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{{Short description|Management and ethical theory that considers multiple constituencies}}
{{Cleanup|date=July 2006}}
[[File:Stakeholder (en).svg|thumb|Examples of a company's internal and external stakeholders]]
As originally detailed by [[R. Edward Freeman]] (1984), '''stakeholder theory''' identifies and models the groups which are [[stakeholder (corporate)|stakeholder]]s of a [[corporation]], and both describes and recommends methods by which management can give due regard to the interests of those groups. In short, it attempts to address the "Principle of Who or What Really Counts."
[[File:Listen to your stakeholders Shimer College 2.jpg|thumb|Protesting students invoking stakeholder theory at [[Shimer College]] in 2010]]
The '''stakeholder theory''' is a theory of [[Organizational behavior management|organizational management]] and [[business ethics]] that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others.<ref> Lin, Tom C. W., [https://ssrn.com/abstract=3294317 Incorporating Social Activism] (December 1, 2018). 98 Boston University Law Review 1535 (2018)</ref> 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 [[stakeholder (corporate)|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'').<ref>{{cite book|url=https://books.google.com/books?isbn=1576752682|title=Stakeholder Theory and Organizational Ethics|last=Phillips|first=Robert|year=2003|isbn=978-1576752685|page=66|publisher=Berrett-Koehler Publishers }}</ref>
In traditional [[input-output model]]s of the corporation, the firm converts the inputs of [[investor]]s, [[employee]]s, and [[supplier]]s into usable (salable) outputs which [[customer]]s buy, thereby returning some [[capital (economics)|capital]] benefit to the firm. By this model, firms only address the needs and wishes of those four parties: investors, employees, suppliers, and customers. In another traditional view of the firm—the [[shareholder]] view—shareholders or stockholders are the owners of the company, and the firm puts their needs first, to increase value for them. However, stakeholder theory recognizes that there are other parties involved, including governmental bodies, [[political group]]s, [[trade association]]s, [[trade unions]], [[community|communities]], associated corporations, prospective employees, prospective customers, and the public at large. Sometimes even competitors are counted as stakeholders.


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.<ref>Harrison, Wicks, Parmar and De Colle, Stakeholder Theory, State of the Art, Cambridge University Press, 2010</ref> Some authors, such as Geoffroy Murat, tried to apply stakeholder's theory to [[irregular warfare]].<ref>Connelley and Tripodi, Aspects of leadership, Ethics, law and Spirituality, Marines Corps University Press, 2012, pp. 39–59</ref>
The stakeholder view of strategy is an instrumental theory of the corporation, integrating both the resource-based view as well as the market-based view, and adding a socio-political level.


== History ==
This view of the firm is used to define the specific stakeholders of a corporation (the normative theory (Donaldson) of stakeholder ''identification'') as well as examine the conditions under which these parties should be treated as stakeholders (the descriptive theory of stakeholder ''salience''). These two questions make up the modern treatment of Stakeholder Theory.
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.<ref name="murdock"/> 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:


<blockquote>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.<ref>{{cite journal|first=Victoria|last=Baumfield|journal=Australian Journal of Corporate Law|pages=187–207|url=https://core.ac.uk/download/pdf/196602239.pdf|title=Stakeholder theory from a management perspective: Bridging the shareholder/stakeholder divide|year=2016|volume=31|issue=1}}</ref></blockquote>
==Scholarly Contributions==


