Shareholder, stakeholder-owner or broad stakeholder maximization

With reference to the discussion about shareholder versus stakeholder maximization it is argued that the normal type of maximization is in fact stakeholder-owner maximization. This means maximization of the sum of the value of the shares and stakeholder benefits belonging to the dominating stakeholder-owner. Maximization of shareholder value is a special case of owner-maximization, and only under quite restrictive assumptions shareholder maximization is larger or equal to stakeholder-owner maximization. Broad stakeholder maximization is the sum of the returns to all stakeholders also including the shareholders of a company. Although it may be the ultimate goal for Corporate Social Responsibility to achieve this kind of maximization, broad stakeholder maximization is quite difficult to give a precise definition. There is no one-dimensional measure to add different stakeholder benefits not traded on the market, and therefore there is no possibility for practical application. Broad stakeholder maximization instead in practical applications becomes satisfying certain stakeholder demands, so that the practical application will be stakeholder-owner maximization under constraints defined by other stakeholders’ interests. These constraints vary for different stakeholder owners and new standards for Corporate Social Responsibility and more active political consumers will strengthen these constraints. 1 Paper presented at the IAFEP (International Association For the Economics of Participation) 12 Biannual Conference, St. Mary’s University, Halifax, July 8-10, 2004: Mending the Global Economy: A Role for Economic Participation 2 Professor, director of Center for East European Studies, Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, 2000 Copenhagen F, Denmark, Telephone (+45) 38153032, Fax (+45) 38152500. E-mail: [email protected]