Stakeholder theory

The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. [Cite book |last=Phillips, R. |first=Robert |coauthors=Edward Freeman |title=Stakeholder Theory and Organizational Ethics |isbn=1576752682 |date=2003 |publisher=Berrett-Koehler Publishers] It was originally detailed by R. Edward Freeman in the book "Strategic Management: A Stakeholder Approach", and 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." [cite book |title=Strategic Management: A stakeholder approach |last=Freeman |first=R. Edward |authorlink=R. Edward Freeman |coauthors= |year=1984 |publisher=Pitman |location=Boston |isbn=0273019139 |pages= ]

Overview

In the traditional view of the firm, the shareholder view (the only one recognized in business law in most countries), the shareholders or stockholders are the owners of the company, and the firm has a binding fiduciary duty to put their needs first, to increase value for them. In older input-output models of the corporation, the firm converts the inputs of investors, employees, and suppliers into usable (salable) outputs which customers buy, thereby returning some capital benefit to the firm. By this model, firms only address the needs and wishes of those four parties: investors, employees, suppliers, and customers. However, stakeholder theory argues that there are other parties involved, including governmental bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, and the public at large. Sometimes even competitors are counted as stakeholders.

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. 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.

cholarly contributions

There have been numerous articles and books written on stakeholder theory. Recent scholarly works on the topic of stakeholder theory that exemplify research and theorizing in this area include Donaldson and Preston and Mitchell, Agle, and Wood (1997), Friedman and Miles (2002) and Phillips (2003).

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", is the core of the theory. [cite journal |last=Donaldson |first=Thomas |authorlink= |coauthors=Preston, Lee E. |year=1995 |month= |title=The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications |journal=Academy of Management Review |volume=20 |issue=1 |pages=65–91 |doi= |url=http://www.jstor.org/pss/258887 |accessdate= |pages=71 ] 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). [cite journal |last=Mitchell |first=R. K. |authorlink= |coauthors=Agle, B. R.; Wood, D. J. |year=1997 |month= |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= |url=http://www.jstor.org/stable/259247 |accessdate= |quote= ] 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. [cite journal |last=Friedman |first=Andrew L. |authorlink= |coauthors=Miles, Samantha |year=2002 |month= |title=Developing Stakeholder Theory |journal=Journal of Management Studies |volume=39 |issue=1 |pages=1–21 |doi=10.1111/1467-6486.00280 |url= |accessdate= |quote= ]

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. [cite book |title=From Pluralist to Patriotic Politics: Putting Practice First |last=Blattberg |first=Charles |authorlink= |coauthors= |year=2004 |publisher=Oxford University Press |location=New York |isbn=0198296886 |pages=172–184 |chapter=Welfare: Towards the Patriotic Corporation ]

ee also

*Stakeholder analysis
*Stakeholder (law)
*Agency cost
*Principal-agent

References

*cite book |title=Multistakeholder Processes for Governance and Sustainability: Beyond Deadlock and Conflict |last=Hemmati |first=Minu |authorlink= |coauthors="et al." |year=2002 |publisher=Earthscan |location=London |isbn=1853838691 |pages=
*cite book |title=The Divine Right of Capital: Dethroning the Corporate Aristocracy |last=Kelly |first=Marjorie |authorlink= |coauthors= |year=2001 |publisher=Berrett-Koehler |location=San Francisco |isbn=1576751252 |pages=

External links

*PDFlink| [http://www.mosaicprojects.com.au/PDF_Papers/P010_Stakeholder_Circle.pdf "Project Relationships and the "Stakeholder Circle"] |900 KiB - Discussion on the role of stakeholders in project management
* [http://www.rotman.utoronto.ca/ccbe/~stake/ Redefining the Corporation]
* [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]
* [http://www.stakeholderforum.org/1index.php Stakeholderforum.org]
* [http://www.earthsummit2002.org/msp/book.html Multistakeholder Processes for Governance and Sustainability - Stakeholder Forum, Earthscan 2002]