Shareholder theory is based in the field of economics on thepremise that businesses exist to create wealth for its owners – itsshareholders. Stakeholder theory broadens that view to include agreater community of constituents. The two theories are notmutually exclusive. They overlap – shareholders are stakeholderstoo – and compete for a larger role in the purpose of the firm.Shareholder theorists believe in the concept of the “invisible handof self-regulation”. Limited government and regulatory interventionin business will result in wealth maximization for the firm and apositive social impact overall. Stakeholder theorists, on the otherhand, believe that wealth maximization results from competitiveadvantage gained
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