Question

1) How doseany author explain the shareholder theory requires no ethical reasoning? and why?

2) why does use of the shareholder theory prevent effective resolution of the 13 common business practices?

Answer 1

1. According to the shareholder theory, all the businesses operate in a sort of a “free market” which would mean that they have no liability or answerability to encourage socialism. This is the reason that Milton Friedman has conceived that the predominant purpose of any business, corporation or organization is to work towards augmenting the value for the business for the stakeholders and the shareholder and no other responsibility is as important as this factor. He also explains that indulging in the practice of corporate philanthropy is a waste of time and opportunities for the stakeholders and therefore reduces the maximum capacity of profit essentially stealing it from the shareholders. Therefore as far as being ethical in their conduct is considered, businesses do not owe anything to the ethical needs of the society and mainly should be concerned with the shareholders.

2. Shareholder theory is concerned with the value proposition for the shareholders of the organization which prevents it from following the 13 common business practices. This is visible in the fact that some companies leverage their transparency, team feedback, building a future, customer service experience and the factor of owning the operation from start to finish in the view of short-term goals, maximum gain and profitability to the point where their entire operation has to deal with the factors such as unethical conduct and worker manipulation. All these go against the 13 common business practices.