Shareholder vs. Stakeholder: Two Approaches to Corporate Governance

Most managers in the United States would shed workers to sustain profitability, whereas Japanese firms often consider job security one of their primary concerns. Both approaches, and their economic impact, can be explained through insider and outsider models of corporate governance. A new study examines the different results of similar corporate governance models by studying firms in different countries and closely examining the relationship between … [ Read more ]

Engaging Stakeholders Improves Financial Results

In contrast to the more traditional shareholder approach, the newly emerging stakeholder theory insists that business is about more than just making money. It’s about all stakeholders’ interests, and declares that companies have a social and environmental responsibility to the community at large. In the paper “Maximizing Stakeholders’ Interests: An Empirical Analysis of the Stakeholder Approach to Corporate Governance,” Silvia Ayuso, Miguel Ángel Rodríguez, Roberto … [ Read more ]

The Unpredictable Dollar-Euro Exchange Rate

The rate at which dollars are exchanged for euros impacts our daily lives. So, it’s no surprise that this and other currency fluctuations are studied and debated. What could be called the “classical approach” attributes changes in the exchange rate to changes in GDP and other such variables. Yet, Meese and Rogoff overturned this theory in 1983 by showing that exchange rate changes are unpredictable. … [ Read more ]

Miguel Angel Ariño

Saying that a company’s purpose is to maximize profits is like saying that man exists in order to breathe. The fact that a man cannot live without breathing is one thing, but the ultimate purpose to which all man’s energies must be directed is quite another. Similarly, it is one thing to say that a company cannot survive without a certain minimum of profits, and … [ Read more ]