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Stockholders and Stakeholders: A New Perspective on Corporate Governance
Freeman, R. Edward, and David L. Reed
25/3  (Spring 1983): 88-106

The article shows that the concept of stakeholders in an organization can be used to understand the tasks of the board of directors. The authors argue that a volunteeristic approach to questions of corporate governance which focuses on effective director behavior is preferable to structural change through legislation. It has long been believed that corporations have obligations to stockholders, holders of the firm's equity, that are sacrosanct and inviolable. Corporate action or inaction is to be driven by attention to the needs of its stockholders, usually thought to be measured by stock price, earnings per share, or some other financial measure. It has been argued that the proper relationship of management to its stockholders is similar to that of the fiduciary to the cestui que trustent, whereby the interests of the stockholders should be dutifully cared for by management. Thus, any action taken by management must ultimately be justified by whether or not it furthers the interests of the corporation and its stockholders.
 

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