Milton Friedman declared that a business must it serve the interests of the shareholders, but this excessively capitalistic view is discarded by the proponents of Stakeholder theory.

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. 4.1 Introduction. Since the 1990s’ the stakeholder theory has become famous as a direct alternative and challenge to the shareholder value theory (Freeman 1984). This belief helped shape his shareholder theory of capitalism: that a company’s sole responsibility is to make money for its shareholders.

This article leverages insights from the body of Adam Smith’s work, including two lesser-known manuscripts—the Theory of Moral Sentiments and Lectures in Jurisprudence—to help answer the question as to how companies should morally prioritize corporate social responsibility (CSR) initiatives and stakeholder claims. Stakeholder theory expresses the idea that business organizations are dependent upon stakeholders for success, and stakeholders have some stake in the organization. About the Stakeholder Theory. The stakeholder ecosystem, this theory says, involves anyone invested and involved in, or affected by, the company: employees, environmentalists … Stakeholder Theory is a view of capitalism that stresses the interconnected relationships between a business and its customers, suppliers, employees, investors, communities and others who have a stake in the organization. Researchers in the field of CSR have claimed that “the phrase ‘corporate social responsibility’ has been used in so many different contexts that it has lost all … At the end this report shows that the stakeholder theory, agency theory, CSR and ethics are diversified over different fields. Total shareholder or stakeholder maximization includes benefits for all groups; researchers prove that implementation of these theories helps the … Stakeholder theory suggests the purpose of the firm is to serve broader societal interests beyond economic value creation for … Although there have been few empirical results showing that … 2010, p. 413) when it is added to the financial commitments and responsibilities of a firm. In 1984, R. Edward Freeman originally detailed … Research in strategy and management, in general, has been increasingly focusing its attention on stakeholder theory following Freeman's (1984) seminal work, as more firms have become aware of the need for implementing corporate social responsibility (CSR) aspects in their planning activities. Consequently, researchers have called for additional empirical evidence of the effects of corporate social performance (Margolis and Walsh 2003; Orlitzky 2008; Schreck 2011) as well as a "names and faces" approach to stakeholder applications (McVea and … Clearly, the concept of CSR has aspects in common with stakeholder theory, as both have underlying moral and ethical principles. There is however an integral link between the two concepts, which is based on the supposition that stakeholder theory is part of the motivation for businesses to be responsible. However, under stakeholder theory, CSR is said to ‘‘exacerbate the problem of capitalism and ethics’’ (Parmar et al. Stakeholder theory deals with discussions on if a business has a greater responsibility towards these stakeholders than towards the shareholders, and how to fulfill these responsibilities. CSR and stakeholder theory have arguably muddied the waters for practical applications of such theories to firm/ stakeholder relationships. After more than half a century of research and debate, there is not a single widely accepted definition of CSR. Stakeholder Theory vs. Shareholder Theory Economist Milton Friedman, whose work shaped much of 20th-century corporate America, was a believer in the free-market system and no government intervention. It argues that the number of stakeholder pressure groups has developed widely since the 1960s’ and the stakeholder forces impact on business must not be underestimated. The theory argues that a firm should create value for all stakeholders, not just shareholders. This chapter focuses on the connections between stakeholder theory and the corporate social responsibility (CSR) literature. Corporate Social Responsibility As a simple example, when a factory produces industrial waste, a CSR perspective attaches a responsibility directly to factory owners to dispose of the waste safely. Both stakeholder theory and CSR stress the importance of company responsibility toward communities and society. The stakeholder theory of CSR.

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