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DJ, 2003 Theories of the Firm Stakeholder Theory.

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Presentation on theme: "DJ, 2003 Theories of the Firm Stakeholder Theory."— Presentation transcript:

1 DJ, 2003 Theories of the Firm Stakeholder Theory

2 DJ, 2003 Introduction z Answer to shareholder (owner) dominance of governance y Inspired by social/egalitarian view z Views firm as having value created not only by shareholders y Employees invest in the firm by developing firm- specific skills

3 DJ, 2003 The theory z Left to the market, individuals do not develop optimal firm-specific skills z Holders of skills should be rewarded in proportion to the importance of those skills to the firm z Institutions of governance should be changed to ensure this

4 DJ, 2003 Advantages z Encourages more cohesion within firms – argument that more cohesion means more profitable z Creates incentives for learning z If applied generally, will lead to greater social cohesion nation-wide

5 DJ, 2003 Critique z Based on neoclassical idea of incentives through returns to individual y Arguably, learning is an organisational rather than individual process z The role of unions – rather than firm-specific learning by individuals – has resulted in promotion

6 DJ, 2003 Writers on Stakeholding z Ciaran Driver and Grahame Thompson (2002) Corporate Governance and Democracy: The Stakeholder Debate Journal of Management and Governance; 6(2): Corporate Governance and Democracy: The Stakeholder Debate z Will Hutton et al (1997) Stakeholding and its Critics, Institute of Economic Affairs z RE Freeman and R Phillips (1999) Stakeholder Theory: A Libertarian DefenseStakeholder Theory: A Libertarian Defense z Mary O’Sullivan, pp.52-58


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