers providing an environment in which shareholders share long-term goals to be the solution for improving corporate governance.

The abuse of executive power model suggests that pursuing the corporate interest without giving excessive power to executive managers who have their personal interests is the key to successful corporate governance.

The stakeholder model regards serving wide interests of stakeholders instead of focusing on the interests of shareholders to be the key to effective corporate governance.

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The normative model for stakeholder theory emphasises the value and places stakeholding in the centre of corporate priorities while the instrumental model for stakeholder theory considers stakeholding important only as a mean of improving the corporate governance.

Though personal interest plays an important role in the priorities of managers, there are many other motives, such as the need to be recognized and respected, that promote the managers’ striving for ensuring the efficient corporate performance.

Such changes in the nature of the firm as easier financing in the capital market, higher demand for process innovation, easier replacement of physical assets, the growing role of the human resource base, more independent human capital, etc., make the boundaries of the firm more flexible and difficult to be fixed.

The new paradigm suggests a wholly new approach to corporate governance opposing, which is more inventive and flexible than the old static one. Such paradigm has the possibilities of using the approach that adjusts to the constantly changing patterns of the corporate governance in different parts of the world. Such paradigm gives an opportunity of using a balanced approach based on the belief that extreme models do not work properly. Instead, it avoids polarizing of public and private goals of the firm. Such paradigm has a possibility of using the approach that regard the reality as interconnected and constantly changing and values the ability of corporate governance to adjust to continuous changes and new tendencies.

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StudyCorgi. (2021, March 29). Management Theories: Shareholding and Stakeholding. Retrieved from https://studycorgi.com/management-theories-shareholding-and-stakeholding/

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"Management Theories: Shareholding and Stakeholding." StudyCorgi, 29 Mar. 2021, studycorgi.com/management-theories-shareholding-and-stakeholding/.

1. StudyCorgi. "Management Theories: Shareholding and Stakeholding." March 29, 2021. https://studycorgi.com/management-theories-shareholding-and-stakeholding/.


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StudyCorgi. "Management Theories: Shareholding and Stakeholding." March 29, 2021. https://studycorgi.com/management-theories-shareholding-and-stakeholding/.

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StudyCorgi. 2021. "Management Theories: Shareholding and Stakeholding." March 29, 2021. https://studycorgi.com/management-theories-shareholding-and-stakeholding/.

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StudyCorgi. (2021) 'Management Theories: Shareholding and Stakeholding'. 29 March.

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