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1 Introduction
In June 2009, more than 1,000 MBA students from several top business schools signed an oath that declared the rejection of the shareholder-oriented business approach and vowed to give equal importance to "shareholders, co-workers, customers and the society in which we operate" ([47] Skapinker, 2009). Whether this is a knee-jerk reaction of MBA students to mitigate the blame of the latest economic crisis on senior executives or the pursuit of a new ideal is beyond the scope of this paper. However, it is clear that these students, among many corporate executives, are opting for the main contending alternative to shareholder- stakeholder theory. The debate between these two theories is not unprecedented. The scandals at Enron, Global Crossing, Tyco International and WorldCom sparked fierce debate as to which of these two theories is superior to the other ([48] Smith, 2003). The decline of many seemingly successful UK banks before the latest financial crisis such as Northern Rock, Royal Bank of Scotland (RBS) and Halifax Bank of Scotland (HBOS) reminded us that this debate is far from over. Indeed, in view of the various characteristics of the crisis, there is an urgency to continue this discussion.
This paper aims to serve this purpose by reviewing some of the existing literature of both shareholder and stakeholder theories and discussing the benefits and problems associated with these frameworks through the lens of the recent financial crisis. It concerns particularly the UK banking and financial services sector because this industry is considered to be one of the primary catalysts of this crisis. Perhaps, more importantly, the problems that plague this sector seemingly epitomise the misguided use of shareholder theory. The main assertion of this paper is that shareholder theory is in itself a sound theory and it is likely that some executives following this theory, rightly or wrongly, have brought disrepute to it. The stakeholder theoretical framework, on the other hand, has yet to asset its influence. It has not managed to supplant shareholder theory because the concept is not yet unambiguously defined, which makes it difficult for the framework to become operational in practical business settings.
This paper is organised as follows: Section 2 first highlights the advantages of shareholder theory. It then discusses the disadvantages...