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Corporate Governance Research Paper

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CORPORATE GOVERNANCE 1
Corporate Governance
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CORPORATE GOVERNANCE 2
Corporate Governance
Over the years, organizations are shifting their purpose from operating to maximize shareholder value
to increasing stakeholder value due to the change of benefit perspectives. The shareholder value
perspective supports profitability over social responsibility while stakeholder value perspectives
advocates for social responsibility over profit. In an ideal world, a corporation should be able to combine
profitability and responsibility without major repercussions but the two are partially contradictory to be
attained simultaneously. Shareholders are the financiers or owners contributing running capital of the
business while stakeholder’s entails a group of people who are affected or can affect the achievement of
an organization’s goals (Henry, 2018, p. 117). Therefore, the shareholder theory holds that a corporation
main purpose should be pursuing economic profitability and views the rest of an organization members
as instruments used for owner’s benefit. Philosophers’ effort to bring ethics and justice to business gave
rise to stakeholder perspectives (Freeman, 2010, p. 8). Also, the influence of corporations in society has
grown tremendously in recent years making the debate about corporate purpose gain attention. The
modern business world has adopted the stakeholder’s value perspective as a way to make corporate
governance more socially responsible and fair to all the stakeholders of an organization.
Advantages and Disadvantages of Shareholder’s theory
Advantages
Increased Returns- when the ultimate goal of an organization is to maximize profits, then all the
operational decisions will be aimed at generating returns from investments. Since the shareholder
philosophy is solely about the money and gaining profit for the owner’s then all the organization effort is
used in finding ways to remain consistent on the goal.
Maintains consistency in corporate governance- shareholder perspective barely notices the other
stakeholders of the business. Its primary goal revolves around the financiers interests. Hence, when the
decisions of a firm are for a long period maintained in one direction then the management attains

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CORPORATE GOVERNANCE 1 Corporate Governance Student’ Name Course Professor Date CORPORATE GOVERNANCE 2 Corporate Governance Over the years, organizations are shifting their purpose from operating to maximize shareholder value to increasing stakeholder value due to the change of benefit perspectives. The shareholder value perspective supports profitability over social responsibility while stakeholder value perspectives advocates for social responsibility over profit. In an ideal world, a corporation should be able to combine profitability and responsibility without major repercussions but the two are partially contradictory to be attained simultaneously. Shareholders are the financiers or owners contributing running capital of the business while stakeholder’s entails a group of people who are affected or can affect the achievement of an organization’s goals (Henry, 2018, p. 117). Therefore, the shareholder theory holds that a corporation main purpose should be pursuing economic profitability and views the rest of an organization members as instruments used for owner’s benefit. Philosophers’ effort to bring ethics and justice to business gave rise to stakeholder perspect ...
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