The Truth About Making Smart Decisions

Chapter 42. To know where you’re going, know where you stand

The shareholder view is that the role of the firm is to maximize profits for shareholders. It isn’t the firm’s role to be concerned about its broader human, social, or political impact except to the extent that it generates greater return for shareholders. The stakeholder view of the firm holds that the company must take into account the interests of other stakeholders, including customers, community members in areas in which it operates, employees, and other players who are affected by the firm’s actions. In the most optimistic view, these perspectives come together in the idea that while the shareholder view maximizes returns for the short run, the stakeholder view maximizes returns ...