Hello,

Please I need help with this assignment and my deadline is tomorrow 4th October 2015, 6:30 Pm WAT. I sincerely apologies for contacting my tutor late.

Question:

To complete this Collaboration:

BySunday (Day 4), in an approximately 750-1,000 word response, address the following issues/questions:

Use your review of the two assigned articles as support to prepare an integrated collaboration response that will address the following question:

What do you believe is an appropriate objective for a manager in the Accounting and Finance fields?

In responding to this question, you might want to consider some of the following:

• What are the challenges that managers face in efforts to be socially responsible?
• How might a self-serving manager exploit social responsibility for his or her own personal gain?
• Do budgeting processes plus strategic management accounting tools encourage a shareholder- or stakeholder-centric focus?
• What mechanisms might help to bind managers interests to those of shareholders or stakeholders?
• Does a positive NPV equate to a project that adds value to the typical stakeholder?

Draw upon examples of existing or recommended practice from the organisation that you researched for your Finance and Accounting for Managers Module Project, plus from your professional background, as well as trends experienced globally and as discussed in the articles.

This two article are required to answer this question and both of them are attached.

1.Jensen, M.C. (2010) Value maximization, stakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance, 22 (1), pp. 32-42.

2.Letza, S., Sun, X. & Kirkbride, J. (2004) Shareholding versus stakeholding: a critical review of corporate governance.Corporate Governance,12 (3), pp. 242-262.

Please provide 750 word answer and I will completed the 250 with a practical example on my own.

Regards,

Bukola.

