This process is experimental and the keywords may be updated as the learning algorithm improves. Stakeholder theory can be explained from a number of different perspectives. This theory emphasises the importance of the involvement of stakeholders in the business in order to create value parmar et al, 2010. Purpose the stakeholder theory encompasses instrumental and normative varieties whose mutual relationship remains unclear and exhibits a classic tension between rational selfinterest and moral. Relationship between manager and stakeholder is based on morals and normative commitments. Dec 10, 2018 stockholder theory and stakeholder theory map out these two paths, allowing each business to decide which ethical path it will choose to take.
According to this perspective, managerial relationships with stakeholders are based on normative, moral commitments. One of the values produced by stakeholder theory includes greater productivity across the organization. Ian mitroff, in his 1983 book stakeholders of the organizational mind, originally laid out the concept. The article focuses on a proposal concerning convergent stakeholder theory. Managers ought to pay attention to key stakeholder relationships. Why normative stakeholder theorists should support. We then develop a punctuated continuum of five stakeholder. The notion of the stakeholder has been used far more since the mid1980s. It can be interpreted from a practical perspective jones 1995. Numerous articles and books written on stakeholder theory generally credit freeman as the father of stakeholder theory. Yes, sometimes the interests are in conflict, but over time they must be shaped in the same direction. This chapter examines some of the normative reasons for adopting a stakeholder the ory of management and for rejecting the once, and perhaps still, dominant shareholder. The advantages and disadvantages of stakeholder theory abound. 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.
Aspects of the stakeholder concept and their implications. 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. Both stockholder and stakeholder theories are normative theories of corporate social responsibility that outline the ethical responsibilities of a corporation. Most writers agree that, to be a most writers agree that, to be a stakeholder, one must have an interest or stake in the corporation. It suggests that shareholders are merely one of many stakeholders in a company. Stakeholder theory by freeman 1984 provides us with a framework that can be used to map out the stakeholders of all different types of businesses. Freeman based his work on the notions of mitroff, mason, and emshoff. Mar 05, 2019 stakeholder theory posits that a company is only successful when it delivers value to its stakeholders, and those values can come in many forms beyond financial benefits.
Stakeholder theory is unquestionably the most popular framework for discussing business ethics. In doing so, instrumental stakeholder theory becomes a subset of shareholder value theory. Kenneth goodpaster seems to think so and his article tries to address this problem. Normative stakeholder theory how is normative stakeholder. Stakeholder theory is required to manage organizations in a highly complex and turbulent environment as it give a practical, efficient, effective, and ethical way. The main benefit is that it forces the corporation to act in the interests of all the stakeholders. While the definition of a stakeholder varies, there are five main types. We contend that the ideology of shareholder value is a product of the normative shareholder theory, while the norm of reciprocity is a social fabric holding businesses and multiple stakeholders together and thus to some degree underlines the normative stakeholder theory. First, we discuss different ways of understanding donaldson and. Concepts, evidence, and implications thomas donaldson georgetown university lee e. Stakeholder theory and normative approaches springerlink. Stakeholder theory as an ethical approach to effective.
The paper identifies three distinct kinds of normative stakeholder theory and three different levels of. It is, however, an important characteristic that underlies their analysis and one that can account for the multiple approaches to stakeholder analysis if. Stakeholder theory an overview sciencedirect topics. This paper attempts to untangle the confusion and to prepare the ground for a more productive approach to the normative stakeholder problem. Analytical approach to stakeholder theory donaldson and preston, 1995, suggested that the research on stakeholder theory has proceeded along three often confused lines. Normative, instrumental and descriptive stakeholder. Much has been written about the stakeholder theory, including a book by r. Stakeholder theory is a theory of management that concerns itself with matters related to morals and ethics in running a business. The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. This theory states that managers ought to pay attention to key stakeholder relationships.
These are the basic principles of the stakeholder theory and the model certainly offers us an alternative to the stockholder model. 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. 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. Stockholder theory and stakeholder theory map out these two paths, allowing each business to decide which ethical path it will choose to take.
It can be interpreted from a normative perspective, which is attributed to the framework of normative stakeholder theory put forward by donaldson and preston 1995. These include customers, employees, local community, shareholders, and suppliers. Typically, the law does not give a voice to stakeholders that are nonshareholders in a corporation. A stakeholder approach which became the theoretical ground for further developments. A stakeholder approach and stakeholder theory and organizational efforts by robert phiilips. Theory and practice this book is distinctive in that it deals with theory, practice, policy, and education. Aug 31, 2016 one common version of stakeholder theory seeks to define the specific stakeholders of a company the normative theory of stakeholder identification and then examine the conditions under which.
