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Business Ethics

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Stakeholder Theory

The Stockholder Theory maintains that managers should act as agents to the stockholder and only serve their interests-the maximization of profits. Milton Friedman's argument being, they are the owners of the business, and hence they should be entitled to all profits. In general the concept is about what the organization should be and how it should be featured. The purpose of the organization should be to manage their interests, needs and viewpoints. The managers should on the one hand manage the corporation for the benefit of its stakeholders in order to ensure their rights and the participation in decision making and on the other.

on orientated so the academic circles prefer the definition of

Friedman means that there is a clear relationship between definitions of what

stakeholders and identification of who are the stakeholders. The main groups of

stakeholders are:

* Customers

* Employees

* Local communities

* Suppliers and distributors

* Shareholders

An argument for the more frequently used stakeholder concept in the early

1980s could be the changes among workers, students, consumer groups and

environmentalists in the late 1960s. One possibility of arguing about the development

of this field is to see the planning process as becoming increasingly sensitive to the

business environment and the need for good information about it. Friedman (2006)

has the opinion that at the time where the SRI came up with their memo they called

for information systems to scan and track stakeholder responses to changes in

corporate strategy as part of this environment. The SRI has developed "measures of

satisfaction" for the stakeholder groups who they have found. Freeman (1984) noted

that planners did not want to attempt to influence specific stakeholder behavior rather

they wanted only to forecast the future environment in order to adapt it with the

capabilities of the company. In the 1960s the environment was very stable, relatively

static and kind of predictable. Freeman (1984) stated that prior to his work, the




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