A stakeholder is any individual or group whose interests affect or are affected by the operations of a business. To have a stake simply means that one’s interests intersect with those of the business.
Stakeholders may be thought of descriptively as features of a company’s strategic terrain as the company seeks to navigate a path toward reaching its objectives. However, in business ethics, stakeholders are mainly thought of normatively as sources or objects of a company’s ethical duties. Stakeholder theory is a point of view within business ethics, popularized by Edward Freeman, holding that a company’s managers are ethically obligated to pursue jointly or to balance the interests of its stakeholders in the conduct of its business. This reflects the idea that companies create value through the cooperation of its stakeholders.
Stakeholder theory was offered initially as an approach to corporate governance; one operating in contradiction to the idea that managers’ ethical obligation as managers is to advance the interests of a company’s shareholders. More recently, it has been offered mainly as a theory of ethical management that may be compatible with managers’ fiduciary duties to shareholders.
Although intuitively appealing, the stakeholder concept raises a number of questions that are difficult to answer. Skepticism about stakeholder theory is usually informed by the idea that one or more of these questions either cannot be answered or that stakeholder theory answers them in an implausible way: Who counts—that is, who are a company’s stakeholders? What interests, held by those who count, ought managers to serve? What is balance, why is it valuable, and how is a manager charged with achieving it to know when it has been achieved or what activities promote it? Whether at the level of governance or of day-to-day management, how does recognizing individuals or groups as stakeholders figure in decision-making? How wide is the range of business ethics questions that can be addressed satisfactorily by thinking about them in terms of the different interests of the stakeholders involved?
- Edward Freeman, Andrew C. Wicks, Bidhan Parmar, Stakeholder Theory and “The Corporate ObjectiveRevisited” Organization Science, 2004
- Joseph Heath, “Business Ethics Without Stakeholders,” Business Ethics Quarterly, 16(3) (2006); 533–557
- Chris MacDonald, “Review of Edward Freeman et al Managing for Stakeholders,” Business Ethics Quarterly, 19: 4. (2009). 621-629
- Alexei Marcoux, “The Fiduciary Argument Against Stakeholder Theory,” Business Ethics Quarterly 13(1) (2003): 1-24