The term "stakeholder" in its current use first appeared in an internal memorandum<ref>R. F. Stewart, J. K. Allen, J. M. Cavender: ''The Strategic Plan'', LRPS report no. 168. Long Range Planning Service, Menlo Park: Stanford Research Institute.</ref> at the [[Stanford Research Institute]] in 1963.<ref name="murdock"/><ref>R. W. Puyt, F. B. Lie, F. J. Graaf: [https://pure.hva.nl/ws/files/4388766/contribution351_2.pdf ''Contagious ideas and cognitive artefacts: the SWOT Analysis evolution in business'']. BAM2017 Conference Proceedings, 2017.</ref> Subsequently, a "plethora"<ref name="murdock"/> of stakeholder definitions and theories were developed.<ref>Bidhan L. Parmar, R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks, Simone de Colle, Lauren Purnell: ''Stakeholder theory: the state of the Art''. The Academy of Management Annals, June 2010, [[doi:10.1080/19416520.2010.495581]].</ref><ref name="murdock">Alex Murdock: ''Stakeholders''. In: Helmut K. Anheier, Stefan Toepler (eds.): International Encyclopedia of Civil Society. [[doi:10.1007/978-0-387-93996-4_154]].</ref> In 1971, Hein Kroos and [[Klaus Schwab]] published a German booklet ''Moderne Unternehmensführung im Maschinenbau''<ref>{{cite book|url=http://www3.weforum.org/docs/WEF_KSC_CompanyStrategy_Presentation_2014_DE.pdf|title=Moderne Unternehmensführung im Maschinenbau|last1=Schwab|first1=Klaus|last2=Kroos|first2=Hein| year=1971}}</ref> (''Modern Enterprise Management in Mechanical Engineering'') arguing that the management of a modern enterprise must serve not only shareholders but all stakeholders (die Interessenten) to achieve long-term growth and prosperity. This claim is disputed.<ref>{{cite book|url=https://www.infosperber.ch/politik/schweiz/wef-gruender-klaus-schwab-schmueckt-sich-mit-fremden-federn/|title=WEF-Gründer Klaus Schwab schmückt sich mit fremden Federn|date=17 January 2020}}</ref> U.S. authors followed; for example, in 1983, [[Ian Mitroff]] published "Stakeholders of the Organizational Mind" in San Francisco. [[R. Edward Freeman]] had an article on Stakeholder theory in the California Management Review in early 1983, but makes no reference to Mitroff's work, attributing the development of the concept to internal discussion in the Stanford Research Institute. He followed this article with a book ''Strategic Management: A Stakeholder Approach''. This book identifies and models the groups which are [[stakeholder (corporate)|stakeholder]]s of a [[corporation]], and both describes and recommends methods by which management can give due regard to the interests of those groups. In short, it attempts to address the "principle of who or what really counts.
There have been well over 100 articles and numerous books written on stakeholder theory including an entire issue of the ''Academy of Management Journal'' (v 42 n 5, 1999). Recent scholarly works on the topic of stakeholder theory that exemplify research and theorizing in this area include Donaldson and Preston (1995) and Mitchell, Agle, and Wood (1997), Friedman and Miles (2002) and [http://www.amazon.com/exec/obidos/tg/detail/-/1576752682/qid=1126184100/sr=2-2/ref=pd_bbs_b_2_2/102-1824125-5149722?v=glance&s=books Phillips (2003)].
In the traditional view of a company, the [[shareholder]] view, only the owners or shareholders of the company are important, and the company has a binding [[fiduciary]] duty to put their needs first, to increase value for them. Stakeholder theory instead argues that there are other parties involved, including [[employee]]s, [[customer]]s, [[Manufacturing|suppliers]], [[financier]]s, [[community|communities]], [[Government agency|governmental bodies]], [[political group]]s, [[trade association]]s, and [[trade unions]]. Even competitors are sometimes counted as stakeholders – their status being derived from their capacity to affect the firm and its stakeholders. The nature of what constitutes a stakeholder is highly contested (Miles, 2012),<ref>{{cite journal |last= Miles|first=Samantha|title=Stakeholders: essentially contested or just confused? |journal= Journal of Business Ethics|year=2012|volume=108|issue=3|pages=285–298|doi=10.1007/s10551-011-1090-8|s2cid=89609310}}</ref> with hundreds of definitions existing in the academic literature (Miles, 2011).<ref>{{cite journal |last=Miles |first= Samantha|title=Stakeholder Definitions: Profusion and Confusion|journal=EIASM 1st Interdisciplinary Conference on Stakeholder, Resources and Value Creation, IESE Business School, University of Navarra, Barcelona|year=2011}}</ref>


