Stakeholder theory

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.[1] It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory.

The stakeholder view of strategy integrates a resource-based view and a market-based view, and adds a socio-political level. One common version of stakeholder theory seeks to define the specific stakeholders of a company (the normative theory of stakeholder identification) and then examine the conditions under which managers treat these parties as stakeholders (the descriptive theory of stakeholder salience).[2]

In fields such as law, management, and human resources, stakeholder theory succeeded in challenging the usual analysis frameworks, by suggesting that stakeholders' needs should be put at the beginning of any action.[3] Some authors, such as Geoffroy Murat, tried to apply stakeholder's theory to irregular warfare.[4]

History

Concepts similar to modern stakeholder theory can be traced back to longstanding philosophical views about the nature of civil society itself and the relations between individuals. In Miles v Sydney Meat-Preserving Co Ltd (1912), which saw the rejection of a shareholder's legal right to a dividend, Australian chief justice Samuel Griffith observed that:

"The law does not require the members of a company to divest themselves, in its management, of all altruistic motives, or to maintain the character of the company as a soulless and bowelless thing, or to exact the last farthing in its commercial dealings, or forbid them to carry on its operations in a way which they think conducive to the best interests of the community as a whole.[5]"

The term "stakeholder" in its current use first appeared in an internal memorandum[6] at the Stanford Research Institute in 1963.[7] Subsequently, a "plethora" of stakeholder definitions and theories were developed.[8][9]

Development

Numerous articles and books written on stakeholder theory generally identify Freeman as the "father of stakeholder theory".[14] Freeman's Strategic Management: A Stakeholder Approach (1984) is widely cited in the field as being the foundation of stakeholder theory, although Freeman himself refers to several bodies of literature used in the development of his approach, including strategic management, corporate planning, systems theory, organization theory, and corporate social responsibility. A related field of research examines the concept of stakeholders and stakeholder salience, or the importance of various stakeholder groups to a specific firm.

An anticipation of such concepts, as part of Corporate Social Responsibility, appears in a publication that appeared in 1968 by the Italian economist Giancarlo Pallavicini, creator of "the decomposition method of the parameters" to calculate the results are not directly economic activity of enterprise, regarding ethical issues, moral, social, cultural and environmental.[15]

More recent scholarly works on the topic of stakeholder theory that exemplify research and theorizing in this area include Donaldson and Preston (1995),[16] Mitchell, Agle, and Wood (1997),[17]

Implementation in other fields

Stakeholder theory succeeds in becoming famous not only in the business ethics fields; it is used as one of the frameworks in corporate social responsibility methods. For example, ISO 26000 and GRI (Global Reporting Initiative) involve stakeholder analysis.[25]

In the field of business ethics, Weiss, J.W. (2014) illustrates how stakeholder analysis can be complemented with issues management approaches to examine societal, organizational, and individual dilemmas. Several case studies are offered to illustrated uses of these methods.

Stakeholder theory has seen growing uptake in higher education in the late 20th and early 21st centuries.[26] 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.[27] Studies of higher education first began to recognize students as stakeholders in 1975. External stakeholders may include employers. In Europe, the rise of stakeholder regimes has arisen from the shift of higher education from a government-run bureaucracy to modern systems in which the government's role involves more monitoring than direct control.[28]

Criticism

The political philosopher Charles Blattberg has criticized stakeholder theory for assuming that the interests of the various stakeholders can be, at best, compromised or balanced against each other. Blattberg argues that this is a product of its emphasis on negotiation as the chief mode of dialogue for dealing with conflicts between stakeholder interests. He recommends conversation instead and this leads him to defend what he calls a 'patriotic' conception of the corporation as an alternative to that associated with stakeholder theory.[30]

Management scholar Samuel F. Mansell argued that stakeholder theory, by applying the political concept of a 'social contract' to the corporation, undermines the principles on which a market economy is based, and could thereby increase the opportunities of weak stakeholder exploitation by self-interested managers rather than to decrease them.[31]

See also

• Agency cost
• Codetermination
• Economic democracy
• Friedman doctrine
• Principal–agent problem
• Stakeholder (corporate)
• Stakeholder (law)
• Stakeholder analysis
• Stakeholder engagement software
• Stakeholder management
• Outline of organizational theory