Profit maximizing firm vs. multiple stakeholder firm model?

Status
Closed
Nov 2014
412
ph
Which of these competing corporate models is the better model for society as a whole? That a firm should only have profit maximization and shareholder value maximization as its goal, or that a firm should attempt to balance the interests of multiple stakeholders with conflicting interests such as employees, shareholders, customers, suppliers, and the communities where the firms operate in? Before the 80s, US corporations basically practiced the multiple stakeholders model of corporate management and were much less ruthless overall in terms of their pursuit of profits, which led to a mess and inefficient management processes, as managers and corporate CEOs tried mostly in vain to most optimally balance the demands and interests of multiple stakeholders, while at the same time trying to keep the firm competitive vs. competitors, which led to the problem of garbage can management. This led in turn to the profit maximization school of thought, where the only aim of a firm is to maximize its profits, but this also led to various issues such as increasing inequality between rank and file and CEO pay, and a declining share worker income to GDP, with income from productivity gains going to shareholders instead of employees, which arguably led to increasing political problems down the road.
 
Status
Closed