STAKEHOLDER AND SHAREHOLDER IN UK

Stakeholder and Shareholder in UK

Abstract

The corporation belongs to stockholders and in their interest must be run. This conception finds its clearest expression in the shareholder value doctrine, according to which the corporation must be run in the interest of shareholders, creating value on their behalf. Thus the objective of management should be to maximize the market value of the company. This is in accordance, in particular, with the interest of minority shareholders, which should be adequately protected.

Table of Contents

Chapter One: Introduction3

The Stakeholder Model3

Corporate governance in the United Kingdom3

UK Combined Code on Corporate Governance3

The Turnbull Report - Combined Code Requirements3

AIM Companies3

UK Companies Act 20043

UK Companies Act 20063

Research Methodology and Method3

Positivism1

Voluntarism1

Determinism1

Ideographic1

Nomothetic1

Paradigms For Social Science Theory3

Method3

Interview3

Case Study3

Stakeholder Theory:3

Chapter Three: Stakeholder Theory in Corporate Governance3

The new concept of business ownership3

Corporate social role3

Company's capital elements constitute3

Risk Investment Income3

The concept of stakeholders is not clearly defined3

The Diversification Of Business Objectives Conflict3

Chapter Four: Shareholder Theory in Corporate Governance3

Business Ends and Compatibility with Stakeholder Model3

Chapter Six: Conclusion3

References3

Chapter One: Introduction

The corporation must be run in the interest of stakeholders. As the interest of stakeholders is various and contradictory, a compromise between the pursuit of the various interests should be found. This compromise could be trusted to managers (Berle and Means' view), to politicians, to an articulated management board, where the different instances may be represented, leading through their interaction and compromise to the specification of the overall interest of the company. According to the latter viewpoint the corporation can be seen as a community, and as such must be run. In the stakeholders' view may also be included the vision of the social responsibility of the firm, whereby society as a whole is a stakeholder. The different conceptions have their counterpart in different aspects of corporate law, from the composition and election rules of directors, to the publicity of societal documents, up to the determination of the rules that determine the framework of corporate life, concerning fusions and mergers, takeovers, and the legal framework of capital markets.2 Of the two conceptions the first seems to be dominant, especially in the Anglo-Saxon environment. In a somewhat different perspective the various corporate institutional systems prevailing in different countries may be seen, whoever are the principals, as different methods to deal with the problem of the separation of ownership and control. The second part of the present paper is dedicated in particular to the consideration of the latter issue in the specific framework of the stakeholder view.

Whatever the actual discipline of corporate governance a large scope for managerial discretion remains, leading to an agency problem, as well as a problem of collective action. This was already well understood by Adam Smith in a famous passage. “The trade of a joint stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of those proprietors seldom pretend to understand anything of the business of the company, and when ...