What is the primary responsibility of a manager? This question is an old one. However, in the light of several incidents in recent years - some examples are the financial crisis, the BP oil spill and the Enron scandal - it seems to be a more a present-day problem than ever before. The traditional answer to it is also mirrored in business law and states that managers are agents of the stockholders and work solely for their benefit. This view is commonly referred to as the stockholder view. The contrary position to this is the stakeholder view. It asserts that in addition to stockholders, managers have also a fiduciary duty to employees, customers and other stakeholders, including the stockholders. In this paper, arguments both for and against each view will be presented. It will also be claimed that acting in strict accordance to one of the theories is an inappropriate way of managing a company, for ethical and practical reasons. Rather, the opposing views do not necessarily exclude each other. A synthesis of the two contrasts is not impossible, as it can be seen in the recently developed concept of the Triple Bottom Line.
Table of Contents
1. Introduction
2. The Stockholder Theory
3. The Stakeholder Theory
4. Synthesis: The Triple Bottom Line
Research Objectives and Themes
This paper aims to explore the primary responsibility of a manager by evaluating the conflicting perspectives of the stockholder theory and the stakeholder theory. It investigates whether these two paradigms are mutually exclusive or if a synthesis, specifically the Triple Bottom Line, offers a more balanced and practical framework for modern business management.
- Analysis of the stockholder view and its focus on profit maximization.
- Examination of the stakeholder theory and its emphasis on fiduciary duties to diverse interest groups.
- Ethical critique of both management models using philosophical lenses such as Utilitarianism and Kantian ethics.
- Discussion of the practical implications of business management in competitive markets.
- Introduction of the Triple Bottom Line as a synthesis of economic, social, and environmental goals.
Excerpt from the Book
The Stockholder Theory
The Nobel laureate Milton Friedman is a strong advocate of the stockholder view. Answering to people who claim that companies have to care about social and environmental issues while doing business, he wrote:
There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game, which is to say, engages in free and open competition without deception of fraud [1].
Corporate Social Responsibility (CSR) is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis [2]. According to Friedman, such a responsibility does not exist. The only thing a manager has to do is caring for the bottom line, increasing shareholder wealth. Any opposing effort leads in a slippery slope directly to socialism. Pursuing social or environmental agendas is the government’s job, not the business’. Whenever conflicts arise between the interests of stockholders and that of any other stakeholder, it has to be resolved in favor of the stockholders. Conflicts of interest for the manager himself therefore cannot exist.
Summary of Chapters
Introduction: Provides the context of the debate regarding the primary responsibility of a manager, identifying the conflict between stockholder and stakeholder views.
The Stockholder Theory: Explores the perspective that managers are primarily agents of the stockholders and that their sole duty is to maximize profits within the legal framework.
The Stakeholder Theory: Discusses the alternative view that managers have fiduciary duties to all parties affected by the company, including employees, customers, and the community.
Synthesis: The Triple Bottom Line: Proposes that the "Profit, People, Planet" approach offers a viable synthesis by combining the efficiency of stockholder interests with the ethical requirements of stakeholder management.
Keywords
Triple Bottom Line, Stockholder Theory, Stakeholder Theory, Corporate Social Responsibility, Profit Maximization, Management Ethics, Fiduciary Duty, Business Ethics, Sustainability, Kantian Ethics, Utilitarianism, Stakeholders, Shareholders, Economic Responsibility, Social Responsibility
Frequently Asked Questions
What is the central research question of this paper?
The paper investigates the fundamental question of what the primary responsibility of a manager should be in a corporate environment.
Which two management theories are compared in this text?
The text compares the stockholder theory, which prioritizes shareholder wealth, and the stakeholder theory, which advocates for broader responsibility toward all groups affected by the company.
What is the role of Corporate Social Responsibility (CSR) in this analysis?
CSR is introduced as a concept that integrates social and environmental concerns into business operations, often debated within the context of whether it should be a company's priority.
Which philosophical frameworks are used to critique these theories?
The author utilizes Utilitarianism to critique the stockholder model and Kantian moral philosophy (including the Categorical Imperative) to support the stakeholder perspective.
What is the Triple Bottom Line concept?
The Triple Bottom Line is a framework that emphasizes that companies should focus on three goals: Profit, People, and Planet, aiming for economic, social, and ecological sustainability.
What is the main conclusion of the author?
The author concludes that the Triple Bottom Line serves as the best answer to the manager's primary responsibility because it bridges the gap between efficiency and ethical obligations.
How does Milton Friedman define the "rules of the game"?
Friedman defines these as the requirements of free and open competition without engaging in deception or fraud.
What does Freeman mean by the "veil of ignorance"?
Referring to John Rawls, it describes a state where decision-makers ignore their own status to ensure that company policies are fair for everyone from the best to the least well-off.
Why does the author consider the stakeholder theory to be "impractical"?
The author notes that stakeholder management can be too complex for managers, as it lacks a clear, single goal and creates difficulties in prioritizing conflicting stakeholder interests.
- Arbeit zitieren
- Klaus Schütz (Autor:in), 2011, The Triple Bottom Line as the answer to the primary responsibility of the manager, München, GRIN Verlag, https://www.hausarbeiten.de/document/198659
