It will confront the stakeholder models graphical representation to the discussion on stakeholder definition, stakeholder identification and categorisation, to recentre the debate to the strategic origin of the stakeholder model. Next, for the purpose of simplicity, i refer to the belief that instrumental stakeholder theory is true as binstrumental and to the belief that. Stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. Stakeholder theory and social identity 79 stakeholder groups into primary secondary carroll 1993. The authors of this paper will follow the normative stakeholder theory, which concerns the correct or appropriate behaviour of the firm jones, 1995. 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. The normative viewpoint explains the stakeholder theory with moral or philosophica l arguments. Business ethics, stakeholder theory, ethical decisionmaking models, corporate social performance and shareholder litigation. Oct 23, 2020 theory, transactions costs and contracts theory into a coherent whole jones, 1995, clarkson, 1995. The core assumptions and propositions of resourcebased theory provide a strong foundation for extending stakeholder theory as a theory of competitive advantage. Stakeholder theory as an ethical approach to effective. When do powerful stakeholders give managers the latitude to. 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.
Another approach to the stakeholder concept is the so called descriptive stakeholder theory. Jul 08, 2015 stakeholder theory is widely accepted but elementary aspects remain indeterminate as the term stakeholder is an essentially contested concept miles, j bus ethics 108. Among these, stakeholder theory or stakeholder thinking has emerged as a new narrative to understand and remedy three interconnected business problemsthe problem of understanding how value is. Yes, sometimes the interests are in conflict, but over time they must be shaped in the same direction. The normative component of stakeholder theory plays a central role in the concept of legitimacy. The stakeholder theory literature represented an abrupt departure. Normative stakeholder theory contains theories of how managers or stakeholders should act and should view the purpose of organization, based on some ethical principle friedman 2006. Hendry, 2005, stakeholder response strategy aaltonen.
Stakeholder concept is basically a redefinition of the purpose of the organization. In the stakeholder theory, managers are treated as significant stakeholder like others aoki, 1984. Resourcebased theory suggests a firms competitive position is defined by its unique bundle of resources and relationships rumelt, 1984. Stakeholder theory and the resourcebased view of the firm. Jones university of washington this article is intended to enhance the position of stakeholder theory as an integrating theme for the business and society field. When do powerful stakeholders give managers the latitude. Stakeholder theory, corporate governance, and public management. The same author cites that jones 1995 states that firms with contracts of cooperation and mutual trust. Donaldson and preston 1995, stakeholder theory is descriptive, instrumental. Donaldson and preston 1995 discuss stakeholder theory from a descriptive, instrumental and normative perspective.
Stakeholder theory has infiltrated many disciplines in some very useful ways. The current history of stakeholder theory has been well documented by donaldson and preston 1995. An important difference is that property rights theory seeks a set of market frictions to 2 the shareholder vs. The papers published in this series can be downloaded in pdf format from. Although finance scholars traditionally ignore the moral foundation of stakeholder theory, as well as the moral foundations of their own shareholderoriented theory, some now recognize the importance of stakeholders in explaining high financial returns, at least in the sense of an instrumental stakeholder perspective jones, 1995. Preston 1995 explan the fi irms stakeholder theory from a descriptive, instrumental and normative viewpoint. Nov 16, 2011 numerous views of stakeholder theory are presented in the literature though a key distinction can be drawn between the tenets of stakeholder theory and the conventional inputoutput model of the firm which see firms as converting investor, supplier, and employee inputs into customer outputs donaldson and preston, 1995. Building on this definition, wood and jones 1995 propose that stakeholder theory is the key to understanding the structure and dimensions of the firms societal relationships. They redefine the policies, programs, and outcomes as internal stakeholder effects, external stakeholder effects, and external institutional effects and argue that. The argument begins with a brief history of the search for a paradigm in the business and society field followed by a discussion of the stakeholder model as theory. This article is intended to enhance the position of stakeholder theory as an integrating theme for the business and society field. Using stakeholder theory to analyze telecenter projects.