Pdf integrating instrumental and normative stakeholder. Recent examples of such an approach show that problems appear with respect to the ethical foundation as well as the specification of the norms and the relation between corporate and individual responsibilities. Normative theory, stakeholders, sustainability, tourism. The purpose of theory is to provide general knowl edge that can be applied in any situation, based on research and discourse. This chapter then surveys some of the prominent normative cores that are used to ground stakeholder theory, that is, kantian, contractarian, feminist ethics, and ethical pragmatism, and the moral obligations that each normative approach generates. Normative approaches towards stakeholder theory hold that. In particular, many shareholder theory advocates are quick to claim that the theories actually con. Donaldson and preston 1995 distinguished between descriptive, instrumental and normative approaches to stakeholder theory. Normative stakeholder theory, by contrast, is grounded in moral or philosophical arguments.
Integrating instrumental and normative stakeholder theories. A stakeholder theory approach to the organisational performance and influence of informationcommunication technology. Stakeholder theory is an important part of modern business ethics. We then develop a punctuated continuum of five stakeholder cultures, ranging from fundamentally amoral cul. There are four types of books that specialize in the stakeholder field. Some pressing questions are raised with respect to each normative approach. We empirically test the effect of the ideology of shareholder value and the norm of reciprocity on managers decision making. Both stockholder and stakeholder theories are normative theories of corporate social responsibility that outline the ethical responsibilities of.
The normative approach within the corporate perspective is twofold. Chapter 3 normative stakeholder theory abe zakhem and daniel e. Normative approach of stakeholder theory definition human. 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. Goodpaster 1991 builds on the work of freeman 1984 and divides stakeholder theory into three approaches of strategic, multifiduciary, and a synthesis. One which states that businesses do have social responsibilities. First, there is instrumental stakeholder theory, which assumes that if managers want to maximise the objective. A stakeholder approach points out the groups which. The stakeholder ecosystem, this theory says, involves anyone invested and involved. A key characteristic of the critical theory approach is expressed as a distinction between three different normative realms, viz. Stakeholder theory six principles of stakeholder theory.
In this regard, researchers on both topics are quick to point out that csr and stakeholder theory are not the same thing. Rather than on a desire to use those stakeholders solely to maximize profits. Stakeholders should be given importance while taking decisions. In the second section, the outlines of a theory of stakeholder management are provided.
Edward freeman, a professor at the university of virginia, in his landmark book, strategic management. The stakeholder perspective is an alternative way of understanding how companies and people create value and trade with each other. Normative approach of stakeholder theory definition. Preston 1995 offers a taxonomy of the different stakeholder theories. In the end, they argue, only one of these interpretations of the theory really makes sense. Stakeholder theory has evolved from a corporatecentric perspective into a more. Thus, the normative aspect of the theory is believed to capture the core of the theory. Distinctions in descriptive and instrumental stakeholder. The papers published in this series can be downloaded in pdfformat from. Many scholars argue for a normative instead of an instrumental approach to stakeholder theory. Logically, normative is more of a deductive process than positive accounting theory. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. The theory argues that a firm should create value for all stakeholders, not just shareholders. The shareholder and stakeholder theories of corporate purpose.
Normative stakeholder theory differs from descriptive stakeholder theory, according to which managers. The strategic approach to stakeholder theory views stakeholders instrumentally. A stakeholder approach, which has been out of print for a decade, there is a dearth of books that provide a. In freemans book, stakeholder theory is described as addressing morals and values in managing an organization, from every. Social corporate responsibility business ethic stakeholder theory normative approach personnel management these keywords were added by machine and not by the authors. This article argues, from a critical theory perspective, that two sets of factors tend to. We next present the three aspects of stake holder theory descriptiveempirical, instrumental, and normative found in the literature and clarify the critical. 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. It suggests that the theory in previous comments are derived in descriptive, instrumental, and normative theory. 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. Freeman based his work on the notions of mitroff, mason, and emshoff 1978. Although there is significant empirical evidence in support of managing for stakeholders, some scholars continue to promote shareholder value.
Normative starts with the theory and deduces to specific policies, while positive starts with specific policies. Stakeholder theory and the corporate objective revisited. The use of stakeholder analysis to investigate corporate. 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.
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