Stakeholder theory:
This theory was presented by karl max. Stakeholders are the ones who are directly affected by the by the firm decisions. Stakeholders are employee, customer, shareholders, government, banks, suppliers etc. Its responsibility of a business is to take care of their all stakeholders. If they are unable to do so they are not being ethical.
Shareholder theory:
This theory was given by Milton Friedman. According to this theory no business is responsible for caring society it’s the work of government, firms do give taxes and those taxes should be use for welfare work. Business main purpose is profit maximization. Business has to more and more and satisfy its shareholders who are investing in the firm. Earning profit and making shareholder happy is the only main concern of business, welfare of society is responsibility of government not businesses.
One thing is common in both stakeholder and shareholder theory is shareholder is main focus and tries to make them happy because they are the ones who are continuously investing their money in business. If they will not be satisfied so they will disassociate themselves from firm there will be lack of money so in that all stakeholders will suffer.
Review Time 