COMM 104 Chapter Notes - Chapter 5: Fiduciary, Corporate Social Responsibility, Stakeholder Theory
7 Feb 2016
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The primary approaches to critiques of shareholders theory have come from the perspectives of shareholder theory, or theory of the firm. Fiduciary duty: refers to the duty of corporate executives to maximize the value of the firm through increased earnings, market share, or some financial standard. This is why managers put the shareholders above everyone else they act as their agent. Shareholder theory emerged from the rise of corporations in the late 19th century. Shareholders have limited liability and cannot be held accountable for any losses incurred by the corporation. Fiduciary responsibility was legally imposed on corporate management to over the principal agent problem that is, agents, such as lawyers and managers, having more knowledge and power than the principals who engage their services. Managers are obligated to maximize profits for shareholders because the know things that the owners (i. e. shareholders) don"t. The considerable power vested in managers was a cause for social concern and regulatory oversight.
