This belief helped shape his shareholder theory of capitalism. Stakeholder theory has seen growing uptake in higher education in the late 20th and early 21st centuries. Shareholder theory economist milton friedman, whose work shaped much of 20thcentury corporate america, was a believer in the freemarket system and no government intervention. It is perhaps more familiar in its narrow sense in which the stakeholder groups are limited to stockholders, customers, employees, suppliers. Agency and organisational economics theories predict that when the ceo also holds the dual ro. After demonstrating that a companys interest is not necessarily synonymous with the interests of its shareholders, a proposition will be made that board members should always highlight social interests. Freeman, harrison and zyglidopoulos discuss the foundation concepts and implementation of stakeholder management as well as the advantages this approach provides to firms and their managers. Finally, an alphabetical bibliography of works used in the preparation of this study is provided in the seventh section. 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.
The stakeholder approach in project management within various industrial sectors, especially construction and information services, is an internationally recognized professional discipline, which enjoys support from a growing community of researchers, scholars, and enquiring practitioners. Determinants of corporate social responsibility disclosure. Stakeholder theory, value, and firm performance cambridge core. Distinctions in descriptive and instrumental stakeholder theory. Kineman ap literature and composition 10 december 2014 plato influenced theory is system through which we determine right and wrong conduct thesis the difference between right and. In order to control this process, a strategic plan is required.
If you continue browsing the site, you agree to the use of cookies on this website. Indeed, it is a theory that seeks to explain the functioning of the management process and taking into account the interests of stakeholders. Texts derived from such discussions have gone forth and multiplied, filling up. Stakeholder theory as a model for sustainable development in ecotourism the concept of the stakeholder in a tourist company. Stakeholder theory scholars have recently addressed two crucial calls.
The main benefit is that it forces the corporation to act in the interests of all the stakeholders. The strategic management research literature has begun to utilize and develop both the classical and modern property rights theory in recent years e. Edward freeman published his landmark book, strategic management. Stewardship theory is a theory that managers, left on their own, will indeed act as responsible stewards of the assets they control this theory is an alternative view of agency theory, in which managers are assumed to act in their own self interests at the expense of shareholders in american politics, the stewardship theory is where a president practices a governing style based on belief. An alternative enlightened shareholder theory will be proposed, inspired by jensens enlightened stakeholder theory 2001. The stakeholder theory was first proposed in the book strategic management.
The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. Yet the concept of the stakeholder is unclear, and research around it often muddled. Stakeholder theory, value, and firm performance business. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory which includes the modern theory of property rightsis fundamental. These three aspects of the theory, although interrelated, are quite distinct. It seeks to help leaders understand the stakeholders and direct. Value maximization, stakeholder theory, and the corporate objective function by michael c. Distinctions in descriptive and instrumental stakeholder. It seems pertinent to know these forms of stakeholder theory and distinguish between them for better understanding of the subject. Value maximization, stakeholder theory, and the corporate. It identifies stakeholder expectations and power and helps business planners in understanding political priorities johnson, scholes, and whittington, 2006. In a corporate context, the term stakeholder was introduced in. The theory argues that a firm should create value for all stakeholders, not just shareholders. Edward freeman originally detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in managing an.
An introduction to stakeholder theory linkedin slideshare. The shareholder theory is an idea that has been predominate in american business practices for the last 25 years as of 2015, according to the economist. Stakeholder theory, corporate governance and public. Stakeholder theory is a component of the larger stakeholder management, which creates positive relationships with stakeholders by managing their expectations and objectives. Using cognitive mapping tool we seek to bring together all of these definitions and derive the original definition of this concept, which alone represents a core reference for the field of corporate governance. Stakeholder theory, value, and firm performance volume 23 issue 1 jeffrey s. It draws together research of over thirty years as it has been applied in a number of business contexts, in a way that allows readers to understand the evolution of theory, how it has been applied and what future avenues need exploration. First, we discuss different ways of understanding donaldson and. In the intervening years, the literature on stakeholder theory has become vast and diverse. Shareholders theory and stakeholders theory are the two normative theories of business ethics and corporate social responsibility. One notices, after little more than a cursory glance at stakeholder theory, that pining down exactly what a stakeholder is, is exceedingly difficult.
