Shareholders Vs Stakeholders Theory, what does it mean to business?

Shareholders are regarded as the owners of the business; they contribute their finance for the safe running of the business.

By contributing their finance they in turn receive a reward in form of dividend for their money which is being used for the running of the business.

Shareholders theory is simply saying that businesses should concentrate on how to maximize the earnings of their owner that’s the shareholders and forget about any other thing like engaging in corporate social responsibility on the community were the business is situated, that any other thing apart from maximization of shareholders earnings is a waste of capital.

Stakeholders are those who contribute directly to the success of the business. They don’t contribute finance to the business but they influence performance of the business, Example includes employees, consumers, community where the business is situated etc.

Stakeholders’ theory is simply saying that businesses while undertaking their primary objective which is to maximize earnings should also consider the stakeholders, the employees, the consumer, the community and others.

By providing the employee a conducive environment and a good salary, it’s a kind of motivates the employee into performance, by producing good product the consumers will be happy to patronize them, by compensating the community where the business is for any damages caused in the environment (corporate social responsibility) the business will survive and be in peace while the community are happy.

So I think, Businesses should adopt stakeholders theory because it will also help them maximize their earnings and enhance their growth and survival. It’s a way of giving back to the society.

Think otherwise, comment.