242 CORPORATE GOVERNANCE Shareholding Versus Stakeholding: a critical review of corporate governance Steve Letza*, Xiuping Sun and James Kirkbride The current debate and theorising on corporate governance has been polarised between a shareholder perspective and a stakeholder perspective. While advocates and supporters of each camp attempt to justify the superiority, rationality and universality of each model in theory, they rarely pay attention to the age-old conceptions, assumptions and presuppositions underpinning their perspectives which are less credible and valid in matching the continually changing practice of corporate governance. This paper serves as a survey and critical review of major current theories on corporate governance. In so doing, it reveals the inadequacy of conventional approaches employed in corporate governance theorising. It calls for a new mode of thinking in analysing corporate governance and concludes by outlining a new direction of research in this field. Keywords: Shareholding, stakeholding, corporate governance, modes of thought, dichotomy, critical review Introduction M *Address for correspondence: The Centre for Director Education, Leeds Metropolitan University, Bronte Hall, Beckett Park, Leeds LS6 3QS. E-mail: srletza@lmu.ac.uk Volume 12 uch of the current debate on corporate governance has centred on practical issues, including corporate fraud, the abuse of managerial power and social irresponsibility. In essence, the debate is about how to solve these perceived problems in corporate practice. For many commentators corporate governance is about building effective mechanisms and measures, either in order to satisfy current social expectations or to satisfy the narrower expectations of shareholders. In the UK, several influential proposals have been produced in recent years in an attempt to settle the practical issues (Cadbury Committee, 1992; Greenbury Committee, 1995; Hampel Committee, 1998; Turnbull Committee, 1999; Higgs 2003). In conjunction with the practical debate sits a debate on the theoretical framework and the quest for the optimal or superior theoretical model of corporate Number 3 July 2004 governance. The debate has touched many deep-seated, fundamental questions, for example what is the purpose of the corporation? In whose interest is the corporation is run? Who should control the corporation? How should they control it? In general, corporate governance is about the understanding and institutional arrangements for relationships among various economic actors and corporate participants who may have direct or indirect interests in a corporation, such as shareholders, directors/managers, employees, creditors, suppliers, customers, local communities, government, and the general public (see Figure 1). Different perspectives in theory result in different diagnoses of and solutions to the problems of corporate governance practice. Some current perspectives on corporate governance have been categorised into two contrasting paradigms: shareholding and stakeholding (see, for example, O'Sullivan, 2000; Blackwell Publishing Ltd 2004. 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. SHAREHOLDING VERSUS STAKEHOLDING Government Shareholders Creditors Customers Directors Managers Suppliers Community Employees General Public Figure 1: Relationships in corporate governance Kakabadse and Kakabadse, 2001; Friedman and Miles, 2002). Such a division hinges on the purpose of the corporation and its associated structure of governance arrangements understood and justified in theory. On the one side is the traditional shareholding perspective, which regards the corporation as a legal instrument for shareholders to maximise their own interests - investment returns. A threetier hierarchal governance structure, i.e. the shareholder general meeting, the board of directors and executive managers, is given in company law in an attempt to secure shareholders' interest (it is often called the mechanism of \"checks and balances\"). On the other side is the stakeholding perspective newly emerged in the later 20th century, which positions itself on the contrary to the traditional wisdom and views the corporation as a locus in relation to wider external stakeholders' interests rather than merely shareholders' wealth. Employees, creditors, suppliers, customers and the local community are major stakeholders often mentioned and emphasised within a broad definition of stakeholding (e.g. Freeman, 1984). Stakeholders' participation in corporate decision-makings, long-term contractual associations between the firm and stakeholders, trust relationships and business ethics are the main proposals for stakeholding management. Current analyses on corporate governance draw more attention to evaluating and judging the superiority of either the shareholder model or stakeholder model and often take part in one-sided arguments, sometimes with a slight modification such as an enlightened shareholder model (see Gamble and Kelly, 2001) and an enlightened stakeholder Blackwell Publishing Ltd 2004 243 model (Jensen, 2001). The analyses seldom step outside the narrow confines of their respective interests to investigate the theoretical genealogy, ideology, presuppositions and value systems behind and underpinning the perspectives or paradigms. This conventional approach constrains their views and raises serious questions as to the theoretical validity and credibility of these models. To understand the current fierce debate on corporate governance, it is important to stand back from the one-sided arguments with their taken-forgranted ideas. Reflexive thinking is needed through critical examination of the major theorems, assumptions and origins of both perspectives. This paper serves as a survey and critical review of both the shareholder and stakeholder perspectives on corporate governance. A major finding in this paper is that although the current prevailing analyses may have some merits and insights at a particular point in time, they are, however, overabstracted and over-static in modelling and theorising corporate governance. They build their \"rational\" arguments and \"ideal\" models on traditional assumptions and theories that were generated and/or constructed in centuries-old societal contexts, far removed from the current modern business environment where, for example, the boundary of the firm has become blurred in terms of global markets and where physical assets are far less important than human resources, knowledge and information. They ignore the continuous change of natural and social realities and distance themselves from the dynamics of corporate governance in practice. The economic approach mostly employed in their analyses tends to be culture-free, historically separated and contextually unrelated. We note that