Chapter 13: Stakeholder Theory

Stakeholders:

Narrow definition: Groups without whose support the business would cease to be viable

Broad definition: Any group or individual that can affect or be affected by the realization of the organization’s purpose

1. Fallacy of separation thesis: Discourse of business and discourse of ethics cannot be separated

2. Moral claim: Stakeholders have moral claim on corporations because corporations have potential to harm or benefit them

3. People as ends, not means: Managers should make decisions respecting stakeholders’ well-being rather than treating them as means to a corporate end (Evan and Freeman, 1993)

-       Narrow definition → primary stakeholders

-       Stakeholder theory saying: should accomadte different claims of stakeholders participating

-       Second assumption: stakeholders have moral claims for the corporation, ethical rights the corporation should follow

-       Third assumption: people are seen as ends not means, people are not means

-   Shareholder theory: all profits are owed to the investors

-   Stakeholder theory: stakeholders are seen as ends, have moral claims, not seen only what they can provide

• Utilitarianism: Recognizes stakeholders’ (not only shareholders’) interests are joint

• Ethics of duties: People as ends, not means to corporations’ ends

• Ethics of rights: shareholders’ rights cannot overrule other stakeholders’ rights

• Character or virtue ethics: Business virtues (eg., efficiency, fairness, respect, integrity, keeping commitments) are critical in being successful at creating value for stakeholders

• Pragmatism: Society is richer if we can create a conversation about how to live together better; business as a form of collaboration

Identification of stakeholders

• Multitude of definitions: no required ethical content to define relevant stakeholders

• Broad view of stakeholders: ecological scope (everything is connected to everything else) with no clear boundaries

-   very different to identify them and asses if a claim is ethical or not 

Vagueness and overbreadth:

• good for everyone and no one; “stakeholders’ interests must be balanced” contains vague terms

Balancing without objectives:

• an impossible managerial quest because stakeholders’ interests may not align – how to resolve conflicting, unethical, unreasonable interests?

1. Changing conditions, changes the ways to prioritize stakeholders

2. Process innovation

   1. Big corporations: 1st movers in process innovation (strong empirical evidence): they are very visible to media and NGOs that can destroy their legitimacy and (b) gain advantage, using visibility

   2. Small companies: don’t have visibility, followers adapting to industry standards

3. Product innovation

   1. Small companies: 1st movers because they are more flexible and develop a distinctive value proposition