Donaldson and preston 1995 argued that stakeholder theory explicitly or. Some authors, like freeman and velamuri 2006, even affirm that the main objective of csr is to create value for stakeholders and to fulfill responsibilities towards them. Results show first that most studies correlate measures of business performance that as yet have no theoretical relationship for example, the level of corporate charitable giving with. Instrumental stakeholder theory and paradigm consensus in business and society. These three aspects of the theory, although interrelated, are quite distinct. A synthesis of ethics and economics, authorthomas m.
From a practical perspective, jones 1995 argued that the instrumental benefits of stakeholder management paradoxically result only from a genuine commitment to ethical principles. However, over the years, critics have attacked the vagueness and ambiguity of stakeholder. In response, freeman and mcvea 2001 called for stakeholder research to turn away from pure research that focuses on the development of stake holder theory, and instead to apply the insights of stakeholder theory to real world problems. The normative aspects of ist most clearly differentiate it from other possible managementapproaches.
Distinctions in descriptive and instrumental stakeholder theory. Kochan and rubinstein toward a stakeholder theory of the firm a theory and to illustrate some of its propositions with a case study of the first decade of experience at the saturn corporation, an organization that appears to embody many of the features of a stakeholder firm. Stakeholder theory and the corporate objective revisited. Jones 1995, for example, argues that if a firm contract with its stakeholders based on mutual trust, it will have a competitive advantage over firms that do not. The article focuses on a proposal concerning convergent stakeholder theory. The stakeholder theory of the corporation western washington. It offers an instrumental theory of stakeholder management based on a. The stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. Concepts, evidence, and implications thomas donaldson georgetown university lee e. In particular, in jones s 1995 instrumental stakeholder theory, csr efforts were seen as potentially instrumental in obtaining necessary resources or stakeholder support. 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. Shortcomings and imperfections in the stakeholder models. Strategic stakeholder management, as described by berman, wicks, kotha, jones academy of management journal. Preston 1995 claim that the normative branch of stakeholder theory is.
Stakeholder theory and managerial decisionmaking interests is critical for managerial survival. A stakeholder approach, which has been out of print for a decade, there is a dearth of books that provide a. Jones 1995 have proposed conceptual explanations for the existence or lack thereof of a causal relationship between csp and cfp, but failed to provide clear answers. First published on the stakeholder theory in 1992 with stakeholder agency theory, journal of management studies. With regard to corporate governance, stakeholder theory has led to an alternative approach to. Instrumental approaches towards stakeholder theory hold that. 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. Chapter sustainable wealth creation 5 applying instrumental.
The main argument is that good management implies positive relationships with key stakeholders, which in turn improve cfp freeman, 1984. Stakeholder theory is unquestionably the most popular framework for discussing business ethics. The basic assumption behind this theory, grounded in an rbv logic, is. 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. Depicting csr stakeholder theory posits that the behavior of an orga. Jones 1982 offered a social control of business framework as an implicit. The stakeholder theory freeman, 1984 is the main theory of this research. Jones is the chairman of the management and organization department and the boeing endowed professor of business administration at the university of washington in seattle.
Overall, stake holder theory describes a business as an open and flexible system made up of diverse actors and active in a network of relationships with various other actors. Indeed, vestiges of the concept may be found in many areas of business from finance, strategic management, and corporate governance. Reframing instrumental stakeholder theory abstract citeseerx. 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. Taking agency theory and stakeholder theory as points of departure, this article proposes a paradigm that helps explain the following. The recent spate of corporate scandals in the united states and elsewhere has dramatized, once again, the severity of the agency problems that may arise between managers and shareholders. This theory regards the corporation as a public association constituted through political and legal. Stakeholder theory an overview sciencedirect topics. 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 19 th century letza et al. 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. 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 support, have been proposed see agle et al. The current history of stakeholder theory has been well documented by donaldson and preston 1995. It addresses morals and values in managing an organization, such as those related to corporate social responsibility. It offers an instrumental theory of stakeholder management based on a synthesis.
We address this issue by extending managements stake holder theory by adding insights from psychologys prospect decision theory and sociologys resource dependence theory. It suggests that the theory in previous comments are derived in descriptive, instrumental, and normative theory. Stakeholder analysis aims to evaluate and understand stake. One of the central propositions of stakeholder literature is that the normative core of stake holder theory is in sharp contrast to the normative core of shareholder theory donaldson and preston 1995. This is also echoed in the habermasian perspective of csr that integrates moral and economic components through a. He argued that firms which create, and sustain, stakeholder relationships based on mutual trust and cooperation will have a competitive advantage over other firms. Overall stake holder theory describe s a busines n ope and flexible system made up of divers actors and active in a network of relationships with various other actors. These scandals remind us that even if we adopt an extremely. 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. Bigley university of washington business school we use convergent elements of major ethical theories to create a typology of corporate stakeholder culturesthe aspects of organizational culture consisting of the beliefs.
This instrumental view of stake holder theory suggests that. The practical melding of csr and stake holder theories remains arguably embedded in the instrumentalist approach to stakeholder theory that posits that csr activities will result in. Pdf instrumental stakeholder theory considers the performance consequences for firms of highly ethical. Pdf how applying instrumental stakeholder theory can provide. Stakeholder theory and the corporate objective revisited 366 organization science 153, pp. When do powerful stakeholders give managers the latitude to. This paper raises a challenge for those who assume that corporate social responsibility and good corporate governance naturally go handinhand. Business ethics, stakeholder theory, ethical decisionmaking models, corporate social performance and shareholder litigation. But because saturn has some rather idiosyncratic features, it repre. Jones and wicks s 1999 convergent stake holder theory assumes the mutual reinforcement of the instrumental and normative aspects. 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. The success of the stakeholder theory in management literature as well as in current business practices is largely due to the inherent simplicity of the stakeholder model and to the clarity of freemans powerful synthesised visual conceptualisation. Jones 1995 24 suggests the property right of contracts at the heart of stakeholder theory kantianism.
In this article, we examine these three aspects of the theory. Foster school of business, university of washington the boeing company endowed professor in business management. 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. Stakeholder theory, corporate governance and public. Depicting csr stakeholde r theory posits thai the behavio of an organisatio n ca b e understoo d an predicte base o a th.
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