Stakeholder Wealth Maximization

One of the shortcomings of the above approach is inefficient redistribution of taxes (as compared to shareholder wealth max approach). Why is this the case? - BN

You want government to redistribute taxes or employers? Who is better equipped for the task?

can you explain it a little bit more? How do taxes come into play in stakeholder management?

Under shareholder max approach redistribution of taxes is done by gov officials. Under stakeholder wealth max redistribution of taxes is done by firm’s management and board. Argument against this is that there is no evidence that this is more efficient.

ok. makes sense. whoever thought CFAI would end up saying Govts. do a fair job at wealth distribution :slight_smile:

I understand the economic argument, but one really needs a definition of “efficient” to answer a question like this. Economic efficiency tends to suggest that if those who have money get to make the decisions about how to spend it and gain the results from using it (i.e. shareholders), that society is better off. I think we can look at something like Three Gorges Dam and say that it might not actually be a good thing for all those people to lose their homes while owners of capital profit from the dam, whether or not the money is being spent most efficiently. The stakeholder approach suggests that people who lose their homes in that instance ought to have some input into whether this happens, whether or not they are part owners in the company.