Are corporations obligated to pursue the interests of shareholders, perhaps at t

Question

Are corporations obligated to pursue the interests of shareholders, perhaps at the expense of other stakeholders? After all, the shareholders own the corporation, so shouldn't they come first?  If so, that would agree with the traditional view of the firm: its mission is to increase the wealth of the shareholders. Or do corporations need to pay attention to other stakeholders as well?  Does the firm need to be concerned with the welfare of its employees? What is the firm's responsibility to the community in which it operates? Etc. So do you support the traditional view, or should corporations be focused more broadly on being responsible to all of its stakeholders? If so, to how do shareholders fit into the mix? Explain your reasoning.

Explanation / Answer

1. A shareholder owns part of a company through stock ownership.

2.Stakeholders are the persons who are interested in the affairs of the company.They can effect the organisation by their actions.eg: Customers,employees,suppliers,government.

3.The organisations responsibility is to produce goods and services that a society wants and to maximise profit for its owners and shareholders.

4.Corporates are not obligated and should never pursue the interests of shareholders at the expense of other stakeholders.

5.Sharehoders always what quick returns on their stocks they don't bother about the policies and procedures adopted by the organisation in achieving returns.It is the company which is responsible to formulate policies which balance both shareholders and stakeholders objectives.

6.The organisation should formulate proper corporate social responsibilty policies and work effectively to achieve them.

Examples;

7.If the organisation focused only on profit maximisation ignoring stakeholders the growth of the company will be effected in the long run which will ultimately effect the wealth of the shareholders of the organisation.

8.The organisation should take profer care for the welfare of the employees of their entity which will result in reduction of employee turnover and increase the motivation among the employees to work for their organisation that improve productivity which ultimately increases the wealth of the organistion.

9.The traditional view only concentrates on profit maximisation whereas the modern policies strive for overall development of the organisation which will help the organisation in a long run.

10.The shareholders should use their voting power to elect proper board of director who can make better policies for best interest of the organisation andachieving the objectives of the organisation which can help both owners and stakeholders of the organisation.

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