I have just two questions please answer them ASAP In One sitting .. 1) Are the c

Question

I have just two questions please answer them ASAP In One sitting..

1) Are the criticisms make about the author's contention that shareholder are now just passive impotent beneficiaries valid as to tangible property? why or why not? Valid as to intangible property? why or why not?

2) Is the mechanism of management being assigned the authority to resolve conflicts among stakeholder giving management even more discretion than allowed under the shareholder theory to make self-interested decisions, which confirms that they cannot be trusted? if yes- why? if no-why ?

Readings Are as below:

Explanation / Answer

1. Shareholders are now just passive impotent beneficiary to

Tangible property: This is a valid criticism. This is because the shareholders are also the owners of tangible properties that are owned by the corporations. However, in the public listing mechanism of the company, most of the public shareholders do not hold and authority of power when it comes to management. Many of them do not even have the option to vote on company decisions and election. All this is while they are part owner of the company and by its inherent nature, all the tangible property the corporation owns.

Intangible property: This too is a valid criticism. Intangible properties of a corporation could be the intellectual properties, brand image and others. However, consider a shareholder for a pharma company. By the ownership right he/she may be entitled to the access to the pharma patents. However it is unlikely that such consideration will be forwarded to even the large shareholders. This is a clear indication that the shareholders today have no potency when it comes to management and the direction of the company rather than reaping the benefit of the profit.

2. There are well-documented and studies that prove that there is an obvious existence of principal agency conflict when it comes to the management of the corporation. There is always a conflict of interest between shareholders and management.

The stakeholder theory brings in four more participants as the stakeholders for a corporations. This means there are now more variables and uncertainties when considering conflict of interest and ethical reasoning.

Considering these points above, the mechanism when management resolves conflict of shareholders give the management more power and authority to work on their self-interest. This I because the management of the organization often are closer to the issues and have more clarity on the truth for the conflict. While there are different practices to align management and shareholder interests (stocks, esops, etc) there cannot be a common ground in aligning the interest for all the stakeholders. This will evidently cause the management to work in favor of one stakeholder or the other. Hence, expecting a fair conflict resolving decision may not be realistic.

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