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Friedman introduced the theory in a 1970 essay for The New York Times titled "A Friedman Doctrine: The Social Responsibility of Business is to Increase Its Profits". [2] In it, he argued that a company has no social responsibility to the public or society; its only responsibility is to its shareholders. [2]
A beneficial shareholder is the person or legal entity that has the economic benefit of ownership of the shares, while a nominee shareholder is the person or entity that is on the corporation's register of members as the owner while being in reality that person acts for the benefit or at the direction of the beneficial owner, whether disclosed or not.
Shareholder democracy is a concept relating to the governance structure of modern corporations. In this structure, shareholders bear ultimate controlling authority over the corporation, as they are the owners and may exercise control within their economic rights. Although shareholders own the corporation, they generally take a passive interest ...
Corporate responsibility is a term which has come to characterize a family of professional disciplines intended to help a corporation stay competitive by maintaining accountability to its four main stakeholder groups: customers, employees, shareholders, and communities.
Some responsibilities include, but are not limited to: community development, employee investment, worker benefits, research and development, and more. These responsibilities are attributed to being long term and do not immediately satisfy the short term – and mainstream – interpretation of shareholder value. [46]
Certain groups of shareholders may become disinterested in the corporate governance process, potentially creating a power vacuum in corporate power. Insiders, other shareholders, and stakeholders may take advantage of these situations to exercise greater influence and extract rents from the corporation.
Most shareholders do not attend shareholder meetings, but rather cast proxy votes via mail, phone, or internet, thus allowing the board to vote for them. However, proxy votes are not a total delegation of the voting power, as the board must vote the proxy shares as directed by their owner even when it contradicts the board's views.
In the 1930s, two law professors, A. A. Berle and Merrick Dodd, famously debated how directors should be made to uphold the public interest: Berle believed there had to be legally enforceable rules in favor of labor, customers and the public equal to or ahead of shareholders, while Dodd argued that powers of directors were simply held on trust.