The Ethical and Environmental Limits of Stakeholder Theory

Abstract

Abstract:We argue that though stakeholder theory has much to recommend it, particularly as a heuristic for thinking about business firms properly as involving the economic interests of other groups beyond those of the shareholders or other equity owners, the theory is limited by its focus on the interests of human participants in business enterprise. Stakeholder theory runs into intractable philosophical difficulty in providing credible ethical principles for business managers in dealing with some topics, such as the natural environment, that do not directly involve human beings within a business firm or who engage in transactions with a firm. Corporate decision-making must include an appreciation of these ethical values even though they cannot be captured in stakeholder theory.

The Stakeholder Model Refined

“…Similar sentiments were expressed by Orts and Strudler (2002), while Hall and Vredenburg (2005) note that ''stakeholder ambiguity is difficult to manage because it is idiosyncratic and context-specific''. In their discussions, some scholars have also widened the range of applications.…”

“…It is seen as important to recognise the limitations of the stakeholder theory so as ''to prevent the theory [being] threatened with meaninglessness'' (Phillips, 1999). Notwithstanding the academic debate, which will hopefully provide further clarifications and delimitations, there has been a fairly general consensus that the stakeholder concept has the potential to deliver a theory of the organisation with practical usefulness for management (Attas, 2004;Donaldson and Dunfee, 1994;Freeman, 1999;Harrison and Freeman, 1999;Jones and Wicks, 1999;Key, 1999;Orts and Strudler, 2002;Preston and Donaldson, 1999).…”

Who are the Stakeholders Now? An Empirical Examination of the Mitchell, Agle, and Wood Theory of Stakeholder Salience

“…One could argue the company is responsible to its stakeholders. However, Orts and Strudler (2002) argue that leaving the term 'stakeholder' so broadly defined as to include insurers, suppliers, consumers, industry associations, governments, and their agencies, communities, environmental groups, the media, and the general public (Brooks, 2004;Canadian Institute of Chartered Accountants, 1997), in addition to the traditional investor and lender groups, leaves the term overly complex and unable to provide a basis for establishing workable guidelines for management behavior. In their effort to address this problem, Mitchell, Agle, and Wood evolve a dynamic model that begins with a broad definition that excludes no stakeholder, actual or potential, from consideration, but allows for the transience of stakeholder status.…”

Corporate and State Social Responsibility: A Long-Term Perspective

“…Stakeholders have different interests in preserving the environment. According to [38], balancing stakeholder interests promises little progress in the area of the environment. Broad stakeholder theories offer no concrete proposals about how competing and conflicting interests should be balanced in general.…”