A stakeholder approach to community participation in a rural. Jones and wicks that the normative element is at the center 1999 suggest a convergent stakeholder of the stakeholder theory by describing the theory that combines both normative and justifications of favoring stakeholder instrumental tools and show how managers theory. Stakeholder management in the local government decision. 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. An empirical investigation of the relationship between. Stakeholder theory has evolved from a corporatecentric perspective into a more comprehensive. Stakeholder theory interest in stakeholders has grown considerably since freemans 1984 seminal work strategic management. In corporate governance, the normative stakeholder theory has its origins in the social entity conception of the corporation, developed in the later part of the 19th century letza et al. Stakeholder theory is managerial in that it reflects and directs how managers operate rather than primarily addressing management theorists and economists. This paper is a preliminary attempt to better understand the concept of legitimacy in stakeholder theory. The broadest definition of the concept is found in the work of freeman 1984. Stakeholder theory focuses on the interests of each separate stakeholder in the. It sees all stakeholders as having an intrinsic value freeman, 1994.
This reflects the point made by donaldson and preston 1995 and endorsed by jones and wicks that stakeholder theory is managerial in nature. Towards a stakeholder theory of strategic management. This paper addresses the possibilities to introduce the stakeholder model in the firm, especially the possibility to give property or decision rights to stakeholders. This paper argues that it is not practical to give full property rights to more than one group of stakeholders. Stakeholder theory stakeholder theory of the organization has been explained from a threepart taxonomy. Stake holder theory is socialism and refers to the entire economy barnett, 1997. 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. Stakeholder theory, corporate governance, and cognitive. Cross validating the consequences model of corporate.
This paper will investigate how deontological and teleological ethical perspectives can be applied to stakeholdership and shareholdership in both theoretical and practical contexts. What can the history of staterun enterprises teach us in the postenron era. From this perspective stakeholder theory can be used as a counterpoint. First published on the stakeholder theory in 1992 with stakeholder agency theory, journal of management studies. In the descriptiveempirical case, attempts are made to find out whether the concepts embedded in the theory correspond to observed reality. In a stakeholder management plan different groups needs to be accommodated. Concepts, evidence, and implications thomas donaldson georgetown university lee e. Positioning stakeholder theory within the debate on corporate.
Stakeholder theory describes and advocates simultaneous attention to the legitimate interests of all appropriate stakeholders donaldson and preston 1995, p. The stakeholder theory freeman, 1984 is the main theory of this research. This is a challenging question for stakeholder theory. Stakeholder theory an overview sciencedirect topics. Wl jones tm 1992 stakeholder agency theory journal of management studies 29. The core theory that a subset of ethical principles trust, trustworthiness, and cooperativeness can. The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. 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. The theory represents a synthesis of the stakeholder concept, economic theory, insights from behavioral science, and ethics. Shareholder theory economist milton friedman, whose work shaped much of 20thcentury corporate america, was a believer in the freemarket system and no government intervention. Pdf ethical theory and stakeholderrelated decisions. Over 100 articles were published on stakeholder theory by 1995 donaldson and preston 1995, p. One form of instrumental stakeholder theory has been advanced by jones 1995a, who makes a theoretical case for the general proposition that if firms contract. The application of the stakeholder theory in the public sector literature seems to be in.
It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. It focuses on the contracts relationships between the firm and its stakeholders and posits that trusting and cooperative relationships will help solve problems related to opportunism jones, 1995. This is also echoed in the habermasian perspective of csr that integrates moral and economic components through a. Value maximization, stakeholder theory, and the corporate objective, business ethics quarterly, vol. Pdf project stakeholder management and stakeholderanalysis. Wood, 1991a imply that corporate social performance should reign supreme. Dec 09, 2020 meanwhile, in parallel, strategy scholars developed instrumental stakeholder theories jones 1995. An empirical investigation of the relationship between change. Enacting specific changes in the law that force management to consider stakeholders e. A longitudinal study of significant change in stakeholder.
