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A Theory about Stakeholders


Take a second to name as many stakeholders as you can that a business should recognize (or just cheat and look at the ones that I listed below)….

 

According to stakeholder theory, which was developed by R. Edward Freeman, there are four stakeholders that are normally addressed by businesses: investors, employees, suppliers, and customers. These are the ones that you probably guessed.  The theory goes on to list a number of other stakeholders though.  These include governmental bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, the public at large, and competitors.  These might not come to mind right away, and most people wouldn’t even think of one of these other stakeholders.  However, business decisions should be made with these unheralded parties in mind.  But how much should they cater to their needs in each individual decision?  This is an essential question that business ethics attempts to answer.  In his theory, Freeman argues that the role of business is to benefit its stakeholders, which will in turn benefit the business.  Ideally, this would be done through innovation that helps align the interests of stakeholders.  If this is accomplished, then the business doesn’t have to deal with tradeoffs that pit stakeholders against each other.  In the end, the fundamental driver of business behavior is the stakeholders of that business.  Because of this, I am fascinated in the identification of stakeholders, and then their subsequent effect on the behavior of businesses.

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Discussion

3 thoughts on “A Theory about Stakeholders

  1. I don’t think stakeholders are given nearly enough credit for what they do. This goes without being siad……or does it? Without stakeholders, all companies would virtually be owned by banks and as highly leveraged as a homeless man attending Bucknell (you get the picture right?). I’m honestly baffled that companies continue to engage in insider trading to benefit themselves and executives. I firmly support the SEC’s recent action in cracking down on these wrongdoers. I feel companies do not fully appreciate their stakeholders enough for the simple fact that stakeholders are the reason companies are able to engage in every day business. Currently, a former employee of UBS took part in unauthorized trading that resulted in a $2.3 billion loss. I’ll repeat that. $2.3 BILLION. And it certainly wasn’t his money that he lost. Companies need to start taking closer looks at who the higher and always keep in mind their stakeholders.

    Posted by Patrick | January 31, 2012, 11:01 pm
  2. I think you pose an interesting question when you say, “how much should they cater to their needs in each individual decision?” Stakeholders, like you mentioned, make up different groups of people. Businesses are supposed to maximize value for stakeholders, but what makes that difficult sometimes is that people may have conflicting interests within a company. For example, a CEO of one company may act in their own interest while disregarding the interests of others. Value to one person may have a completely different meaning to another. I think it’s important to do what is morally right and what benefits the majority of the people. That being said, it is important to keep in mind that making everyone happy is not always easy.

    Posted by Jenna | January 31, 2012, 11:38 pm

Trackbacks/Pingbacks

  1. Pingback: How to Prepare a Stakeholder Map « Martin Webster, Esq. - March 14, 2012

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Blog 5 before session 6 What (interest) or Who (person) Inspires You? For this week’s prompt, the Blog Council wants you to examine how this class relates to your own interests. So, please write about how this class relates to some of your own intellectual or other learning interests. We are NOT interested in how it relates to a specific career goal. Plan B: same idea, but based on a person. See whole post for details.

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