A stakeholder approach published by pitman publishing in 1984. Starbucks did just that when announcing their new sustainability bond. Corporations have ceased to be merely legal devices through which. When a firm takes the interests of its stakeholders into account makes it better in terms of performance contrary to simply focusing on the interests of shareholders. The stakeholder theory of corporate governance has been developed extensively in the uk, and has even been enshrined into law companies act 2006. This page intentionally left blank stakeholder theory in 1984, r. Im sure that you remember friedmans thesis, but here it is as a reminder. Edward freemans stakeholder theory holds that a companys stakeholders include just about anyone affected by the company and its workings. Edward freeman s stakeholder theory holds that a companys stakeholders include just about anyone affected by the company and its workings. In stakeholder theory, its descriptive stance dictates the firm, i.
Harrison, university of richmond, virginia, andrew c. Freeman surveyed use of the stakeholder concept up to the writing of his book. Use features like bookmarks, note taking and highlighting while reading stakeholder theory. See freeman et al 2010 for a detailed history of the stakeholder idea. Agency theory and stakeholder theory compared business. Youll notice right off that freeman s stakeholder theory replaces the. This book examines this body of research and assesses its relevance for our understanding of modern business. Under stakeholder theory, firms with high stakeholders pressure disclose more on the intellectual capital. What is the stakeholder theory of corporate governance.
The first question probes into the primary focus of the firm, which encourages managers to express their shared sense of value of what they create and what brings the main. Lets take a look at freeman s thesis, and see just how different they are. Stakeholder theory has infiltrated many disciplines in some very useful ways. Nor do i dwell on the definition of what a stakeholder is, as the traditional definitions given by freeman. We sketch three primary arguments from ethical theory for adopting managing for stakeholders. Stakeholder theory as an ethical approach to effective. The fact that stakeholder theory is a bold proposal does not mean it is an incorrect approach to resolving moral questions in business. Freemans 1984 initial intent was to offer a pragmatic approach to strategy that urged organizations to be cognizant of stakeholders to achieve superior.
A stakeholder approach kindle edition by freeman, r. Jul 30, 2008 we argue that the primary responsibility of the executive is to create as much value for stakeholders as possible, and that no stakeholder interest is viable in isolation of the other stakeholders. Stakeholder theory and the corporate objective revisited. The contribution of stakeholder theory 271 kamoche and mueller 1998. The success of the stakeholder theory in management literature as well as in current business practices is largely due to the inherent simplicity of the stakeholder model and to the clarity of freemans powerful synthesised visual conceptualisation. Stakeholder theory is extended to a genre freeman, 1994.
In the intervening years, the literature on stakeholder theory has become vast and diverse. This study is the first one to examine the relationship between the level of icd and. A stakeholder approach, a work that set the agenda for what we now call stakeholder theory. Corporate social responsibility and stakeholder theory. This is only a partial representation of ed freemans published works on stakeholder theory. Yes, sometimes the interests are in conflict, but over time they must be shaped in the same direction.
Pdf stakeholder theory diverts attention from creating business success to concentrating on who share its fruits. Essec business school encourages students and participants in. Numerous articles and books written on stakeholder theory generally credit freeman as the father of stakeholder theory. 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 state of the art cambridge university press that summarizes the body of research that has accumulated and made. On the stakeholder theory side, ethical components can be drawn from several sources including the principles of corporate rights and corporate effects evan and freeman 1988, pragmatism freeman et al. One of the most important developments of the theory is usually referred back to r. Pdf stakeholder theory the state of the art jader melo. A stakeholder approach 1984, about a dozen books and more than. The contribution of stakeholder theory michelle greenwood and r.
The stakeholder theory of the corporation western washington. Shortcomings and imperfections in the stakeholder models. Jun 21, 2015 a stakeholder theory of the modern corporation imsa digital edward freeman. Starbucks sustainability and the stakeholder theory. It is contended in this discussion that there is a common paradigm that is pervasive throughout research and practice in hrm. A stakeholder approach was first published in 1984 as a part of the pitman series in business and public policy. Sep 12, 2016 freemans theory states the way to a successful business is to keep every stakeholder happy and find where all their interests intersect, while still doing what is ethically correct.
