The stakeholder theory

In management[ edit ] In the last decades of the 20th century, the word "stakeholder" became more commonly used to mean a person or organization that has a legitimate interest in a project or entity. In discussing the decision-making process for institutions—including large business corporationsgovernment agenciesand non-profit organizations —the concept has been broadened to include everyone with an interest or "stake" in what the entity does. This includes not only vendors, employeesand customersbut even members of a community where its offices or factory may affect the local economy or environment. In this context, a "stakeholder" includes not only the directors or trustees on its governing board who are stakeholders in the traditional sense of the word but also all persons who paid into the figurative stake and the persons to whom it may be "paid out" in the sense of a "payoff" in game theorymeaning the outcome of the transaction.

The stakeholder theory

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The stakeholder theory

About the Author H. Contact him at jeff. University of Chicago Press, Note that I am considering only the normative version of the theory, which states how managers ought to behave. There are also descriptive versions of the stakeholder theory, which describe actual behavior of managers, and instrumental versions, which predict outcomes for example, higher profits if managers behave a certain way.

The stakeholder theory

These distinctions are drawn crisply in T. Bowie Englewood Cliffs, New Jersey: Prentice-Hall,97— It is to this version of the normative stakeholder theory that the following description refers.

Note, however, that Post, Preston and Sachs, who take a more instrumental than normative view of stakeholder theory, embrace a wider enumeration of stakeholders, including regulatory authorities, governments and unions.

Note that these are ethical rights. Some authors — for example, see J. However, the most recent writings by the leading proponents of the social contract theory — including T.

What is stakeholder theory? definition and meaning -

Oxford University Press,3— Stanford University Press, Free Press,30— Harvard Business School Press,7—8. Blackwell,Stakeholder theory was first described by Dr. F.

Edward Freeman, a professor at the University of Virginia, in his landmark book, “Strategic Management: A Stakeholder Approach.” It suggests that shareholders are merely one of many stakeholders in a company.

Basic idea of the Stakeholder Theory and Definition The traditional definition of a stakeholder is “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Freeman ).

The general idea of the Stakeholder concept is a redefinition of the. Stakeholder Decisions – This element of the stakeholder theory is the element that could make or break a project. For example, what if an external stakeholder that was responsible for the rotating heads on the electric razor found a flaw, but did not reveal it?

The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. It was originally detailed by Ian Mitroff in his book "Stakeholders of the Organizational Mind", published in in San Francisco. Stakeholder Theory is a widely undestood concept in Business today.

Stakeholder theory states that the purpose of a business is to create value for stakeholders not just shareholders. Business needs to consider customers, suppliers, employees, communities and shareholders. In a corporation, as defined in its first usage in a internal memorandum at the Stanford Research Institute, a stakeholder is a member of the "groups without whose support the organization would cease to exist".

The theory was later developed and championed by R. Edward Freeman in the s. Since then it has gained wide acceptance in business practice and in theorizing relating to.

The Shareholders vs. Stakeholders Debate