Does shareholders-oriented model always better than stakeholder-oriented model ?

A cura di Tingting Zeng

Shareholder-oriented model is a ideological convergence  based  on the corporate governance theory, it is emphasizes the ownership of corporates belong to all the shareholders, managers must responsible for shareholders’ interests,i ncluding controlling block holders and highly dispersed individual shareholders’ interests. The failure of alternative models,the competitive pressures of global commerce and the shift of interests group driving consensus on shareholders-oriented model, meanwhile, the forces of logic, example, competition, these three important economic forces made the virtues of the model increasingly salient,all this making the standard model finds a stable position on corporate governance. Contrasting the manager-oriented model, labor-oriented model, state-oriented model, stakeholder-oriented model ,shareholder-oriented model has his own advantages, but with the global development in the wold ,shareholder-oriented model suffered more and more queries,it challenged  by stakeholder-oriented model.


The reason why shareholder-oriented model can live such a long time is because the ownership of the company is only belongs to all the shareholders ,under this model shareholders pay for the residual risk, and of course have residual control and residual claim rights,it’s a normative view of corporate structure and governance. The purpose  of corporates  governance is maximize the value of shareholders and avoiding managers  diverting to themselves a disproportionate share of corporate  benefits commonly involve inefficient investment choices  and management by opportunistic behaviors, managers are just employed by shareholder, and supposed  to offer service and  only  are responsive for shareholders, although it establish a strong corporate  management with duties to serve the interests of shareholders alone, as well as strong  minority shareholder protections, but it may bring some problems in the developing  corporate governance .

Firstly, As we know, we separate the management rights from the ownerships to protect creditors interests better, then, the shareholder become the one who out of door, managers play an important role in corporate  governance, even shareholder need to depend on them instead of using them. Secondly, under the standard model, although block shareholders ,dispersed individual shareholders,and controlling  shareholders,non-controlling shareholder all get a dominated position and their interests can be protect well,but other participates like employees, customers,creditors,merchants and boarder interests groups can’t be treated equally,meanwhile ,they  have to face the risk come from corporate. Thirdly, In today’s society, corporate is not only a economic entity but also a social entity the key element to gain corporate  value  is not only the substance, but also the invisible factors, like human source, such as the ability  of a corporate’s employee  have, the corporate ‘s value is not only about  shareholders, but also about  stakeholders .

Actually ,to become a social entity  and acquire a continuously  ability to gain, the runners have to consider other factors especially  stakeholders, stakeholders include all the people who has connection  with cooperate, like  employers, customer,creditors,merchants and boarder interests groups, stakeholders-oriented model emphasize that managers are responsive to stakeholder  interests as well.

Firstly, theoretically ,there are two kinds of models in stakeholder model,one of is  fiduciary model of corporation ,to hold this ,only investors are given direct representation the corporate board, it has the same weaknesses to manager-oriented model, another one  is some like labor-oriented model, named stakeholder models of the  representative type,in this model,two or more stakeholder constituencies appoint representative to the board of directors, it’s same to really  make the stakeholder  become a part of decision-making  and can relaxing the conflicts between employee and corporate, but it may also lead a inefficient  decision-making, some stakeholders are not very know how to choose  or vote a right choice ,once there is a different  opinion on decision, managers must spend time to resolve it. Secondly, moreover, if the managers responsible for stakeholders ,they will become more busy and need to take everything  into consider, more than that , they can easily  get rid of supervision of shareholders and have more discretion power to look after their own benefits .


Both shareholder-oriented model and stakeholder-oriented have advantages and disadvantages,U.S and U.K is typically  country which adopt shareholder-oriented model, in there, vast majority of corporations never been  question this standard  model ,they have strong desire to seek money,and their economic patten is allow them to look after short-term benefits, on the contrary, Germany and Japan are prefer stakeholder-oriented model, they are not only consider the benefits, but also the customer needs and employees’ interests. To sum up, before the 1980s,shareholder-oriented model is the supremest theory in the corporate  governance, after that, the view to realize the value of a corporate  and the nature of business have changed,stakeholder-oriented model same to have opportunity  to fight for the top position among all the theories. Anyway, which model can be adopted  needs  to depend the culture, political, economic, geographic position, personnel quality and so on, but in continental Europe,the interests of controlling shareholders traditionally  dominate corporate  policy, so, maybe it’s better to them to adopt the shareholder-oriented model to manage corporate. In my opinion, I think shareholder-oriented model ideology has more profoundly corporate  governance practices, if we adopt the stakeholder-oriented model, maybe manager will deviate the role of obligation, the purpose  of corporate  will become vague, and more than that, supervision on managers will become a difficult things, the first thing to run a business is  making money, it’s different  from organization, maybe we should put profit  in the first position instead  of becoming a sociable organization is better suit cooperates .


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