Stakeholder Theory Essay

2.2 Stakeholder Theory In traditional view, the companies serve only their shareholders because they are the owners of the company. Therefore the companies have the financial obligations towards shareholders which have always put the shareholders’ needs at first (Friedman, 1970). However, the stakeholder theory argued that the companies should properly serve the stakeholders’ needs first before they can meet the shareholders’ expectations, because it is believed that the stakeholders have significant impact on the success and viability of the company (Murray & Vogel 1997). Stakeholders are the entities who will be affected by the activity of the business, such as creditors, employees, government, competitors, customers, suppliers, regulatory agencies, unions, and the community. Nowadays, the perception of serving shareholders and obliged only to their demands has changed. Most of the companies realised that generating profit is no longer the only goal for the company to be successful. This is because the companies are increasingly affected by the stakeholders as never before. …show more content…
This means that the stakeholders have an impact on the company, regardless of they act as an individual or as a collective group, formal or informal. Many managing directors thought that stakeholders’ interference was just a private affair of the company and thus the less progressive companies might decide to ignore it. Unfortunately ignorance to public issues might cost the company in the long run. On the other hand, more progressive companies would look into the problems, being responsive to the public issues and decide to meet the stakeholders’ needs and expectations through implementing corporate social responsibilities program. As the issues are being solved at the early stage of issue development, it would not hurt the company in the long