The theory that youve just read about is significantly different from the stockholder theory that we saw from friedman. Stakeholder theory an overview sciencedirect topics. Freeman supports the stakeholder theory in saying that anyone who has a stakeclaim in the firm has the right to be treated as a participating determining factor in the direction of a. The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. The only group that has a moral claim on the corporation is the people who own shares of the stock. Abstract for the last 30 years a growing number of scholars and practitioners.
I want to show, along with boatright, that there is no stakeholder paradox, and that the principle on which such a paradox is built, the separation thesis, is nicely selfserving to business and ethics academics. Use features like bookmarks, note taking and highlighting while reading strategic management. The purpose of this paper is to connect two fairly recent concepts in management theory and practice. In our readings last week, freeman and friedman have two very contrasting opinions on the goals and responsibilities of a business. The third, the normative dimension, is explicitly moral and is the domain of ethicists. He expressed the concept clearly, emphasized the way the concept could be implemented by management in practice.
Stakeholder theory and the corporate objective revisited organization science 153, pp. In 2008, freeman and his colleagues wrote managing for stakeholders, setting out the managerial framework for companies to implement a stakeholder approach. Findings stakeholder theory is found to be a particularly useful perspective for addressing some of the important issues in business from an international perspective. Should the evolution of stakeholder theory be discontinued. The relation between csr and stakeholder theory whenever one talks about business ethics either in terms of scholarship, or the discipline taught in business schools, or organizational norms applied in companies both csr and stakeholder theory come as two major concepts. Download it once and read it on your kindle device, pc, phones or tablets. Jan 01, 2011 honoring the twentyfifth anniversary of one of the most influential books in the history of business strategy and ethics, r. Its publication proved to be a landmark moment in the development of stakeholder theory. Second, although effective management of stakeholder relationships helps businesses. Edward freeman published his landmark book, strategic management.
Since the publication of freemans landmark book, strategic manage ment. A stakeholder approach, cambridge university press, new york. A stakeholder approach is widely cited in the field as being the foundation of stakeholder theory, although freeman himself credits several bodies of literature in the development of his. Freeman defines a stakeholder as any group or individual who can affect or is affected by the. And in 2010, freeman and his colleagues published stakeholder theory. A brief history of the development of this approach is followed by a summary and an assess. Stakeholder theory can be normative because the function of a firm can be interpreted and moral and philosophical guidelines in the operation of a firm can be identified. Concepts and strategies elements in organization theory series by r. Stakeholder theory can be instrumental because the relationship between stakeholder management and the achievement of the objectives of a firm can be identified. Theory and practice deals with the stakeholder field in a comprehensive manner.
Stakeholder theory and the corporate objective revisited 366 organization science 153, pp. Stakeholder theory proposes that treating all stakeholders well creates a sort of synergy parmar. 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. Edward freeman the purpose of this paper is to revisit the development of the stakeholder management approach developed in strategic management. Cambridge core strategic management stakeholder theory by r.
The purpose of this paper is to enter the conversation about stakeholder theory with the goal of clarifying certain foundational issues. Application of stakeholder theory to publicprivate partnerships to contextualise stakeholder theory to ppp, the fundamentals of this paradigm must be restructured. View stakeholder theory research papers on academia. The evolution of stakeholder theory and its current limitations the literature on stakeholder theory has evolved from friedmans classic economic model 7, to an approach asking firms to balance their stakeholders interests with their business objectives 18. We sketch three primary arguments from ethical theory for adopting. The development of an ethical perspective of hrm that is both employee centered and explicitly normative and, as such, distinct from dominant and critical perspectives of hrm has progressed in recent years. It figures markedly in the latest version of the corporate governance code. Our article makes two important contributions to the literature. Stakeholder theory and value creation the key idea about capitalism is that the entrepreneur or manager creates value by capturing the jointness of the interests of the stakeholders. Both the agency theory and stakeholders theory, regardless of their respective pros and cons, have contributed in explaining the actions of interest groups in the corporate governance debates. A stakeholder approach, this work assembles a collection of contributions by the most.