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Stakeholder Theory and Competing Concept

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Introduction

Stakeholder theory was given by R. Edward Freeman, which was expressed many ways to represent the stakeholder as an important part of the corporate responsibility. According to Stenberg (1996), this stakeholder theory, is basically not capable to provide better corporate governance. He also stated that, this theory is unable to provide a better view of business performance (Edward & Reed, 1983).

Currently, the stakeholder theory has been grown up from its origin and seen as the concept of Value Maximization in the business firm. It is one of the important goals of the business organization (Werther & Chandler, 2005). In the present time, stakeholder theory allows the business firms to define the role and responsibility of the stakeholder and evaluate their nature and requirements to resolve the conflicts among various stakeholders.

Definitions

Definition of Stakeholder: Stakeholders can be defined as those people who have some stake in the business firm, means who are directly or indirectly related with the organization. The stakeholders have some interest in the business firm, which can be monetary or non-monetary (Jones, 2004).

Stakeholder Theory: It can be defined as the practices of the management and the perspective of the stakeholders to increase the value of the firm. Performance of a business organization and stakeholders interest is directly linked with each other, thus it can be said that stakeholder is an individuals or group of individuals, who are affected by the organization’s activities (Jensen, 2001).

Value Maximization: It can be defined as the increase in the value of the organization. The firm can achieve value maximization by increasing profit.

Types of Stakeholders

Many analysts related ...

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