== Development ==
Donaldson and Preston argue that the normative base of the theory, including the "identification of moral or philosophical guidelines for the operation and management of the corporation" (pg. 71), is the core of the theory. Mitchell, et al derive a typology of stakeholders based on the attributes of [[power (sociology)|power]] (the extent a party has means to impose its will in a relationship), legitimacy (socially accepted and expected structures or behaviors), and urgency (time sensitivity or criticality of the stakeholder's claims). By examining the combination of these attributes in a binary manner, 8 types of stakeholders are derived along with their implications for the organization. Friedman and Miles explore the implications of contentious relationships between stakeholders and organizations by introducing compatible/incompatible interests and necessary/contingent connections as additional attributes with which to examine the configuration of these relationships.
Numerous articles and books written on stakeholder theory generally identify Freeman as the "father of stakeholder theory".<ref>{{cite journal|last=Laplume|first=André|author2=Karan Sonpar|author3=Reginald Litz|date=Dec 2008|title=Stakeholder Theory: Reviewing a Theory That Moves Us|journal=Journal of Management|volume=34|issue=6|pages=1152–1189|doi=10.1177/0149206308324322|s2cid=143857200}}</ref> Freeman's ''Strategic Management: A Stakeholder Approach'' (1984) is widely cited in the field as being the foundation of stakeholder theory,<ref name=dp /> although Freeman himself refers to several bodies of literature used in the development of his approach, including [[strategic management]], [[Strategic planning|corporate planning]], [[systems theory]], [[Organizational behavior|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.<ref>"Integrated structures in the Italian distribution system", Giuffre Editore, Milan, 1968, pp. VIII / 351
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.
^ "Universal Biographical Encyclopedia" Treccani, 2007 Edition, Vol. 14, p. 617; "Treccani - Portal", Social Sciences / economists / Biographies; Annual Meeting Bancoper, Bologna, 15.11.2008, Prefect Angelo Tranfaglia, "Profit and social responsibility", p. 12; "Finanza e Mercati", February 3, 2009, p. 11, Mara Consoli, "When ethics become a bargain"; New Chronicles, CNEL, Rome, 12.01.2009, Adelaide Mochi, "Socialis Prize and corporate social responsibility"</ref>


More recent scholarly works on the topic of stakeholder theory that exemplify research and theorizing in this area include Donaldson and Preston (1995),<ref name=dp>{{cite journal|last=Donaldson|first=Thomas|author2=Preston, Lee E.|year=1995|title=The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications|journal=Academy of Management Review|volume=20|issue=1|pages=65–91|doi=10.5465/amr.1995.9503271992|jstor=258887}}</ref> Mitchell, Agle, and Wood (1997),<ref>{{cite journal|last=Mitchell|first=Ron|author2=Agle, BR|author3=Wood, DJ|year=1997|title=Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts|journal=Academy of Management Review|volume=22|issue=4|pages=853–886|doi=10.2307/259247|jstor=259247}}</ref> Friedman and Miles (2002),<ref>{{cite book|title=Stakeholders: Theory and Practice|last=Friedman|first=Andrew L.|author2=Samantha Miles|publisher=Oxford University Press|year=2006|isbn=978-0199269860}}</ref> and Phillips (2003).<ref>{{Cite book|title=Stakeholder Theory and Organizational Ethics|last=Phillips|first=Robert|publisher=Berrett-Koehler Publishers|year=2003|isbn=978-1-57675-268-5}}</ref>
==See also==
*[[Stakeholder (law)]]


