Stakeholder theory is not the same as corporate social responsibility csr theory. This is only a partial representation of ed freemans published works on stakeholder theory. Stockholder theory, also known as shareholder theory, says that a corporations managers have a duty to maximize shareholder returns. Aseem nath tripathi introduction there is a continuing debate about what the purpose of the modern corporation should be. A number of scholars have applied stakeholder theory to marketing. The theory represents asynthesisof the stakeholder concept, economic theory, insights from behavioral science, and ethics. Stakeholder theory of the modern corporation, freeman. Dialogue on the stakeholder theory of the corporation. Shareholder theory claims corporation managers have a duty to maximize shareholder returns. Corporations have ceased to be merely legal devices through which. The authors take issue with the foundation of the argument, claiming that the theory loses force and clarity when presented as a descriptive model. Even though the stakeholder theorys ultimate objective is the concerns continued existence, it must be achieved by balancing the interests of all stakeholders, including the shareholders, whose interests are usually addressed through profits.
A stakeholder is a party that has an interest in a company, and can either affect or be affected by the business. The stakeholder theory of the corporation western washington. Thus, this gives rise to a network of dyadic obligations among the stakeholder groups of the corporation. The first aspect of the theory creates a framework for checking the connections between the practice of stakeholder management and the success of a corporations performance. Pdf stakeholders theory and corporate social responsibility in. Examine social responsibility and how it influences stakeholder management differentiate between the systems theory, social network theory, collaboration theory and social exchange theory. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext.
The shareholder and stakeholder theories of corporate purpose by dr. The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. In the intervening years, the literature on stakeholder theory has become vast and diverse. The second part identifies and analyses some of the concerns raised about the theory and the primary points that are directed against the theory. In this sense, stakeholders of a firm can be defined as. The stakeholder theory and how it ties into your corporate.
The stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. In this article, we examine these three aspects of the theory. Stakeholder theory and the corporate objective revisited. The shareholder and stakeholder theories of corporate. Edward freemans stakeholder theory holds that a companys stakeholders include just about anyone affected by the company and its workings. The paper concludes that while the stakeholder theory is attractive in a number of ways, it is lacking in many respects, and it cannot be justified as a theory of the objective of large corporations. Positioning stakeholder theory within the debate on corporate. The stakeholder equilibrium can be implemented by introducing new property rights employee rights and consumer rights and instructing managers to maximize the total value of the firm the value of these rights plus shareholder value. While agency theory asserts that the exclusive focus of corporate governance is to ensure the interests of shareholders, stakeholder theory proposes that corporations should serve all groups or individuals who have a stake in the corporation. Edward freeman a stakeholder theory of the modern corporation freeman, managing for stakeholders humanity argument. These two paths are called the shareholder theory and the stakeholder theory. Stakeholder theory, corporate governance and public management. Stakeholder theory and the corporate objective revisited organization science 153, pp.
Among these, stakeholder theory or stakeholder thinking has emerged as a new narrative to understand and remedy three interconnected business problemsthe problem of understanding. Stakeholder theory is a prominent popular and academic way of understanding business ethics, however no fullscale defense of stakeholder theory exists examines stakeholder theory from the perspective of several fields of study including strategic management, economics, moral and political philosophy, social psychology, and. Stakeholder theory as an ethical approach to effective. 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. The second aspect of the theory is used to describe particular corporations behaviors. The stakeholder theory and how it ties into your corporate objective posted by admin on 1223 categorized as others the stakeholder theory owes its origin in modern business management to the 1984 book strategic management. Corporate social responsibility as a simple example, when a factory produces industrial waste, a csr perspective attaches a responsibility directly to factory owners to dispose of the. In this article, we examine these three aspects of the. It is not the purpose of this paper to provide an overview of the vast literature on corporate social responsibility csr, stakeholder theory sht and the socalled triple bottom line 3bl. Pdf this article summarizes the major features and different schools of thought surrounding concepts such as corporate governance, corporate social. 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. Kantian capitalism scroll down the pdf to locate this reading add to my bookmarks export citation. Company, interest groups, income, stakeholders, value.
Edward freeman many groups have a moral claim on the corporation because the corporation has the potential to harm or benefit them call these groups stakeholders. Pdf there is a widely held view within the general public that large corporations should act in the interests of a broader group of agents than. Edward freeman corporations have ceased to be merely legal devices through which the private business transactions of individuals may be carried on. Edward freeman date 1988 page start 97 page end 106 web address. Concepts, evidence, and implications thomas donaldson georgetown university lee e. Pdf a theory of the stakeholder corporation researchgate. Besides, a stakeholder group might have certain duties and obligations to its own set of stakeholders, and to the other groups of stakeholder of the corporation. Stakeholder identification, who are those groups and individuals who can affect and are affected by achievement of a corporations. Businesses are human institutions populated by real live complex human beings. This article attempts to advance the case for using the stakeholder model as an integrating theme for the field by proposing a formalinstrumental theoryof stakeholder management. The stakeholder approach to corporate governance according to stakeholder theory, companies should design their corporate strategies considering the interests of their stakeholders groups and individuals who can affect or are affected by the organizations purpose freeman, 1984. For the 1st interdisciplinary conference on stakeholders, resources and value creation. Stakeholder theory an overview sciencedirect topics.
A stakeholder approach, a work that set the agenda for what we now call stakeholder theory. One which states that businesses do have social responsibilities. A theory of the stakeholder corporation magill 2015. Linked references are available on jstor for this article. The primary stakeholders in a typical corporation are its investors.
A stakeholder approach, cambridge university press, new york. That view is in opposition to the longheld shareholder theory proposed by economist milton friedman that in capitalism, the only stakeholders a company should care about are its shareholders and thus, its bottom line. Stakeholder theory, corporate governance and public. According to the theory, which was first introduced by milton friedman in the 1960s, a corporation is primarily responsible to its stockholders due to the cyclical nature of business hierarchy. These three aspects of the theory, although interrelated, are quite distinct. Ethical aspects of shareholder value objective cejsh. If there is only one firm, the stakeholder equilibrium is pareto optimal. Stakeholder theory of the modern corporation university of dayton. The corporation has, in fact, become both a method of property tenure and a. In a single sentence, stakeholder theory affirms that those whose lives are touched by a corporation hold a right and obligation to participate in directing it.
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. Murphy, stevens, mcleod, and andersen 1997 contend that the fundamental change is the concept of the entire organisation contributing to create value for the customer, and it includes all the stakeholders who are associated with the organisation. To create value for stakeholders, executives must understand that business is fully situated in the realm of humanity. Economist milton friedman, whose work shaped much of 20thcentury corporate. Though still much used for this purpose, the corporate form has acquired a larger significance.