Question

In: Accounting

Is your current organization managed by the stakeholder or stockholder approach? Is this appropriate? Would you...

Is your current organization managed by the stakeholder or stockholder approach? Is this appropriate? Would you make changes? Why or why not?

Expert Solution

INTRODUCTION

Both the approaches i.e StockHolder and Stake Holder Approach are a part of theory of CSR i.e. Corporate Social Responsibility and even business ethics which discuss about the roles and responsibilites of an entity towards the society.

Which approach is more appropriate is a never ending debate.

Stockholder or Shareholder approach tells that shareholders give capital to a company’s managers, who are accustomed to act as per the powers authorized by shareholders. The prime motive of the Business should be to increase stockholders wealth.

While "Stakeholder" is a broad term and it includes:-

* Debtors *Creditors *Government *Banks *Suppliers *Customers etc i.e whosoever is connected with the company.

This approach has the belief that managers have duty towards stockholders as well as other stake holders like individuals and constituencies that contribute, either voluntarily or involuntarily, to company’s wealth-creating capaciy and activitie and who are therefore its potential beneficiaries and/or risk bearers.

ABOUT CURRENT ORGANIZATION

I currently work in a Private limited company in which there are 10 Directors i.e Managers and they are also the stock Holders.

They are engaged in manufacturing industry and are a profit making entity.

The name of the company is "Kailash Paper Conversion (P) Ltd"

The company basically follows mix approach between noth the approaches.

Since there is no distinction between the management and the stockholders, is is indeed possible to follow a mixture of both the approaches.

The prime motive however is still biased on increasing the stockholders wealth.

So, the dominant position is undoubtedly Stockholder's.

APPROPRIATENESS

I find the approach followed by the company as appropriate as they are generating good profits and the company is also benifiting its stakeholder in many ways. Some of the examples are:-

1) Timely Paymet to Suppliers

2) Tax Payment to The Govt as per the Laws & within prescribed time.

3) Following the applicable Rules and regulations.

4) Directors being managing the company is a way that is not detrimental to the interest of stakeholders.

CONCLUSION

The company is doing very good in all aspects and i suggest no change at all.

ekkarill92 answered 2 years ago

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