[[Thomas Donaldson (ethicist)|Thomas Donaldson]] and Lee E. Preston argue that the theory has three distinct but mutually supportive aspects, descriptive, instrumental, and normative:<ref>{{cite journal|last=Donaldson|first=Thomas|author2=Preston, Lee E.|year=1995|title=The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications|journal=Academy of Management Review|volume=20|issue=1|pages=70–71|doi=10.2307/258887|jstor=258887}}</ref>
==External links==
*The descriptive approach is used in research to describe and explain the characteristics and behaviors of firms, including how companies are managed, how the board of directors considers corporate constituencies, the way that managers think about managing, and the nature of the firm itself.<ref>{{cite journal|last=Donaldson|first=Thomas|author2=Preston, Lee E.|year=1995|title=The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications|journal=Academy of Management Review|volume=20|issue=1|pages=70|doi=10.2307/258887|jstor=258887}}</ref>
*[http://www.rotman.utoronto.ca/ccbe/~stake/ Redefining the Corporation]
*The instrumental approach uses empirical data to identify the connections that exist between the management of stakeholder groups and the achievement of corporate goals (most commonly profitability and efficiency goals).<ref name="td95p71">{{cite journal|last=Donaldson|first=Thomas|author2=Preston, Lee E.|year=1995|title=The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications|journal=Academy of Management Review|volume=20|issue=1|pages=71|doi=10.2307/258887|jstor=258887}}</ref>
*[http://www.sup.org/book.cgi?book_id=4304%204310%20 "Redefining the Corporation: Stakeholder Management and Organizational Wealth", by Post, Preston, and Sachs, Stanford University Press, 2002]
*The normative approach, identified as the core of the theory by Donaldson and Preston, examines the function of the corporation and identifies the "moral or philosophical guidelines for the operation and management of the corporation".<ref name="td95p71" />
Since the publication of this article in 1995, it has served as a foundational reference for researchers in the field, having been cited over 1,100 times.{{citation needed|date=October 2013}}

Mitchell, et al. derive a typology of stakeholders based on the attributes of [[power (sociology)|power]] (the extent a party has means to impose its will in a relationship), legitimacy (socially accepted and expected structures or behaviors), and urgency (time sensitivity or criticality of the stakeholder's claims).<ref>{{cite journal|last=Mitchell|first=R. K.|author2=Agle, B. R.|author3=Wood, D. J.|year=1997|title=Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts|journal=Academy of Management Review|volume=22|issue=4|pages=853–886|doi=10.2307/259247|jstor=259247}}</ref> By examining the combination of these attributes in a binary manner, 8 types of stakeholders are derived along with their implications for the organization. Friedman and Miles explore the implications of contentious relationships between stakeholders and organizations by introducing compatible/incompatible interests and necessary/contingent connections as additional attributes with which to examine the configuration of these relationships.<ref>{{cite journal|last=Friedman|first=Andrew L.|author2=Miles, Samantha|year=2002|title=Developing Stakeholder Theory|journal=Journal of Management Studies|volume=39|issue=1|pages=1–21|doi=10.1111/1467-6486.00280|s2cid=143220996}}</ref> [[Robert Allen Phillips]] distinguishes between normatively legitimate stakeholders (those to whom an organization holds a moral obligation) and derivatively legitimate stakeholders (those whose stakeholder status is derived from their ability to affect the organization or its normatively legitimate stakeholders).

== 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 [[Global Reporting Initiative|GRI (Global Reporting Initiative)]] involve stakeholder analysis.<ref>{{Cite book|url=https://books.google.com/books?isbn=1439803749|title=Social Responsibility: Failure Mode Effects and Analysis|last1=Duckworth|first1=Holly Alison|last2=Moore|first2=Rosemond Ann|year=2010|isbn=978-1439803745|page=10|publisher=CRC Press }}</ref>

