Stakeholder Theory Analysis: CEO Bonuses and IPOs in Chinese Startups

This essay examines the application of stakeholder theory to the issue of CEO bonuses in Chinese startups, particularly in the context of initial public offerings (IPOs). The article discusses how large bonuses are being awarded to CEOs, potentially at the expense of future shareholders. Stakeholder theory, encompassing ethical, normative, and managerial aspects, emphasizes fair treatment of all stakeholders and considers their power and expectations. The analysis focuses on an article discussing the trend of Chinese startups granting substantial stock awards to CEOs during IPOs, sometimes without performance hurdles. It contrasts this practice with the principles of stakeholder theory, particularly regarding fair pay and the consideration of investor interests. The essay concludes by highlighting the importance of stakeholder theory for competitiveness, sustainability, and ethical business management in the service industry. Desklib offers a range of resources, including similar essays and solved assignments, to aid students in their academic pursuits.

Running head: STAKEHOLDERS THEORY
Stakeholders theory
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STAKEHOLDERS THEORY
CEOs are starting to bank billion dollar bonuses with IPOs
The article chosen here states how the chief executing officers of the start-ups of
China are provided with bonuses. The article states the rich amount which are provided to the
CEOs are coming at the expense of future shareholders which will push startups to take on
public investors. The startups are been kept private as there is a presence of plenty of private
capital to keep them going (Jensen, 2017). The bonuses related to Initial Public Offering
performs to bulk up the share of the founder. The article states how the stakeholder theory are
to be applied while providing bonus to the chief executive officers of the startups of China.
Stakeholders Theory
The theory consisting the ethics of the business and organizational management and
which also directs both values and morals in managing the organization is termed as
stakeholder theory. The strategy of the stakeholder view integrates both views include market
and resource based and also adds to the socio political level. One of the most common
version of the stakeholder theory seeks to define the specific stakeholders of a company
(Antonelli, D'Alessio & Cuomo, 2017). The stakeholder theory consists of an ethical,
normative and positive branch. This theory can be used as an umbrella term that addresses
issues which are associated with the relationship with the stakeholders. The managerial
branch of the stakeholder theory refers to the issues of the power of the stakeholders and how
their relative power affects the organisation with the expectation of the stakeholders. The
normative perspective of the stakeholder theory states that all stakeholders should be fairly
treated and the issues are not directly relevant. Stakeholder theory is different from
Legitimacy theory in a way that it refers to a particular group within a society. The branch of
the Stakeholder theory which is managerial states that the corporate management are likely to
attend the expectations of stakeholders (Strand & Freeman, 2015). This theory mainly

STAKEHOLDERS THEORY
focuses on how the organization is interacting with some particular shareholders. On the
other hand the Legitimacy Theory takes the ‘society’ as a whole. Stakeholders are a group of
individuals who can affect the organization’s achievement or can be get affected by the
achievement of the objective of the organisation. According to the Toyota Australia,
stakeholders are those group of individuals who are affected by the company’s operations.
The idea of the shareholder theory is when there is a duty of the managers to maximize the
interest of shareholders.
Analysis
The power of the stakeholders is to influence the corporate management which can be
seen as the function of the degree of stakeholder’s control over the resources, which is needed
by the organisation. The ethical branch states that the theory have intrinsic rights which
should not be violated. The article states about the startups that China started making public
(Greeven& Wei, 2017). The chief executing officer of Pinduoduo have been offered a stock
worth $1.3 billion without crossing any performance hurdles because the e-commerce
company prepares for Initial Public Offering of the US. JD.com also incurred $US591
million of costs when it went public in the year 2014. As the intrinsic rights of the theory
states that there should be fair working conditions and fair pay, the head of Xiaomi earned
$US1.5 billion. The article also states that when an IPO bonus is no tied to future
performance is unusual because initial public offering is a kind of public offering which is
used for compensating the CEOs (Boone, Floros & Johnson, 2016). Lei Jun already had a
majority voting rights and is one of the largest shareholder and therefore, when he was paid
without performance goals the investors were not happy. As the stakeholder theory is a
theory of business ethics, the article states that according to Frank Bi granting a stock award
is not a good sign in terms of corporate governance for investors.

STAKEHOLDERS THEORY
CONCLUDE
In order to conclude it can be said the stakeholder theory has a huge importance in the
service industry. This approach acts as huge beneficial for the competitiveness and
sustainability in the service industry and also supports ethics in the business management.

STAKEHOLDERS THEORY
Reference list
Antonelli, V., D'Alessio, R., & Cuomo, F. (2017). Beyond Stakeholders Theory: Financial
reporting and voluntary disclosure in Italian SME according to a System dynamics
point of view. Economia Aziendale Online, 7(4), 285-304.
Boone, A. L., Floros, I. V., & Johnson, S. A. (2016). Redacting proprietary information at the
initial public offering. Journal of Financial Economics, 120(1), 102-123.
Greeven, M. J., & Wei, W. (2017). Business Ecosystems in China: Alibaba and Competing
Baidu, Tencent, Xiaomi and LeEco. Routledge.
Jensen, M. C. (2017). Value maximisation, stakeholder theory and the corporate objective
function. In Unfolding stakeholder thinking (pp. 65-84). Routledge.
McLeod, M. S., Moore, C. B., Payne, G. T., Sexton, J. C., & Evert, R. E. (2018).
Organizational virtue and stakeholder interdependence: an empirical examination of
financial intermediaries and IPO firms. Journal of Business Ethics, 149(4), 785-798.
Strand, R., & Freeman, R. E. (2015). Scandinavian cooperative advantage: The theory and
practice of stakeholder engagement in Scandinavia. Journal of business ethics,
127(1), 65-85.