Shareholder or Stakeholder model?

Does the corporation exist for the benefit of shareholders, or does it have other, equally important stakeholders, such as employees, customers and suppliers?

In a study titled, "Stakeholder Capitalism, Corporate Governance and Firm Value" (2007), finance professor Franklin Allen (e.a.) tackles this issue. In showing the various benefits of the stakeholder approach, he demonstrates that the issue is not as settled as some researchers and business people in the US or the UK might think.

Several conclusions emerge from the study, which uses a mathematical model to explore the advantages and disadvantages of stakeholder-oriented firms. First, stakeholder-oriented companies have lower output and higher prices, and can have greater firm value than shareholder-oriented firms. Second, firms may voluntarily choose to be stakeholder-oriented because it will increase their value, according to the study.

In a recent study (2008) called, "Rhineland Exit", Dutch (CPB) researchers Bovenberg and Teulings defend the victory of the Shareholder model over the stakeholder model (Rhineland model). They also state that the principle of maximization of shareholder value, being the ultimate goal of the firm, is at odds with the Rhineland philosophy of a balanced treatment of the interests of all stakeholders.

Why arguing so much about share or steak? By choosing the "stakeholdermodel with weights" it's simple to accomodate and optimize the final model to the company goals.

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