It's through loyal customers that enable companies to retain and sustain competitive advantage. Because shareholder wealth is one convincing way to assess performance, the idea of shareholder primacy provides a … The Shareholder Theory If you were to ask me for the one defining characteristic that sets stakeholder theory apart from other approaches, I’d probably say that stakeholder theory puts ethics at the heart of business. Menu About Editor; About IJVASC. The theory provides an … Thus, religious groups and political parties can be considered stakeholders if the position taken by a company can affect their membership favorably or … It leads the corporation decision-makers focus on the shareholders’ interests. the management of a company should first consider the interest and the advantage of the shareholders, before it meets any decision. Some CEOs have already spoken out. This is one of major disadvantages of stakeholder engagement. The Berle and Dodd’s debate in 1930s is where the primacy theory originated. This includes shareholders and employees, customers, suppliers, government agencies, and any other stakeholders affected by the business’s actions. Although each theory has its roots in business ethics, the foundation of the two theories differs greatly. Stockholder theory, also known as shareholder theory, says that a corporation’s managers have a duty to maximize shareholder returns. The corporation as a sovereign power in a market economy. Stakeholder theory defines some ethical action which has to be taken by organization to give regard to their stakeholders. Increased investment from happy financiers. There’s not just one stakeholder theory, but many. Shareholder theory and its limitations. Shareholders’ primacy is an outlook that portrays that shareholders are the owners of the corporation and other stakeholders are not so important. 7. The corporation as a private association in a market economy. Both the shareholder1 and stakeholder theories are normative theories of corporate social responsibility, dictating what a corporation’s role ought to be. pros and cons of shareholder theory. etc. Stakeholder theory explains morals and values in managing organization. Although shareholder primacy may be favored by most, there are many limitations and disadvantages to a shareholder-centric approach of corporations.