Final answer:
The first law of business in seeking competitive advantage has two main theories: caring for shareholders, which emphasizes maximizing shareholder wealth, and caring for stakeholders, which involves balancing the interests of all parties impacted by the firm.
Step-by-step explanation:
In seeking competitive advantage, the first law of business is a debated topic between caring for shareholders versus caring for stakeholders. Shareholder primacy theory advocates for the obligation of a firm's managers to act solely in the interest of its shareholders. This is because shareholders own a portion of the company by investing their capital and, as per this theory, managers are expected to maximize shareholder wealth. In contrast, stakeholder theory contends that managers should balance the interests of all stakeholders, which encompasses anyone who has a stake or interest in the firm, including employees, customers, the community, and beyond.
Both perspectives have their own moral and economic reasoning. Shareholder primacy takes a deontological stance on corporate governance, focusing on the duty to cater to the business owners. Conversely, stakeholder theory brings a broader ethical view, considering the impacts on and the rights of all those affected by business activities. Over time, legal and social changes often reflect the ever-evolving debate between these models, such as legislation related to workplace safety (e.g., acts enforced by OSHA) and the varying expectations of corporate responsibilities towards society and the environment.