Shareholder Primacy

Decent Essays
It goes without saying that corporations have a huge impact on society, they define the city skylines with their high rise buildings and provide the very products we need for our everyday life. However, the fact remains that corporations exist to be a money making tool for its owners. Many corporations are run based on the theory of shareholder primacy which postulates that the management of a corporation has one duty-to maximise shareholder dividends (Hall et al., 2008). Now, there really isn’t a problem with the owners of a company wanting to get returns for their investment but the issue begins to arise when these owners (shareholders) begin to indirectly manage these corporations for their benefit alone. There have been an increased clamour …show more content…
All theses corporations have a few things in common; they were big corporations at the time, their downfall happened as fast as their bloom, and they were all taken down by accounting scandals. While it is easy to blame their executives and their accountants for the downfall, it is important to examine a possible underlying factor that led to the company going bust- shareholders. Under shareholder primacy the benefits of the manager’s was often tied to the stock price of the company, it was the shareholder’s way of controlling the manager to continually bring in profits to them. At first glance, this might seem like a bright plan as it means the manager has the right motivation to keep the company profitable and the stock price high. What happens when the company hits a bit of a rough patch though is that the managers under considerable pressure from the shareholders falsify revenue numbers to keep the stock price up and the shareholders happy. This illegal and unethical practice gives the illusion that the company is healthy until the bubble created then bursts. …show more content…
The stakeholder approach offers a good balance between making profits and corporate social responsibility to grow the company as well as develop social wealth. For almost 100 years the Coca-Cola brand has been a household name globally with its products being consumed in about 200 countries of the world (Bickle, 2011). The Coca-Cola company is perfect proof that corporate success depends on meeting the interests of stakeholder groups like customers, the government, special interest groups and the community at large. It is necessary to consider the interests of these stakeholders because their investments directly affect the performance of the corporation. The Coca-Cola company uses a Golden Triangle approach spanning the public, private, and civil society sectors in its stakeholder engagement (The Coca-Cola Company, 2017). With the stakeholder approach, managers are have a duty not only to the shareholders but to the consumers, employees, and local community since they are all risk bearers in the running of the business. According to the Coca-Cola company website, the company is “committed to ongoing stakeholder engagement as a core component of our business and sustainability strategies, our annual reporting process, and our activities around the world”. The company lists bottling partners,

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