Shareholding versus Stakeholding Assignment Example | Topics and Well Written Essays - 1000 words

Shareholding versus Stakeholding - Assignment Example After suitable measures to overcome the conflict have been taken, the business climate of the enterprise will be readily acceptable by the public investing in the shares of the company. This may indirectly raise the prices of the shares, leading to the generating of profit of the shareholders. Another reason for the rise of the difference between the stakeholders and the shareholders is the lack of protection rendered to the third party. Thus it is very important for the managers to pay heed to the rising differences between the stakeholders and shareholders of the company. But the main issue that the company faces is whether to use single value objective function or balanced scorecard (Siems, 2007, p.180). The challenges faced by managers to be ‘socially responsible’ In the process of being socially responsible, managers face a few challenges, for example the process of value seeking rather than value maximizing. Therefore, through the achievement of the value seeking f unction, the confusion that leads to maximizing the value is difficult to overcome, as the way the world is structured is quite complicated. Under no situation can the maximization of the value of the managers be guaranteed, but the assurance can be given that the movement of the managers is in the right direction. The absence of the negative externalities in the input factor market does not lead to the rise in the opportunity cost of the firm. If the firm is still earning the social cost of the company, this may result in the dilemma caused to the managers during the performance of the social responsibilities. Self-serving manager exploiting social responsibility for his/her personal gain Sometimes the managers of the companies with a purpose of performing the social responsibilities tend to serve their personal gains. The reason behind this is the use of the stakeholder’s theory, through which the personal short run-interests of the shareholders are accomplished. Since a be tter criterion cannot be provided, the proper evaluation of the managers is not possible. Thus, by the application of the shareholders theory, the managers pursue their own interest at the expense of the firm’s financial claimants and the society at large. The directors and the managers use the resources of the firm for their own needs, such as art, medical research, etc. without being held liable for the expenditures caused to the company. As with the practice of the stakeholder theory the internal control system of the company is being hampered, hence arguments are being placed for the government intervention – anti-takeover provisions, for example – in these areas (Letza S., et al., 2004, p.247). Budgeting and strategic management accounting tools as an encouragement for shareholder or stakeholder centric focus Such accounting tools as budgeting and the strategic management, Balanced Scorecard, and the others had been a helpful encouragement in the focusing o n the shareholders and the stakeholders of the concerned country. These tools help decide to what standard the company should stick to avoid neglecting the interests of both the shareholders and the stakeholders of the company. With tools like budgeting and strat