Stakeholder management, reciprocity and stakeholder responsibility. Edward freeman a stakeholder theory of the modern corporation freeman, managing for stakeholders humanity argument. Stakeholder theory has its strengths attributed by its conceptual breath and versatility. Lets take a look at freemans thesis, and see just how different they are. Stakeholder theory attempted to describe, prescribe, and derive alternatives for corporate governance that included and balanced a multitude of interests. The general theme of stakeholder thinking is an appropriate and effective way of articulating a whole host of concerns which surround the stakeholder concept or the stakeholder theory of the firm. Stakeholder theory download ebook pdf, epub, tuebl, mobi. The purpose of this article is to pose several challenges to this assumption, from within the framework of managerial capitalism, and to suggest the bare bones of an alternative theory, a stakeholder theory of the modern corr. The stakeholder theory of corporate governance has been developed extensively in the uk, and has even been enshrined into law companies act 2006. Kantian capitalism scroll down the pdf to locate this reading add to my bookmarks export citation. A utilitarian perspective on the csr debate stakeholder.
He calls these the legal argument and economic argument, respectively. Stakeholder is a person, group, organization, or system who affects or can be affected by an organizations actions. The stakeholder theory does not provide a solid normative foundation of indentifying who can be ascertained as a stakeholder of companies. Edward freeman milton friedman the only group that has a moral claim on the corporation is the people who own shares of the stock that is, the shareholders. The only group that has a moral claim on the corporation is. The purpose of this paper is to enter the conversation about stakeholder theory with the goal of clarifying certain foundational issues.
Stakeholder management and corporate performance lee e. A stakeholder approach 1984, the stakeholder theory originated by r. Some stakeholder theorists argue the business case from an instrumentalist perspectivethat managing. Toward a contemporary conceptual framework for stakeholder. Stakeholder theory and the corporate objective revisited. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. Stakeholder theory of the modern corporation, freeman.
In the following section, the stakeholder theory will be analyzed and the factors that determine its superiority to the shareholder theory will be elaborated. Freeman argues in favor of a stakeholder theory of the modern corporation. Stakeholder theory is unquestionably the most popular framework for discussing business ethics. Atomic individualism is embedded in most definitions of stakeholder theory, and as a result, stakeholders are not integral to the basic identity of the corporation which is considered to be independent of, and separate from, its stakeholders. Download it once and read it on your kindle device, pc, phones or tablets. Edward freeman freeman is the acknowledged father of the stakeholder approach.
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. Stakeholder theory of the modern corporation flashcards. This is only a partial representation of ed freemans published works on stakeholder theory. Edward freeman, a stakeholder theory of the modern. What is the stakeholder theory of corporate governance. Edward freeman published his landmark book, strategic management. Assessing freemans stakeholder theory springerlink.
Edward freeman date 1988 page start 97 page end 106 web address. 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. Corporate social responsibility and stakeholder theory. A stakeholder theory of the modern corporation imsa digital edward freeman. The purpose of this essay is to outline an emerging view of business that we shall call managing for stakeholders. Feminist theory has been suggested as a way of developing a more relational view of the corporation and its stakeholders, but it lacks a systematically. Freeman gives two main arguments in favour of stakeholder theory. Freeman has engrossed much of the business ethics literature. I will just give the barebone arguments and replies. Edward freeman originally detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in managing an organization. Edward freeman born december 18, 1951 is an american philosopher and professor of business administration at the darden school of the university of virginia, particularly known for his work on stakeholder theory 1984 and on business ethics. 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. Edward freemans stakeholder theory holds that a companys stakeholders include just about anyone affected by the company and its workings. Stakeholders include shareholders themselves, along with employees, customers, suppliers, creditors, governments and the society at large.
At least since the publication of the monumental strategic management. An owner of a corporation is not a stakeholder in a corporation. For example, many ways that people believe the government should be run. Edward freeman many groups have a moral claim on the corporation because the corporation has the potential to harm or. Making reference to the theory with no restrains leads reasonably to the.
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. Concepts, evidence, and implications thomas donaldson georgetown university lee e. The question we ultimately ask is whether it is because of stakeholder theorys apparent facility that it is so pleasing even though its false evidence may in fact be masking ambiguities that could lead many analysts astray, whether or not they lend any. The idea of the stakeholder as a factor in corporate governance is quite new. A stakeholder approach, cambridge university press, new york. The theory has drawn considerable attention and support since its early formulation. Stakeholder theory and the corporate objective revisited 366 organization science 153, pp. Preston university oi maryland the stakeholder theory has been advanced and justified in the management literature on the basis oi its descriptive accuracy, instrumental power, and normative validity. Use features like bookmarks, note taking and highlighting while reading stakeholder theory. Stakeholder theory is about value creation and trade it is a managerial theory about how business works. Preston university of maryland, college park harry j. They have exceeded freemans intentions which are more libertarian. Freeman insists on the primacy of the role of the stockholder in the corporation.
A stakeholder approach, which has been out of print for a decade, there is a dearth of books that provide a. Businesses are human institutions populated by real live complex human beings. In the intervening years, the literature on stakeholder theory has become vast and diverse. However, under stakeholder theory, csr is said to exacerbate the problem of capitalism and ethics parmar. Roughly speaking, enron has done for reflection on corporate governance what aids did for research on the immune system. We will argue that taking a stakeholder approach to business is ideally suited to integrate business, ethics, and societal considerations. A stakeholder approach, a work that set the agenda for what we now call stakeholder theory. The corporation has, in fact, become both a method of property tenure and a means of organizing.
Sapienza university of baltimore the proposition that business corporations can and should serve the interests of multiple stakeholders, rather than simply those of shareholders, is enjoying a considerable current vogue. Though still much used for this purpose, the corporate form has acquired a larger significance. The theory that youve just read about is significantly different from the stockholder theory that we saw from friedman. 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. The basic idea is that businesses, and the executives who manage them, actually do and should create value for customers, suppliers, employees, communities, and financiers or shareholders. Shareholder theorists argue that managers must act in accordance with the interests of a corporations shareholders, but stakeholder theorists believe managers must act in. It asks both business and ethics questions about each stakeholder relationship. To create value for stakeholders, executives must understand that business is fully situated in the realm of humanity. A stakeholder approach originally published in 1984 and reprinted by cambridge university press in 2010 identifies and models the groups which are stakeholders of a corporation. It figures markedly in the latest version of the corporate governance code. Edward freeman corporations have ceased to be merely legal devices through which the private business transactions of individuals may be carried on. While students commonly assume the identity of being key stakeholders of higher education, the present article explores the possible complications stemmed from such key identity.
Subsequently, some advocates have moved a bit too quickly and without proper definition or argument. Before talking about stakeholder theory, we must know the definition of stakeholder. Preston university of maryland the stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. More than anything else, it seems, the stakeholder concept envisions a way of thinking about organizations and managers actions within and about.
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