In short, businesses have duties to all of its stakeholders. Freeman doesnt cite mitroff as a source, rather he attributes stakeholder theory to discussions at the stanford research institute. Edward freeman originally detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in. Thus, in essence, a great deal turns on their rawlsian argument. Analytical approach to stakeholder theory donaldson and preston, 1995, suggested that the research on stakeholder theory has proceeded along three often confused lines. Stakeholder analysis aims to evaluate and understand stake. The theory that was created by freeman 1984, also called stakeholder theory. One which states that businesses do have social responsibilities. In doing so, instrumental stakeholder theory becomes a subset of shareholder value theory. Stakeholder theory and managerial decisionmaking interests is critical for managerial survival. It suggests that a companys stakeholders include people like employees, customers, community members, competitors, vendors, contractors, and shareholders.
For instance, freemans 1984 stakeholder theory advocates that companies should consider the interests of a broader group of stakeholders. 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. A stakeholder approach, originally published in 1984 and reprinted 2010 by. We next present the three aspects of stake holder theory descriptive. Phillips is more concerned with the integrity and defining the principle of stakeholder fairness. Shortcomings and imperfections in the stakeholder models. In this sense, stakeholders of a firm can be defined as.
Stakeholder theory provides the grounding for this research. Concepts, evidence, and implications thomas donaldson georgetown university lee e. A stakeholder approach, cambridge university press, new york. The strategic approach to stakeholder theory views stakeholders instrumentally. While freemans inspirational ideas led directly to the prominence enjoyed by stakeholder theory in the field of management today. Ed freemans 1984 award winning book, strategic management. In this regard, researchers on both topics are quick to point out that csr and stakeholder theory are not the same thing. It suggests that the theory in previous comments are derived in descriptive, instrumental, and normative theory. Teori stakeholder stakeholder theory ramizes dalam bukunya cultivating peace, mengidentifikasi berbagai pendapat mengenai stakeholder. A stakeholder approach was reprinted in 2010 by cambridge university press. Theory and practice as updating freeman 1984 in that we provide a summary of the development of the stakeholder concept up to 2005.
The term stakeholder was chosen as a literary device to call into question managements sole emphasis on stockholders freeman, 1999 and instead suggested that the. The members within a category are not at all homogenous. The stakeholder theory freeman, 1984 is the main theory of this research. A stakeholder approach 1984, he defines a stakeholder as. Edward freemans foundational work continues to inspire scholars and.
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. 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. In the intervening years, the literature on stakeholder theory has become vast and diverse. 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. 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. A stakeholder approach 1984 which is regarded as a seminal work of stakeholder theory. A stakeholder approach was first published in 1984 as a part of the pitman series in business and public policy. In freemans book, stakeholder theory is described as addressing morals and values in managing an organization, from every stakeholder interest or perspective. Among these three definitions, contemporary stakeholder theory is most often credited to the work of ed freeman. I agree that a wider definition is preferable, but not just for ethical reasons. Stakeholder theory six principles of stakeholder theory. The stakeholder theory of the corporation western washington. Freeman has engrossed much of the business ethics literature. Stakeholder theory an overview sciencedirect topics.
Edward freeman published his landmark book, strategic management. Cambridge core strategic management stakeholder theory by r. 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. We describe two divergent approaches to stakeholder theorya social science approach and a normative ethics approachand examine their differences and similarities. A stakeholder approach identifies and models the groups which are stakeholders of a corporation, and both describes and. 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.
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. 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. In a press release from publisher berrettkoehler in september of 2003. 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. 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. The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. Sep 24, 2008 at least since the publication of the monumental strategic management. Stakeholder theory augments resource based theory by. First notable publication on the stakeholder theory. Subsequently, some advocates have moved a bit too quickly and without proper definition or argument. Edward freeman originally detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in managing an organization. Toward a comprehensive model of stakeholder management. It was in this environment that freeman 1984 suggested that managers apply a vocabulary based on the stakeholder concept. 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. Stakeholder theory is a theory of management that concerns itself with matters related to morals and ethics in running a business. Oct 18, 2014 the stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. To assess the holistic potential of stakeholder management, the framework stakeholder management capability smc by freeman 1984. Arnold schwarzenegger this speech broke the internet and most inspiring speech it changed my life.
The purpose of theory is to provide general knowl edge that can be applied in any situation, based on research and discourse. The theory argues that a firm should create value for all stakeholders, not just shareholders. 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. Stakeholder approach in 1984 by building on the work of many others. 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. Harrison, university of richmond, virginia, andrew c.
This is only a partial representation of ed freeman s published works on stakeholder theory. 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. Objections to friedmans shareholderstockholder theory. Numerous articles and books written on stakeholder theory generally credit freeman as the father of stakeholder theory. A broader definition also aligns with edward freemans view. Ian mitroff, in his 1983 book stakeholders of the organizational mind, originally laid out the concept. Since the publication of freemans landmark book, strategic manage ment. Goodpaster 1991 builds on the work of freeman 1984 and divides stakeholder theory into three approaches of strategic, multifiduciary, and a synthesis. 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 and the corporate objective revisited 366 organization science 153, pp. This theory encourages the company through an agent to build good relations not only with the principal but all. A stakeholder approach, a work that set the agenda for what we now call stakeholder theory. Since the 1980s stakeholder theory has developed the thesis that the organisation has a moral relationship with groups other than shareholders freeman, 1984. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. Corporate social responsibility awareness, firm commitment and organizational performance. A stakeholder approach 1984, about a dozen books and more than. 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 engagement in managing risk loosemore, m. Faculty of the built environment, university of new south wales, australia. One of the most important developments of the theory is usually referred back to r. The strategic management discipline did not immediately absorb the stake holder approach into its mainstream, although.
Assessing freemans stakeholder theory springerlink. 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. The article focuses on a proposal concerning convergent stakeholder theory. Although this framework is popular in management and in organizational studies, a lack of empirical work, an overemphasis. Freemans stakeholder theory was first created to put forward another vision of what a companys objective, its raison detre, is.
A stakeholder approach 1984, the stakeholder theory originated by r. Evans brako ntiamoah, priscilla oforiwaa egyiri, michael kwamega. 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. This is based on the assumption that an organisations as well as individuals, possess. Stakeholder theory as an ethical approach to effective.
Freeman and evanys rawlsian argument in order to establish fairness among all of the stakeholders, it is necessary. 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. For nonprofits, stakeholders may include employees. Since neither approach is complete without the other, we propose a new way of theorizing about organizations. 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. Stakeholder theory or approach has its beginnings in organizational management and ethics phillips, freeman and wicks, 2003.
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. They have exceeded freemans intentions which are more libertarian and free. 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. It is a practical theory because all firms have to manage stakeholders. Widely acknowledged as a world leader in business ethics and strategic management, r. Stakeholder theory and the corporate objective revisited. The shareholder and stakeholder theories of corporate purpose. 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.
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