Introduction
Professionals in financial management are concerned with the practical significance of the numbers that appear in financial documents. Given a set of information about certain financial behavior, they ask, what do the figures mean? There are several goals of financial management, one of which is maximizing value without harming shareholders.
The Stakeholder Concept
The stakeholder concept is associated with the concept of corporate governance. Corporate governance involves regulatory and market mechanisms and the relationships that exist between a company's management, its board, its shareholders, other stakeholders, and the goals for which the corporation is governed. Stakeholders are those who are affected by an organization's activities. The stakeholders can be internal, like owners or employees. They can also be external, like customers, suppliers, the government, local communities, and the environment . Some stakeholders are involved directly in economic transactions with the business. Others are either affected by, or able to affect, an organization's actions without directly engaging in an economic exchange with the business (for example, trade unions, communities, activist groups, etc). Because of the breadth of the term stakeholder, there are different views as to whom should be included in stakeholder considerations.
Environment as stakeholder
The environment can be seen as a stakeholder. Maximizing value without harming stakeholders is, for some, one of the goals of financial management.
Stakeholders vs. Shareholders
In the field of corporate governance and corporate responsibility, a major debate is currently occurring about whether a firm or company should make decisions chiefly to maximize value for shareholders, or if a company has obligations to other types of stakeholders. This increased after the financial crisis of the late 2000s, when concerns deepened about the potential of companies to lower the welfare of other stakeholders while maximizing their shareholder value. While the Anglo-American (US and UK) business "model" tends to emphasize the interests of shareholders over other implicated parties, some European countries formally recognize other stakeholders in corporate governance decisions.
Some people who argue that businesses should consider other stakeholders, like the government or the environment, argue that an attention to these types of stakeholders is intimately intwined with market value. They also argue that a holistic view can enhance general outcomes for all the stakeholders that are involved. Still others argue that stakeholders, even if they are not considered in business decisions, should at the very least not suffer harm, and that businesses should maximize value only if they can do so without generating harm.