Wl jones tm 1992 stakeholder agency theory journal of. Ackoff 1979 is further clarified by the definition t. Descriptive stakeholder theory appears rooted in organizational behavior literature and describes the. The same author cites that jones 1995 states that firms with contracts of cooperation and mutual trust with their stakeholders acquire competitive advantage over those that do not. Stakeholder theory, corporate governance, and cognitive mapping techniques garoui nassreddine and jarboui anis1 email.
This belief helped shape his shareholder theory of capitalism. It offers an instrumental theory of stakeholder management based on a synthesis. Though the elaboration of legitimacy contained herein applies generally to all normative cores this paper relies on phillipss principle of stakeholder fairness and therefore begins with a brief description of this work. A stakeholder approach, and identifies and models the groups which are stakeholders of a corporation, and both describes and recommends methods by. Decision rights to employees and creditors are already in place in some countries, but the possibility to introduce. Stakeholder theory s distinctive twist on strategy was emphasizing the building and maintenance of sustainable stakeholder relationships as the key to firm performance.
Articles of corporate social responsibility strategic. Donaldson and preston 1995 argued that stakeholder theory explicitly or implicitly contains theory of three different typesdescriptiveempirical, instrumental. Stakeholder theory and corporate social performance stakeholder theory posits that firms possess both explicit and implicit contracts with various constituents, and are responsible for honoring all contracts freeman, 1983, 1984. Donaldson and preston 1995 frame stakeholder theory into three distinctions.
Ackoff 1979 is further clarified by the definition that a stakeholder. The core theory in this article is that application of ethical principles to management. Jones 1995 holds that stakeholder theory, being based on mutual trust and cooperation, confers a competitive advantage on themanagerwhofollowsit. The practical melding of csr and stakeholder theories remains arguably embedded in the instrumentalist approach to stakeholder theory that posits that csr activities will result in. Stakeholder theory was developed further by donaldson and preston 1995 who stressed the ethical nature of csr as well as the potential for increased financial performance that satisfies the interest of shareholders who invest in a business. Stakeholder theory is widely accepted but elementary aspects.
A stakeholder is defined as any person, group, or organization that can place a claim on an organizations attention, resources, or output or is affected by that output. It offers an instrumental theory of stakeholder management based on a synthesis of the stakeholder concept, economic theory, behavioral science, and ethics. Dec 03, 2020 among these, stakeholder theory or stakeholder thinking has emerged as a new narrative to understand and remedy three interconnected business problemsthe problem of understanding how value is. Jones and wicks 1999 propose stakeholder theory as a normative ethic that should approach which obligations from the stakeholder model rest upon the management, and particularly the level of importance of obligations attributed to some stakeholders over other stakeholder groups. Preston 1995 claim that the normative branch of stakeholder theory is the central. Organizational theorists have long been concerned with the effects of.
From a descriptive perspective, stakeholder theory identifies the organizations stakeholders and also describes and explains organization behavior and. Article information, pdf download for stakeholder theory. According to damakayadi, 2003 the stakeholder management enables making the company more efficient in terms of growth, profitability and. Instrumental stakeholder theory and paradigm consensus in business and society. This theory regards the corporation as a public association constituted through political and legal. Stakeholder theorists emphasize that stakeholders should not be considered in terms of their respective power, but based on the principle of. Jones 1995 explains why treating stakeholders well can lead to competitive advantage. Hill and jones 1992 expand agency theory to include all of a firms important stakeholders. Wood and jones 1995 use a stakeholder framework to modify woods definition of corporate social performance as principles, processes, and outcomes. According to this theory, the satisfaction of various stakeholder groups is instrumental for organizational. In the instrumental view of stakeholder theory, the relationship between stakeholder management and environmental performance is investigated, whereas the normative approach involves. Apr 01, 1995 this article is intended to enhance the position of stakeholder theory as an integrating theme for the business and society field. As a result of honoring contracts, a company develops a repu. 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 theory of network governance jones.
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