A critical approach to the stakeholder theory as a corporate objectivefunction

Abstract

At the core of the issue of management models on corporate governance are some basic questions such as these that must be addressed. What is the corporate-function? Which are the criteria for decision-making and performance evaluation? Literature cites two corporate objective-functions which stand out, one which maximizes shareholder value and the other which balances the interests of stakeholders. A critical approach to the stakeholder theory is made including the origin, concepts, advantages and disadvantages in a comparison to that of the shareholders. The conceptual deficiencies of the stakeholder theory point to the maximization of the shareholder value as a more robust objective-function for achieving a higher level of social welfare, maximization of corporate efficiency and productivity while providing a better evaluation of managers.