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Stakeholder Theory

Freeman initially brought the stakeholder concept to light. There has always been debate

between the Friedman and Freeman theories, i.e. shareholder v/s stakeholder respectively.

The authors in this article review the literature published by various authors during the

period 1984-2007 on the stakeholder concept. According to Freeman, a firm will besuccessful only if its takes into account the interests of all the stakeholders involved. The

earlier theories focused only on creating value for the shareholders by maximizing returns.

This model is, however, not sustainable and, thus, it is important to understand all the

stakeholders related to a business be it employees, suppliers, customers, the community or

the banks who lend money. The authors sampled 179 articles from 8 journals related to the

stakeholder concept for this study. The different studies reveal how the concept of

stakeholder has gained momentum over the years and its recent acceptance indicates the

rising impact of businesses on the society, NGOs, communities and the environment.

The stakeholder concept developed into the strategic management and organization theorymodels before blending into the CSR issues of management. Freeman in his work indicated

that it is important for managers to understand how the activities of a business influence

all the factors involved in the business. To complement Porters strategies he highlighted

four stakeholder strategies: exploit defend, swing and reinforce (Andr O. Laplume). The

authors identify three phases in the development of the stakeholder concept: incubation

period, incremental period (development of the concept) and maturity period (rising

attention). The stakeholder concept is developed around 5 themes definition and

salience, stakeholder actions and responses, firm actions and responses, firm performance

and theory debates. Themes 3 and 5 have been widely discussed over the years. Moreover,the span of these themes indicates the wider acceptance of the stakeholder concept and

questions the traditional shareholder view. The studies highlight that a business should be

focused on creating value for its stakeholders and treat them with caution so as not to

alienate them (Andr O. Laplume).

The authors then provide some generic recommendations and specific ones for each theme.

The generic being that qualitative studies is required to understand how the stakeholder

concept relates with small, family businesses and not for profit firms, since all the previous

studies were focused on publicly traded large firms. Apart from this, more qualitative

research is required to explain the strategic emphasis of the theory which has beenoverlooked in the previous studies. Empirical research is one of finding solutions to the

unanswered questions and assumptions (Andr O. Laplume).

In a nutshell, the recent corporate issues and environmental concerns has given rise to the

acceptance of the stakeholder concept, but more qualitative research is required to resolve

the key challenges it faces.

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Bibliography

Andr O. Laplume, K. S. (n.d.). Stakeholder Theory: Reviewing a Theory That Moves Us.Journal of

Management.

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