very recent studies have seriously questioned the traditional theory of the firm and called for a new direction in building a new theory of the firm that reflects the modern day business environment (e.g., Zingales, 2000; Rajan and Zingales, 2000). Other studies in law, sociology, politics and culture in relation to corporate power and control may also offer some insights into rethinking corporate governance and overcome part of the shortcomings of current models. It is the conventional modes of thought and associated approaches such as dualism/dichotomy, idealism/perfectionism, universality and permanency that endorse and justify the polarised shareholding and stakeholding models. This paper is structured as follows. In the next section current major theoretical models in corporate governance are summarised based on the mainstream typology. These models are presented as examples to indicate Volume 12 Number 3 July 2004 244 CORPORATE GOVERNANCE how the two academic schools of shareholding and stakeholding have been divided into opposing camps. Following this, the major theorems and arguments of the shareholding and stakeholding perspectives are examined respectively, from which their basic assumptions and presuppositions are clearly observed. Attention is given to the shifting character of the corporate reality as well as the perspectives themselves, from which the superiority of both theoretical models is questioned. Recent new challenges to the traditional theory of the firm and stakeholder theory are reviewed. Finally, we conclude the paper with some remarks on the limitations of current approaches, particularly the conventional modes of thought, on analysing corporate governance issues and call for a new way of thinking. The conclusion of this paper is that modes of thought do matter in understanding corporate governance. The corporate governance debate: shareholding vs stakeholding As current analyses on corporate governance approach the governance issue from different perspectives and base their views on different assumptions and presuppositions, there exist quite diverse theoretical models which can be identified in the literature. Major surveys and/or reviews of corporate governance models have been conducted by Hawley and Williams (1996), Shleifer and Vishny (1997), Turnbull (1997b) and Keasey et al. (1997). Hawley and Williams (1996) suggest four major views in the corporate governance debate in the US, i.e. the finance model, the stewardship model, the stakeholder model and the political model. The dominant model in the late 20th century is the finance view of corporate governance, which is concerned with a universal agency problem and how to adopt appropriate incentive systems and/or the mechanism of takeover to solve this problem. While the finance model is focused on shareholder rights and control in publicly held corporations, Shleifer and Vishny (1997) extend the finance view of the firm to include not only shareholders, but also debt-holders and bankers. In contrast to the dominant finance model, the stewardship model (see Donaldson and Davis, 1994) assumes a different nature of agent/managerial behaviour and argues that managers are trustworthy and should be fully empowered. The stakeholder model further extends the purpose of the corporation from maximising shareholders wealth to delivering wider outputs to a range Volume 12 Number 3 July 2004 of stakeholders and emphasises corporate efficiency in a social context. Departing from the prevailing economic analysis of corporate governance, the political model (e.g. Pound, 1992, 1993), according to Hawley and Williams (1996), is a non-market approach for monitoring management, such as shareholder democracy and negotiation. In Turnbull's (1997b) view, such a political model focuses only on the micro level of politics in corporations, the broader political context such as the political tradition, ideology, government intention, regulation and institution is considered elsewhere (e.g. Letza and Smallman, 2001). Turnbull also reviews other models based on culture, power and cybernetics, in addition to the above four models. Based on Blair's (1995) taxonomy, Keasey et al. (1997) also summarise four competing models in the current studies of corporate governance, each with its own diagnosis of and solutions for the Anglo-American governance issues. The four schools of thought are the principal-agent or finance model, the myopic market model, the abuse of executive power model, and the stakeholder model. Here, the principal-agent or finance model and the stakeholder model are the same as those in the classification of Hawley and Williams, as mentioned above. In the view of the principalagent or finance model (e.g. Manne, 1965; Jensen and Meckling, 1976), although the separation of ownership and control may provide the opportunities for managerial divergent behaviours from maximising shareholders' value, the markets - particularly the capital market, the managerial labour market and the market for corporate control - provide the most effective restraints on managerial discretion (note that this assumption is rejected by Pound (1992, 1993) for the reason that a new form of governance based on politics rather than finance would be more effective and less expensive). This school claims that corporate governance failures are best addressed by removing restrictions on factor markets and the market in corporate control, together with strengthening the incentive system (bonuses, stock options, etc.), introducing a voluntary code and appointing non-executive directors. Though the myopic market model (e.g. Charkham, 1994; Sykes, 1994; Moreland, 1995) agrees with the principal-agent or finance model that the maximisation of shareholders' interests is the focus, it argues that the fundamental flaw of the Anglo-American corporate governance system is its excessive concern with short-term market value. Certain long-term expenditures, particularly capital investment and research and development Blackwell Publishing Ltd 2004 SHAREHOLDING VERSUS STAKEHOLDING spending, are systematically undervalued by the markets because of the immediate pressure or interest from hostile takeovers. The shortsighted markets thus force otherwise diligent managers to concentrate solely on the current share price and ignore the long-term value creation of the firm, or take decisions against the threat of hostile takeover at the expense of shareholders interest. The solution for improving corporate governance is to provide an environment in which shareholders (particularly large and/or institutional shareholders) and managers are encouraged to share longrun performance horizons, such as increasing shareholders' loyalty and voice, reducing the shareholder exit, encouraging \"relationship investing\