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.<ref>{{Cite book|title=Drivers and Barriers to Achieving Quality in Higher Education|last1=Leisyte|first1=I.|last2=Westerheijden|first2=D.F.|year=2014|isbn=978-9462094949|editor-last=Eggins|editor-first=Heather|page=84|chapter=Stakeholders and Quality Assurance in Education|publisher=Springer |chapter-url=https://books.google.com/books?isbn=9462094942}}</ref> 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.<ref>{{Cite book|url=https://books.google.com/books?isbn=383097440X|title=Stakeholder Regimes in Higher Education|last=Bjørkquist|first=Catharina|year=2011|isbn=978-3830974406|page=23|publisher=Waxmann Verlag }}</ref> Studies of higher education first began to recognize students as stakeholders in 1975.{{sfn|Leisyte|Westerheijden|2014|p=86}} External stakeholders may include employers.{{sfn|Leisyte|Westerheijden|2014|p=86}} 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.<ref>{{Cite book|title=Higher Education in a Globalising World|last=Neaves|first=Guy|year=2002|isbn=978-1402008641|editor1-last=Teichler|editor1-first=Ulrich|page=33|chapter=The Stakeholder Perspective|publisher=Springer |editor2-last=Enders|editor2-first=J.|editor3-last=Fulton|editor3-first=Oliver|chapter-url=https://books.google.com/books?isbn=1402008643}}</ref>

Economist and university professor [[Danuše Nerudová]], a candidate in the [[2023 Czech presidential election]], is a proponent of stakeholder capitalism where "questions of sustainability and global politics, as well as the development of domestic societies" will have increased relevance for company and state decision making. Researcher Benjamin Tallis has examined whether a move from [[neoliberalism]] to stakeholder capitalism, "which implies a different role for the state as well as a focus on creating more cohesive and resilient societies", could affect public optimism in the Czech Republic.<ref name=expatccz20230103>{{cite news |title=INTERVIEW: Presidential candidate Danuše Nerudová on the EU, economy, and what sets her apart |url=https://www.expats.cz/czech-news/article/exclusive-presidential-candidate-danuse-nerudova-speaks-to-expats-cz-about-the-eu-economy-and-what-sets-her-apart |work=Expats Cz |last=Tallis|first=Benjamin |date=3 January 2023 |access-date=10 January 2023 }}</ref>

== 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.<ref>{{cite book|title=From Pluralist to Patriotic Politics: Putting Practice First|last=Blattberg|first=Charles|publisher=[[Oxford University Press]]|year=2004|isbn=978-0-19-829688-1|location=New York|pages=172–184|chapter=Welfare: Towards the Patriotic Corporation}}</ref>

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.<ref name=Mansell>{{cite book |last=Mansell |first=Samuel F. |date=2013 |title=Capitalism, Corporations and the Social Contract: A Critique of Stakeholder Theory |series=Business, Value Creation, and Society |location=Cambridge, UK; New York |publisher=[[Cambridge University Press]] |isbn=9781107015524 |oclc=808628201 |doi=10.1017/cbo9781139058926}}</ref>

== 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]]


==References==
==References==
{{Reflist|colwidth=30em}}
* Blattberg, C. 2004 ''From Pluralist to Patriotic Politics: Putting Practice First'', Oxford and New York: Oxford University Press, ch. 6. ISBN 0-19-829688-6.

* Donaldson, T. & Preston, L. 1995. ''The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications''. Academy of Management Review, v 20, n 1, pp 65-91.
===Sources===
* Freeman, R.E. 1984, ''Strategic Management: A stakeholder approach''. Boston: Pitman.
{{refbegin}}
* Friedman, A.L. & Miles, S. 2002 ''Developing Stakeholder Theory''. Journal of Management Studies, v 39, n 1, pp 1-21.
* {{cite journal | last1 = Freeman | first1 = R. Edward | author2-link = Alexander Moutchnik | last2 = Moutchnik | first2 = Alexander | year = 2013 | title = Stakeholder management and CSR: questions and answers. | journal = UmweltWirtschaftsForum | volume = 21 | issue = 1| pages = 5–9| doi=10.1007/s00550-013-0266-3| s2cid = 154210736 }}
* Mitchell, R.K., Agle, B.R., & Wood, D.J. 1997. ''Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts''. Academy of Management Review, v 22, n 4, pp 853-886.
*{{cite book |title=Multistakeholder Processes for Governance and Sustainability: Beyond Deadlock and Conflict |last=Hemmati |first=Minu |year=2002 |publisher=Earthscan |location=London |isbn=978-1-85383-869-9 |display-authors=etal}}
*[http://www.amazon.com/exec/obidos/tg/detail/-/1576752682/qid=1126184100/sr=2-2/ref=pd_bbs_b_2_2/102-1824125-5149722?v=glance&s=books Phillips, R. 2003, "Stakeholder Theory and Organizational Ethics". (San Francisco: Berrett-Koehler Publishers).]
*{{cite book |title=The Divine Right of Capital: Dethroning the Corporate Aristocracy |last=Kelly |first=Marjorie |year=2001 |publisher=Berrett-Koehler |location=San Francisco |isbn=978-1-57675-125-1 |url-access=registration |url=https://archive.org/details/divinerightofcap0000kell }}
{{refend}}