Normative theory of business ethics empirical theory of management. According to most scholars in the field, stakeholder theory is not a special theory on a firms constituencies but sets out to replace todays prevailing neoclassical economic concept of the firm. Enron, tyco international and worldcom inter alia, have demonstrated in no uncertain terms that the shareholder theory is severely flawed. Conceptual enquiry, essentially contested concept, metatheory, stakeholder definitions, stakeholder classification. Numerous views of stakeholder theory are presented in the literature though a key distinction can be drawn between the tenets of stakeholder theory and the conventional inputoutput model of the firm which see firms as converting investor, supplier, and employee inputs into customer outputs donaldson and preston, 1995. Stakeholder theory looks at the relationships between an organization and others in its internal and external environments. Arnold schwarzenegger this speech broke the internet and most inspiring speech it changed my life. A stakeholder approach, a work that set the agenda for what we now call stakeholder theory. Stewardship theory the impartiality of the board is compromised. Studies of higher education first began to recognize students. In this way, stakeholder theory is similar in large degree with alternative models of strategic management such as resource dependence theory, p. 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.
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. These are the basic principles of the stakeholder theory and the model certainly offers us an alternative to the stockholder model. The stakeholder theory and the common good article pdf available in journal of business ethics 179. Stakeholder theory is about creating more value at its core. Stakeholder mapping stakeholder analysis howandwhat. One influential definition defines a stakeholder in the context of higher education as anyone with a legitimate interest in education who thereby acquires a right to intervene. This book examines this body of research and assesses its relevance for our understanding of modern business. I have attempted to answer these calls by developing a theoretical framework that links together stakeholder management. But who should share the value that is created varies from managers view. Kenneth goodpaster seems to think so and his article tries to address this problem. It is obvious that freemans definition, given above in section 2. Stakeholder mappinganalysis is the process of understanding the stakeholders. Jun 29, 2012 stakeholder theory scholars have recently addressed two crucial calls.
The stakeholder theory evolved in different forms over the period, has assumed much popularity and a distinct place in the business ethics literature. Stakeholder theory definition in the cambridge english. Stakeholder, any individual, social group, or actor who possesses an interest, a legal obligation, a moral right, or other concern in the decisions or outcomes of an organization, typically a business firm, corporation, or government. As for the instrumental dimension of stakeholder theory, it focuses mainly on the role of leaders. Early stakeholder theorists such as dill 1975 and freeman and reed. Both of them are theories about how corporate leaders deal in their business environment by each of their different perspectives, one is emphasizing to put priority on shareholders interests, the other is emphasizing to put priority on larger business. A conceptual framework of business ethics and organizational management which addresses moral and ethical values in the management of a business or other organization. Moralist theory key people who influenced the theory plato aristotle horace backround aren saini ms. 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. Jensen, the monitor group and harvard business school n most industrialized nations today, economists, management scholars, policy makers, corporate executives, and special interest groups are engaged in a 2001 michael c. 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. 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 research on social discourse in societies, firms, and organizations written by researchers working in fields such as management, corporate governance, accounting and finance, strategy, sociology, and politics often make reference to the term stakeholder. Define how the organization needs to deal with its stakeholders in fair and.
Stakeholder theory is a view of capitalism that stresses the interconnected relationships between a business and its customers, suppliers, employees, investors, communities and others who have a stake in the organization. The paper argues that the normative theory elaborated by critical theorists such as habermas exhibits important advantages over its rivals and that these. The stakeholder theory has been in the management agenda for about thirty years. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. If the point of stakeholder theory is to take seriously the responsibilities the corporation has towards the various stakeholder groups this has to entail more than simply enumerating them. Stakeholders either affect or are affected by the achievement of.
Nor do i dwell on the definition of what a stakeholder is, as the traditional definitions given by freeman. This theory constitutes a core issue in pseudo disputes today, a state of affairs attesting to the status of the serious thing that is the firm, and translating the existence of an american intellectualism in the field of management sciences. Stakeholder theory stakeholder management and strategic planning slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. That is, each of these stakeholder groups has a right not to be treated as a means to some end, and therefore must par ticipate in determining the future direction.
Therefore, it is insufficient to the task of stakeholder accountability. The book is a great tool for those who want to have a deep understanding of different perspectives of stakeholder theory. According to most scholars in the field, stakeholder theory is not a special theory on a firms constituencies but sets out to replace todays prevailing. Edward freeman s stakeholder theory holds that a companys stakeholders include just about anyone affected by the company and its workings. Towards a stakeholder theory of strategic management. Operating business for the ultimate benefit of the shareholder is challenged by the stakeholder theory, which considers shareholders and other parties involved, including the customers and. Stakeholder theory attempted to describe, prescribe, and derive alternatives for corporate governance that included and balanced a multitude of interests. First, we discuss different ways of understanding donaldson and prestons 1995 taxonomy.