5.1 Week 5 – Lesson 1

Week 5 – Lesson 1: Discussion post.

It is my belief that corporate managers should aim to maximise stakeholder value rather than maximise shareholder value only. Although shareholders continue to be an essential segment of the public, modern corporations are embedded in complicated social, environmental, and economic environments and, in the long run, performance of the corporation is grounded in factors beyond short-term financial returns.

Concentrating exclusively on shareholder value will further prompt short-term decisions, cost-cutting at the cost of employees, damaging the environment, or potential reputational damage. By contrast, a stakeholder oriented approach acknowledges that people – including employees, customers, suppliers, communities and regulators – all play a role in the long-term capacity of the firm to create value on an ongoing basis. This means that shareholder value will most likely be realised in sustained measure if it is managed responsibly by such stakeholders.

That being said, maximising stakeholder value is not the same as ignoring shareholders. It is, rather, the harmony between interest-holder interests and the integration of the long-term strategies with the ethical, social, and environmental issues.

In the climate of today – when ESG expectations, transparency and accountability are of increasing importance – a focus on stakeholders seems to make it more realistic to support long-term corporate performance.