{{Social accountability}}


[[Category:Corporate finance]]
[[Category:Corporate finance]]
[[Category:Public relations]]

Latest revision as of 04:21, 25 November 2024

Examples of a company's internal and external stakeholders
Protesting students invoking stakeholder theory at Shimer College in 2010

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

[edit]

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.[5] 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.[6]

The term "stakeholder" in its current use first appeared in an internal memorandum[7] at the Stanford Research Institute in 1963.[5][8] Subsequently, a "plethora"[5] of stakeholder definitions and theories were developed.[9][5] In 1971, Hein Kroos and Klaus Schwab published a German booklet Moderne Unternehmensführung im Maschinenbau[10] (Modern Enterprise Management in Mechanical Engineering) arguing that the management of a modern enterprise must serve not only shareholders but all stakeholders (die Interessenten) to achieve long-term growth and prosperity. This claim is disputed.[11] U.S. authors followed; for example, in 1983, Ian Mitroff published "Stakeholders of the Organizational Mind" in San Francisco. R. Edward Freeman had an article on Stakeholder theory in the California Management Review in early 1983, but makes no reference to Mitroff's work, attributing the development of the concept to internal discussion in the Stanford Research Institute. He followed this article with a book Strategic Management: A Stakeholder Approach. This book identifies and models the groups which are stakeholders of a corporation, and both describes and recommends methods by which management can give due regard to the interests of those groups. In short, it attempts to address the "principle of who or what really counts. In the traditional view of a company, the shareholder view, only the owners or shareholders of the company are important, and the company has a binding fiduciary duty to put their needs first, to increase value for them. Stakeholder theory instead argues that there are other parties involved, including employees, customers, suppliers, financiers, communities, governmental bodies, political groups, trade associations, and trade unions. Even competitors are sometimes counted as stakeholders – their status being derived from their capacity to affect the firm and its stakeholders. The nature of what constitutes a stakeholder is highly contested (Miles, 2012),[12] with hundreds of definitions existing in the academic literature (Miles, 2011).[13]

Development

[edit]

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,[15] 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.[16]

More recent scholarly works on the topic of stakeholder theory that exemplify research and theorizing in this area include Donaldson and Preston (1995),[15] Mitchell, Agle, and Wood (1997),[17] Friedman and Miles (2002),[18] and Phillips (2003).[19]

Thomas Donaldson and Lee E. Preston argue that the theory has three distinct but mutually supportive aspects, descriptive, instrumental, and normative:[20]

  • The descriptive approach is used in research to describe and explain the characteristics and behaviors of firms, including how companies are managed, how the board of directors considers corporate constituencies, the way that managers think about managing, and the nature of the firm itself.[21]
  • The instrumental approach uses empirical data to identify the connections that exist between the management of stakeholder groups and the achievement of corporate goals (most commonly profitability and efficiency goals).[22]
  • The normative approach, identified as the core of the theory by Donaldson and Preston, examines the function of the corporation and identifies the "moral or philosophical guidelines for the operation and management of the corporation".[22]

Since the publication of this article in 1995, it has served as a foundational reference for researchers in the field, having been cited over 1,100 times.[citation needed]

Mitchell, et al. derive a typology of stakeholders based on the attributes of power (the extent a party has means to impose its will in a relationship), legitimacy (socially accepted and expected structures or behaviors), and urgency (time sensitivity or criticality of the stakeholder's claims).[23] By examining the combination of these attributes in a binary manner, 8 types of stakeholders are derived along with their implications for the organization. Friedman and Miles explore the implications of contentious relationships between stakeholders and organizations by introducing compatible/incompatible interests and necessary/contingent connections as additional attributes with which to examine the configuration of these relationships.[24] Robert Allen Phillips distinguishes between normatively legitimate stakeholders (those to whom an organization holds a moral obligation) and derivatively legitimate stakeholders (those whose stakeholder status is derived from their ability to affect the organization or its normatively legitimate stakeholders).

