At the time when he wrote this theory, the dominant ideology, upheld by figures like milton friedman, is the idea that a companys aim is to accumulate profit so it can then be redistributed amongst the shareholders. In this sense, stakeholders of a firm can be defined as. Arnold schwarzenegger this speech broke the internet and most inspiring speech it changed my life. Corporate social responsibility awareness, firm commitment and organizational performance. In doing so, instrumental stakeholder theory becomes a subset of shareholder value theory. When edward freeman first published his book about stakeholder theory in 1984, it raised awareness of the relationships and the rippleeffect of a company and its many stakeholders. We next present the three aspects of stake holder theory descriptive.
A stakeholder approach identifies and models the groups which are stakeholders of a corporation, and both describes and. In this regard, researchers on both topics are quick to point out that csr and stakeholder theory are not the same thing. One of the most important developments of the theory is usually referred back to r. Ian mitroff, in his 1983 book stakeholders of the organizational mind, originally laid out the concept. Freemans stakeholder theory was first created to put forward another vision of what a companys objective, its raison detre, is. The strategic approach to stakeholder theory views stakeholders instrumentally. Evans brako ntiamoah, priscilla oforiwaa egyiri, michael kwamega. Stakeholder theory and the corporate objective revisited 366 organization science 153, pp. The stakeholder theory of the corporation western washington.
It states that what is needed are theories that are divergent and thus utilize the point of view of stakeholder terms in showing different but useful methods of understanding organizations. In a press release from publisher berrettkoehler in september of 2003. A stakeholder approach 1984, about a dozen books and more than. The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. Stakeholder theory as an ethical approach to effective. Stakeholder engagement in managing risk loosemore, m. A stakeholder approach 1984, he defines a stakeholder as.
In freemans book, stakeholder theory is described as addressing morals and values in managing an organization, from every stakeholder interest or perspective. The theory that was created by freeman 1984, also called stakeholder theory. It was first proposed by freeman 1984, in tkaczynski, 2009 who suggested that an organization is characterised by its relationship with various groups and individuals. A stakeholder approach 1984 which is regarded as a seminal work of stakeholder theory. Teori stakeholder stakeholder theory ramizes dalam bukunya cultivating peace, mengidentifikasi berbagai pendapat mengenai stakeholder. Stakeholder theory an overview sciencedirect topics. The assertion that organisations should concern themselves with the demands of multiple constituencies can be traced further back to classic management studies by chester barnard and mary parker follett. Assessing freemans stakeholder theory springerlink. This is based on the assumption that an organisations as well as individuals, possess.
Freeman has engrossed much of the business ethics literature. It suggests that a companys stakeholders include people like employees, customers, community members, competitors, vendors, contractors, and shareholders. A broader definition also aligns with edward freemans view. Ed freemans 1984 award winning book, strategic management. 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. Preston university of maryland the stakeholder theory has been advanced and justified in the man agement literature on the basis of its descriptive accuracy, instrumen tal power, and normative validity. Thus, in essence, a great deal turns on their rawlsian argument. This is only a partial representation of ed freeman s published works on stakeholder theory.
Edward freemans foundational work continues to inspire scholars and. This involves much more attention being devoted to developments of the concept, particularly since 1984, and to an assessment of the extent to which the concept has been. Goodpaster 1991 builds on the work of freeman 1984 and divides stakeholder theory into three approaches of strategic, multifiduciary, and a synthesis. Stakeholder analysis aims to evaluate and understand stake. 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 approach, including strategic management. We describe two divergent approaches to stakeholder theorya social science approach and a normative ethics approachand examine their differences and similarities. Examining stakeholder theory through practice in order to both present the development of a technique and also ground it in the relevant litera ture, the presentation of each technique is introduced by a consideration of the existing literature. The purpose of theory is to provide general knowl edge that can be applied in any situation, based on research and discourse. Stakeholder theory and managerial decisionmaking interests is critical for managerial survival. While freemans inspirational ideas led directly to the prominence enjoyed by stakeholder theory in the field of management today. I agree that a wider definition is preferable, but not just for ethical reasons. This book has served to define a starting point for subsequent scholars and executives and continues to inspire scholars and students concerned with a more practical view of how business. The members within a category are not at all homogenous. Objections to friedmans shareholderstockholder theory.
However, other writers have suggested including those groups or individuals who are affected by the organization as well as those who can affect it among the number of an organizations stakeholders bryson et al. In the intervening years, the literature on stakeholder theory has become vast and diverse. For nonprofits, stakeholders may include employees. Shortcomings and imperfections in the stakeholder models. Concepts, evidence, and implications thomas donaldson georgetown university lee e. To assess the holistic potential of stakeholder management, the framework stakeholder management capability smc by freeman 1984. Stakeholder approach in 1984 by building on the work of many others. A stakeholder approach 1984, the stakeholder theory originated by r. A stakeholder approach was reprinted in 2010 by cambridge university press. A stakeholder approach, a work that set the agenda for what we now call stakeholder theory. The strategic management discipline did not immediately absorb the stake holder approach into its mainstream, although. According to stakeholder theory, companies should design their corporate strategies considering the interests of their stakeholders groups and individuals who can affect or are affected by the organizations purpose freeman, 1984. 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.
