The current business environment is characterised by the importance of Essay

The current business environment is characterised by the importance of the investor and the drive for shareholder value - Essay Example When we talk about 'The current business environment is characterised by the importance of the investor and the drive for shareholder value' we will be talking in the perspective of Business and accounting managers. Henry Mitzberg, the Cleghorn professor of Management Studies, Mcgill University, started the debate by putting the blame on the students of Business Schools. He states that the 'Shareholder value is an antisocial dogma that has no place in a democratic societyIt breeds a society of exploitationsit is bad for business (Mitzberg, 2004, p 154). He alleges that the students of business schools get the impression that the organisations' share price is the only performance measure worth worrying about. Dr. Nick Tiratsoo of Nottingham University Business School has published a paper 'Mitzberg, shareholder value, and the business school: who has a case to answer' where he, tries to explore Mitzberg's argument about shareholder value and the business schools. He states, 'The conclusion offered that Mitzberg has substantially overstated his case, and thus clouded rather clarified a necessary debate about how business schools are to evolve in the future'. A corporation is essentially defined in terms of its legal status and the ownership of assets. Corporations are typically regarded as artificial persons in the eyes of the law. Corporations are notionally owned by shareholders. Managers and Directors have a fiduciary responsibility to protect the interests of the shareholders. It was Milton Freedman, who in his classic article 'The Social responsibility of business is to increase its profit vigorously' argued against the notion of social responsibilities of corporations. He professed that only the human beings have the moral responsibility for their actions. Its managers' responsibility to act solely in the interest of the shareholders. Social issues and problems are the proper province of the state rather than corporate managers. Freedman defines, 'A stakeholder in an organization is . Any group or individual who can affect or is affected by the achievements of the organizations' objectives.' Shareholder Value as defined by Value Based Management.net 'the definition of shareholder value is the value of the company minus the Future claims (debts). The value of the company can be calculated as the Net Present Value of all Future cash flows plus the value of the non operating assets of the company'. There is a great debate on the importance of Stakeholders Value over Shareholders Value. The Shareholder Value perspective emphasizes on Profitability over Responsibility. It relates the success of an organization by its share price, dividends and economic profit. The Stakeholders perspective on the other hand emphasizes on Responsibility over Profitability. It suggests that an organizations success should be measured by the satisfaction of its stakeholders i.e. customers, employees, society in general and also its shareholders. Sir Brian Pitman, senior Advisor, Morgan Stanley on his speech