Implementation in other fields

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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.[28] External stakeholders may include employers.[28] 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.[29]

Economist and university professor Danuše Nerudová, a candidate in the 2023 Czech presidential election, is a proponent of stakeholder capitalism where "questions of sustainability and global politics, as well as the development of domestic societies" will have increased relevance for company and state decision making. Researcher Benjamin Tallis has examined whether a move from neoliberalism to stakeholder capitalism, "which implies a different role for the state as well as a focus on creating more cohesive and resilient societies", could affect public optimism in the Czech Republic.[30]

Criticism

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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.[31]

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.[32]

See also

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References

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  1. ^ Lin, Tom C. W., Incorporating Social Activism (December 1, 2018). 98 Boston University Law Review 1535 (2018)
  2. ^ Phillips, Robert (2003). Stakeholder Theory and Organizational Ethics. Berrett-Koehler Publishers. p. 66. ISBN 978-1576752685.
  3. ^ Harrison, Wicks, Parmar and De Colle, Stakeholder Theory, State of the Art, Cambridge University Press, 2010
  4. ^ Connelley and Tripodi, Aspects of leadership, Ethics, law and Spirituality, Marines Corps University Press, 2012, pp. 39–59
  5. ^ a b c d Alex Murdock: Stakeholders. In: Helmut K. Anheier, Stefan Toepler (eds.): International Encyclopedia of Civil Society. doi:10.1007/978-0-387-93996-4_154.
  6. ^ Baumfield, Victoria (2016). "Stakeholder theory from a management perspective: Bridging the shareholder/stakeholder divide" (PDF). Australian Journal of Corporate Law. 31 (1): 187–207.
  7. ^ R. F. Stewart, J. K. Allen, J. M. Cavender: The Strategic Plan, LRPS report no. 168. Long Range Planning Service, Menlo Park: Stanford Research Institute.
  8. ^ R. W. Puyt, F. B. Lie, F. J. Graaf: Contagious ideas and cognitive artefacts: the SWOT Analysis evolution in business. BAM2017 Conference Proceedings, 2017.
  9. ^ Bidhan L. Parmar, R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks, Simone de Colle, Lauren Purnell: Stakeholder theory: the state of the Art. The Academy of Management Annals, June 2010, doi:10.1080/19416520.2010.495581.
  10. ^ Schwab, Klaus; Kroos, Hein (1971). Moderne Unternehmensführung im Maschinenbau (PDF).
  11. ^ WEF-Gründer Klaus Schwab schmückt sich mit fremden Federn. 17 January 2020.
  12. ^ Miles, Samantha (2012). "Stakeholders: essentially contested or just confused?". Journal of Business Ethics. 108 (3): 285–298. doi:10.1007/s10551-011-1090-8. S2CID 89609310.
  13. ^ Miles, Samantha (2011). "Stakeholder Definitions: Profusion and Confusion". EIASM 1st Interdisciplinary Conference on Stakeholder, Resources and Value Creation, IESE Business School, University of Navarra, Barcelona.
  14. ^ Laplume, André; Karan Sonpar; Reginald Litz (Dec 2008). "Stakeholder Theory: Reviewing a Theory That Moves Us". Journal of Management. 34 (6): 1152–1189. doi:10.1177/0149206308324322. S2CID 143857200.
  15. ^ a b Donaldson, Thomas; Preston, Lee E. (1995). "The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications". Academy of Management Review. 20 (1): 65–91. doi:10.5465/amr.1995.9503271992. JSTOR 258887.
