Although stockholder and stockholder management are agreed on the purpose of a firm to conduct economic activity in ways that benefit everyone there is disagreement on how this is done in particular the stockholder view makes it a take of management to ensure that this outcome occurs whereas on the economic approach mutual benefit is a result of the opportunity each group has to make mutually advantageous agreements that is a firm works like a market in creating mutual benefit from the opportunity to trade just as a market achieves this result without any person directing it so too does a firm in theory
In practice though some stockholders fail to benefit as they should from a firm's activity this may occur for a variety of including management's willful violation of agreements market failures and externalities or third-party effects for example a company might fail to make expected contributions to a pension plan sell a product to consumers with undisclosed defects or operate a polluting factory in general it is the responsibility of government to prevent or correct for these possibilities but managers especially those at the top of a business organization might also be held to have some responsibility stockholder management asks managers to recognize that a firm should benefit all stockholders to be aware when it fails to do so and to take some responsibility for correcting the problems that lead to this failure just as we all have a responsibility to make sure the markets work as they should to produce a benefit for all so too do we all including managers have a responsibility for ensuring the proper functioning of firms
Second corporate governance is concerned with how business organization should be legally structured and controlled the provisions that management has a fiduciary duty to serve shareholder interests and that shareholder wealth maximization should be the objective of the firm dictate how decisions about major investment decisions and overall strategy should be made they tell us very little about how managers should actually go about their task of managing a firm so as to create wealth for stockholder or anyone else
everyone can benefit from the productive activity of a firm only if there is a vision for a creating a valuable product or service as well as a strategy for achieving this vision
Freeman and his colleagues (freeman wicks and parmar 2004 p.364) describe stockholder management as addressing this matter of what managers and other need to do to create wealth they write
Economic value is created by people who voluntarily come together and cooperate to improve everyone's circumstances managers must develop relationships inspire their stockholder and create communities where everyone strives to give their best to deliver the value the firm promises