It suggests that the theory in previous comments are derived in descriptive, instrumental, and normative theory. A stakeholder approach, cambridge university press, new york. Stakeholder theory augments resource based theory by. Harrison, university of richmond, virginia, andrew c. Freeman doesnt cite mitroff as a source, rather he attributes stakeholder theory to discussions at the stanford research institute. Numerous articles and books written on stakeholder theory generally credit freeman as the father of stakeholder theory. Stakeholder management theory conceives an organization as a complex, dynamic and interdependent. Yes, sometimes the interests are in conflict, but over time they must be shaped in the same direction. Subsequently, some advocates have moved a bit too quickly and without proper definition or argument. One which states that businesses do have social responsibilities. Faculty of the built environment, university of new south wales, australia.
Since the publication of freemans landmark book, strategic manage ment. A stakeholder approach, originally published in 1984 and reprinted 2010 by. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. In short, businesses have duties to all of its stakeholders. The shareholder and stakeholder theories of corporate purpose. They have exceeded freemans intentions which are more libertarian and free. This theory encourages the company through an agent to build good relations not only with the principal but all. Stakeholder theory or approach has its beginnings in organizational management and ethics phillips, freeman and wicks, 2003. Since neither approach is complete without the other, we propose a new way of theorizing about organizations. Stakeholder theory six principles of stakeholder theory.
Edward freeman originally detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in managing an organization. Edward freeman originally detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in. Further extensions of stakeholder theory such as the instrumental stakeholder theory jones, 1995, which holds that csr efforts can be instrumental in obtaining necessary resources or stakeholder. Stakeholder theory is managerial in that it recommends attitudes, structures, and practices and requires that simultaneous attention be given to the interests of all legitimate stakeholders.
It was in this environment that freeman 1984 suggested that managers apply a vocabulary based on the stakeholder concept. The stakeholder theory freeman, 1984 is the main theory of this research. Among these three definitions, contemporary stakeholder theory is most often credited to the work of ed freeman. For instance, freemans 1984 stakeholder theory advocates that companies should consider the interests of a broader group of stakeholders. Freeman, harrison and zyglidopoulos discuss the foundation concepts and implementation of stakeholder management as well as the advantages this approach provides to firms and their managers. Its publication proved to be a landmark moment in the development of stakeholder theory. Although this framework is popular in management and in organizational studies, a lack of empirical work, an overemphasis. 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.
Phillips is more concerned with the integrity and defining the principle of stakeholder fairness. A theory that refocuses decisionmaking power and the benefits of labor from those who invest money stockholder to stakeholders any group or individual who can affect or is affected by the achievement of the activities of an organization freeman, 1984, p. First notable publication on the stakeholder theory. Stakeholder theory provides the grounding for this research.
The study utilizes body of knowledge developed in the field of project management and uses numbers of complementary theories such as the theory of stakeholder influences rowley, 1997, the. Oct 18, 2014 the stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. Widely acknowledged as a world leader in business ethics and strategic management, r. As a matter of legitimacy, if a manager does not at least occasionally meet the claims of certain stakeholders groups, he or she will lose the support of those groups. Stakeholder theory is a theory of management that concerns itself with matters related to morals and ethics in running a business. It is a practical theory because all firms have to manage stakeholders. Toward a comprehensive model of stakeholder management.
Analytical approach to stakeholder theory donaldson and preston, 1995, suggested that the research on stakeholder theory has proceeded along three often confused lines. A stakeholder approach was first published in 1984 as a part of the pitman series in business and public policy. The theory argues that a firm should create value for all stakeholders, not just shareholders. Freeman and evanys rawlsian argument in order to establish fairness among all of the stakeholders, it is necessary. 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. A stakeholder approach points out the groups which. Nor do i dwell on the definition of what a stakeholder is, as the traditional definitions given by freeman. Stakeholder theory 209 as formulated by freeman and evan, only aids the stakeholder theory if such moral and legal mandates can be derived. 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.
Sep 24, 2008 at least since the publication of the monumental strategic management. The article focuses on a proposal concerning convergent stakeholder theory. Cambridge core strategic management stakeholder theory by r. Edward freeman published his landmark book, strategic management. Since the 1980s stakeholder theory has developed the thesis that the organisation has a moral relationship with groups other than shareholders freeman, 1984. Stakeholder theory and the corporate objective revisited.
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