  16. ^ "Integrated structures in the Italian distribution system", Giuffre Editore, Milan, 1968, pp. VIII / 351 ^ "Universal Biographical Encyclopedia" Treccani, 2007 Edition, Vol. 14, p. 617; "Treccani - Portal", Social Sciences / economists / Biographies; Annual Meeting Bancoper, Bologna, 15.11.2008, Prefect Angelo Tranfaglia, "Profit and social responsibility", p. 12; "Finanza e Mercati", February 3, 2009, p. 11, Mara Consoli, "When ethics become a bargain"; New Chronicles, CNEL, Rome, 12.01.2009, Adelaide Mochi, "Socialis Prize and corporate social responsibility"
  17. ^ Mitchell, Ron; Agle, BR; Wood, DJ (1997). "Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts". Academy of Management Review. 22 (4): 853–886. doi:10.2307/259247. JSTOR 259247.
  18. ^ Friedman, Andrew L.; Samantha Miles (2006). Stakeholders: Theory and Practice. Oxford University Press. ISBN 978-0199269860.
  19. ^ Phillips, Robert (2003). Stakeholder Theory and Organizational Ethics. Berrett-Koehler Publishers. ISBN 978-1-57675-268-5.
  20. ^ Donaldson, Thomas; Preston, Lee E. (1995). "The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications". Academy of Management Review. 20 (1): 70–71. doi:10.2307/258887. JSTOR 258887.
  21. ^ Donaldson, Thomas; Preston, Lee E. (1995). "The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications". Academy of Management Review. 20 (1): 70. doi:10.2307/258887. JSTOR 258887.
  22. ^ a b Donaldson, Thomas; Preston, Lee E. (1995). "The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications". Academy of Management Review. 20 (1): 71. doi:10.2307/258887. JSTOR 258887.
  23. ^ Mitchell, R. K.; Agle, B. R.; Wood, D. J. (1997). "Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts". Academy of Management Review. 22 (4): 853–886. doi:10.2307/259247. JSTOR 259247.
  24. ^ Friedman, Andrew L.; Miles, Samantha (2002). "Developing Stakeholder Theory". Journal of Management Studies. 39 (1): 1–21. doi:10.1111/1467-6486.00280. S2CID 143220996.
  25. ^ Duckworth, Holly Alison; Moore, Rosemond Ann (2010). Social Responsibility: Failure Mode Effects and Analysis. CRC Press. p. 10. ISBN 978-1439803745.
  26. ^ Leisyte, I.; Westerheijden, D.F. (2014). "Stakeholders and Quality Assurance in Education". In Eggins, Heather (ed.). Drivers and Barriers to Achieving Quality in Higher Education. Springer. p. 84. ISBN 978-9462094949.
  27. ^ Bjørkquist, Catharina (2011). Stakeholder Regimes in Higher Education. Waxmann Verlag. p. 23. ISBN 978-3830974406.
  28. ^ a b Leisyte & Westerheijden 2014, p. 86.
  29. ^ Neaves, Guy (2002). "The Stakeholder Perspective". In Teichler, Ulrich; Enders, J.; Fulton, Oliver (eds.). Higher Education in a Globalising World. Springer. p. 33. ISBN 978-1402008641.
  30. ^ Tallis, Benjamin (3 January 2023). "INTERVIEW: Presidential candidate Danuše Nerudová on the EU, economy, and what sets her apart". Expats Cz. Retrieved 10 January 2023.
  31. ^ Blattberg, Charles (2004). "Welfare: Towards the Patriotic Corporation". From Pluralist to Patriotic Politics: Putting Practice First. New York: Oxford University Press. pp. 172–184. ISBN 978-0-19-829688-1.
  32. ^ Mansell, Samuel F. (2013). Capitalism, Corporations and the Social Contract: A Critique of Stakeholder Theory. Business, Value Creation, and Society. Cambridge, UK; New York: Cambridge University Press. doi:10.1017/cbo9781139058926. ISBN 9781107015524. OCLC 808628201.

Sources

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