Question

In Germany and Scandinavia, among others, labor unions have representation on boards of directors or supervisory boards. How might such union representation in the board be viewed under the shareholder versus the stakeholder wealth model?

Answer 1

Stakeholders : have a stake in the company. He/she is interested in performance of the company for multiple reasons other than capital increment.They focus on better wuality of service and business. As employee are pillars of any company, they will act in goodwill of unions whenever there are necessary demands.

All strategies suggested by them will take care of every stakeholder which contributes to longevity of the company. Be it , unions, employees, shareholders, suppliers etc. So, view point is generally neutral to positive. In certain cases. However, certain out of box/unnecessary demands from unions can be rejected by stakeholders.

Shareholders hold equity shares in a company and therefore have an certain ownership in the company. Their goal is to maximise returns on their investments in the company. They are liquid and may exit the company after getting desired profits.They are not liable for debts of company generally except sole proprietor and partnerships companies.

So, they might not care about the Unions demands if they are meant to decrease their returns or get a chunk out of company's profits.They prefer company to focus on expansions using the profits than meeting demands from the profits. So, view point is generally negative to neutral.