This page intentionally left blank stakeholder theoryin 1984, r. The stakeholder theory is a theory of organizational management and business ethics that. The state of the art 405 continue to provide useful insights into the practice of sustainable and ethical value creation. The state of the art examines this body of research and assesses its relevance for our understanding of modern business.
Stakeholder theory is about value creation and trade and how to manage a business effectively. In the intervening years, the literature on stakeholder theory has become vast and diverse. Scholars around the globe have published over 36,000 articles and books using stakeholder theory. These relationships can be framed in a variety of ways. From the author of the landmark 1984 title, strategic management. Each of these framings will be more or less useful for certain purposes.
Edward freeman published his landmark book, strategic management. This belief helped shape his shareholder theory of capitalism. From the stakeholder to stakeholder theory springerlink. The stakeholder theory evolved in different forms over the period, has assumed much popularity and a distinct place in the business ethics literature.
Everyday low prices and free delivery on eligible orders. Edward freeman published his landmark book, strate. In 1967, community groups in the united states invited themselves to an eastman kodak agm against a backdrop of racial tension and mass unemployment amongst greater clevelands black population. In our paper we have explored the concepts of business ethics and corporate social responsibility with a perspective that meaningfully csr should be seen in the context of. A stakeholder approach,1 much less be concerned with its main arguments some 25 years later. Attracted a combination of attributes and powers and attained degree of prominence entitling it to be dealt with as a major social institution 2. The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. Multistakeholder participation is a specific governance approach whereby relevant stakeholders participate in the collective shaping of evolutions and uses of the internet in 2005, the working group in internet governance wgig, set up by the world summit on the information society wsis, defined internet governance as. We begin by offering a short history of the stakeholder concept and the three problems it was designed to solve. It is global in scope, well documented, and coherently argued. A stakeholder approach, comes a response to the resultant literature in the intervening years. Examples of a companys internal and external stakeholders.
The term stakeholder partie prenante in french is used in different ways by specialists and members of the public. This book examines this body of research and assesses its relevance for our understanding of modern business. In this article, we examine these three aspects of the theory. In the two studies reported here, we used stakeholder theory to examine managerial decisions about balancing stakeholder interests. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. Protesting students invoking stakeholder theory at shimer college in 2010. Preston university of maryland the stakeholder theory has been advanced and justified in the man agement literature on the basis of its descriptive accuracy, instrumen tal power, and normative validity. At its best it may be an idealized and abstract view of markets built around the goals of prediction, not around the way that actual business works. How to escape poverty is your thinking keeping you poor. An example of this argument has been advanced by thomas donaldson and lee preston, who argue that stakeholder groups.
All the mentioned thoughts and principles of the stakeholder concept are known as normative stakeholder theory in literature. If stakeholder theory is to solve the problem of value creation and trade, it must show how business can in fact be described through stakeholder relationships. Managers have special obligation to stockholders a. Shareholder theory economist milton friedman, whose work shaped much of 20thcentury corporate america, was a believer in the free market system and no government intervention. Among these, stakeholder theory or stakeholder thinking has emerged as a new narrative to understand and remedy three interconnected business. Thus, this gives rise to a network of dyadic obligations among the stakeholder groups of the corporation. Edward freeman of the darden school of business at the university of virginia gives insights into stakeholder theory. Stakeholder theory quotes showing 11 of 1 economics may not fundamentally be about value creation in real business. Download one of the free kindle apps to start reading kindle books on your smartphone, tablet, and computer.
Towards a stakeholder theory of strategic management. Stakeholder theory, value, and firm performance business. Stakeholder theory outline stakeholder theory of the. Williamson, o 1985, the economic institutions of capitalism free press, new york. In the intervening years, the literature on stakeholder theory has. Stakeholder theory is widely recognized as a management theory, yet very little research has considered its implications for individual managerial decisionmaking.
Stakeholder theory provides an appropriate lens for considering a more complex perspective of the value that stakeholders seek as well as new ways to measure it. The opposite theory is the broader model of corporate social responsibility. Subsequently, we turn to outlining and evaluating the uses of this concept in various. On the stakeholder theory side, ethical components can be drawn from several sources including the principles of corporate rights and corporate effects evan and free man 1988, pragmatism freeman et al. Even competitors are sometimes counted as stakeholders their status being. For the wider public, it is a generic term, equivalent to citizen, to anyone taking part in public life. Business ethics and corporate social responsibility is. The stakeholder theory intends to balance economics and ethics issues connected with corporations operations, so it can be said that the theory takes in the complexity of the world.
Stakeholders may bring an action against the directors for failure to perform the required duty of care freeman 2004. A viable alternative although the recognition of stakeholder obligations has been with us since the birth of the modern corporate form, the development of a coherent stakeholder theory awaited a shift in legal thinking from a perspective on shareholders as owners to one of investors, more on a par with providers of other inputs that a company needs to. Stakeholder theory is a a conceptual framework of business ethics and organizational management which addresses moral and ethical values in the management of a business or other organization. This paper argues that the notion of value has been overly simplified and narrowed to focus on economic returns. While stakeholder theory s state of the art needs some expansion and updating, particularly in the managerial realm, this book remains an extensive record of academic effort to date and additional areas to be included and explored further. Among these, stakeholder theory or stakeholder thinking has emerged as a new narrative to understand and remedy three interconnected business problemsthe problem of. An important difference is that property rights theory seeks a set of market frictions to 2 the shareholder vs. This article seeks to expand business and society research in a number of ways. Many business courses introduce students to the stakeholder theory of management freeman, 2007 which offers a theoretical model that effectively opposes shareholder models in which decisions end up being viewed solely from the perspective of what might serve the firms financial goals. The purpose of this article is to pose several challenges to this assumption, from within the framework of managerial capitalism, and to suggest the bare bones of an alternative theory, a stakeholder theory of the modern corr. Concepts, evidence, and implications thomas donaldson georgetown university lee e. Stakeholder theory, corporate governance and public. Stakeholder theory as a basis for capitalism springerlink.