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 be
successful 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 theory
models 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 been
overlooked 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.
Bibliography
Andr O. Laplume, K. S. (n.d.). Stakeholder Theory: Reviewing a Theory That Moves Us. Journal of
Management .