The Social Responsibility of Management: A Critique of the Shareholder Paradigm and Defense of Stakeholder Primacy

Shareholder Theory allows management to ignore the interests of the other constituencies while pursuing its own narrow self‐interest under the guise (the ethical facade) of promoting the interests of the shareholder owners. The Shareholder Theory does not provide any relistic counterweight against management abuse. The Enron example strengthens the arguments for the use of Stakeholder theory and exposes the utter failure of the Shareholder Theory.