Stakeholder vs Stockholder Theory

In: Philosophy and Psychology

Submitted By chapmanl1
Words 1125
Pages 5
Larry Chapman
Business Ethics
Exam Two

The Stakeholder theory of a firm is made up into equal percentages on a pie chart, which is made up of Financials, Suppliers, Employees, Customers and Communities. The Stockholder theory of a firm is made up by a pyramid structure consisting of Labor, Management, CEO, Board and Stockholders. I believe the Stakeholder theory is less ethical than the stockholder theory in terms of Libertarianism and Egoism. Libertarianism view points are that there is no direct harm, not infringing on rights, not breaking the laws, government protection only, free market and charity. The Egoism viewpoint is to maximize long-term self-interest. The Stakeholder Theory is less ethical from the Libertarianism viewpoint, because there are some major concerns that don’t agree with their principles. The first principle it breaches is no-direct harm, because it does cause direct harm. The theory causes direct harm by having everybody set as equal to the firm, but in reality the creditors and shareholders are above everybody. I believe this causes harm in that you have to pay back your creditors and shareholders back first, because without them there would not be a company and if you don’t pay them their higher percentage they will not re-invest inside the company, which will cause the direct harm to the pie by causing the equal pie pieces to be broken up and forcing the company to shutdown due to default. This theory also infringes on the rights of the Financials, because if they were to pay back the shareholders and creditors it would be done through dividends, which comes from the company’s performance. So to pay back a higher dividend they have to have a large net-income, so then they would have to raise prices to their customers, which then they are taking one piece of the pie to give to the other piece of pie that should be even, thus causing…...

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