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Journal ArticleDOI

The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications

01 Jan 1995-Academy of Management Review (Academy of Management)-Vol. 20, Iss: 1, pp 65-91

Abstract?The stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. These three aspects of the theory, although interrelated, are quite distinct; they involve different types of evidence and argument and have different implications. In this article, we examine these three aspects of the theory and critique and integrate important contributions to the literature related to each. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental. If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the managers of the unit are fiduciaries for it and not merely for its individual members, that they are . . . trustees for an institution [with multiple constituents] rather than attorneys for the stockholders.

Topics: Stakeholder (61%), Stakeholder theory (60%), Stakeholder management (60%), Stakeholder analysis (59%), Business ethics (51%)

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Citations
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Journal ArticleDOI
Abstract: Stakeholder theory has been a popular heuristic for describing the management environment for years, but it has not attained full theoretical status. Our aim in this article is to contribute to a theory of stakeholder identification and salience based on stakeholders possessing one or more of three relationship attributes: power, legitimacy, and urgency. By combining these attributes, we generate a typology of stakeholders, propositions concerning their salience to managers of the firm, and research and management implications.

9,978 citations


Journal ArticleDOI
Abstract: Most theorizing on the relationship between corporate social/environmental performance (CSP) and corporate financial performance (CFP) assumes that the current evidence is too fractured or too variable to draw any generalizable conclusions. With this integrative, quantitative study, we intend to show that the mainstream claim that we have little generalizable knowledge about CSP and CFP is built on shaky grounds. Providing a methodologically more rigorous review than previous efforts, we conduct a meta-analysis of 52 studies (which represent the population of prior quantitative inquiry) yielding a total sample size of 33,878 observations. The meta-analytic findings suggest that corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility is likely to pay off, although the operationalizations of CSP and CFP also moderate the positive association. For example, CSP appears to be more highly correlated with accounting-based measures of CFP than with market-based ...

5,881 citations


Cites background from "The Stakeholder Theory of the Corpo..."

  • ...The performance of business organizations is affected by their strategies and operations in market and non-market environments (Baron 2000)....

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  • ...Instrumental stakeholder theory (for example, Clarkson 1995; Cornell and Shapiro 1987; Donaldson and Preston 1995; Freeman 1984; Mitchell et al. 1997 (the classification of these studies as exemplifying ‘instrumental stakeholder theory’ was made ex post)) suggests a positive relationship between…...

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  • ...According to this theory, the satisfaction of various stakeholder groups is instrumental for organizational financial performance (Donaldson and Preston 1995; Jones 1995)....

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Journal ArticleDOI
Abstract: We outline a supply and demand model of corporate social responsibility (CSR). Based on this framework, we hypothesize that a firm's level of CSR will depend on its size, level of diversification, research and development, advertising, government sales, consumer income, labor market conditions, and stage in the industry life cycle. From these hypotheses, we conclude that there is an “ideal” level of CSR, which managers can determine via cost-benefit analysis, and that there is a neutral relationship between CSR and financial performance.

5,678 citations


Cites background from "The Stakeholder Theory of the Corpo..."

  • ...According to Donaldson and Preston (1995), three aspect of this theory-normative, instrumental, and descriptive-are "mutually supportive....

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Journal ArticleDOI
Abstract: Companies are increasingly asked to provide innovative solutions to deep-seated problems of human misery, even as economic theory instructs managers to focus on maximizing their shareholders' wealt

4,325 citations


Journal ArticleDOI
Abstract: The Corporate Social Responsibility (CSR) field presents not only a landscape of theories but also a proliferation of approaches, which are controversial, complex and unclear. This article tries to clarify the sit- uation, ''mapping the territory'' by classifying the main CSR theories and related approaches in four groups: (1) instrumental theories, in which the corporation is seen as only an instrument for wealth creation, and its social activities are only a means to achieve economic results; (2) political theories, which concern themselves with the power of corporations in society and a responsible use of this power in the political arena; (3) integrative theories, in which the corporation is focused on the satisfaction of social demands; and (4) ethical theories, based on ethical responsibilities of corporations to society. In practice, each CSR theory presents four dimensions related to profits, political performance, social demands and ethical values. The findings suggest the necessity to develop a new theory on the business and society relationship, which should integrate these four dimensions.

3,337 citations


Cites background from "The Stakeholder Theory of the Corpo..."

  • ...…to justify it through arguments taken from Kantian capitalism (Bowie, 1991; Evan and Freeman, 1988), modern theories of property and distributive justice (Donaldson and Preston, 1995), and also Libertarian theories with its notions of freedom, rights and consent (Freeman and Philips, 2002)....

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  • ...As main approaches we can distinguish the following....

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References
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Journal ArticleDOI
Abstract: In this paper we draw on recent progress in the theory of (1) property rights, (2) agency, and (3) finance to develop a theory of ownership structure for the firm.1 In addition to tying together elements of the theory of each of these three areas, our analysis casts new light on and has implications for a variety of issues in the professional and popular literature, such as the definition of the firm, the “separation of ownership and control,” the “social responsibility” of business, the definition of a “corporate objective function,” the determination of an optimal capital structure, the specification of the content of credit agreements, the theory of organizations, and the supply side of the completeness-of-markets problem.

45,832 citations


Journal ArticleDOI
Abstract: Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which it was erected. This examination is, however, essential not only to prevent the misunderstanding and needless controversy which arise from a lack of knowledge of the assumptions on which a theory is based, but also because of the extreme importance for economics of good judgement in choosing between rival sets of assumptions. For instance, it is suggested that the use of the word “firm” in economics may be different from the use of the term by the “plain man.”1 Since there is apparently a trend in economic theory towards starting analysis with the individual firm and not with the industry,2 it is all the more necessary not only that a clear definition of the word “firm” should be given but that its difference from a firm in the “real world,” if it exists, should be made clear. Mrs. Robinson has said that “the two questions to be asked of a set of assumptions in economics are: Are they tractable? and: Do they correspond with the real world?”3 Though, as Mrs. Robinson points out, “more often one set will be manageable and the other realistic,” yet there may well be branches of theory where assumptions may be both manageable and realistic. It is hoped to show in the following paper that a definition of a firm may be obtained which is not only realistic in that it corresponds to what is meant by a firm in the real world, but is tractable by two of the most powerful instruments of economic analysis developed by Marshall, the idea of the margin and that of substitution, together giving the idea of substitution at the margin.

20,413 citations


Book ChapterDOI
01 Mar 2010

17,781 citations


"The Stakeholder Theory of the Corpo..." refers background in this paper

  • ...For example, according to Cyert and March (1963), the neoclassical theory of the firm attempts to explain the economic principles governing production, investment, and pricing decisions of established firms operating in competitive markets....

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Book
01 Jan 1984
Abstract: Part I. The Stakeholder Approach: 1. Managing in turbulent times 2. The stakeholder concept and strategic management 3. Stakeholder management: framework and philosophy Part II. Strategic Management Processes: 4. Setting strategic direction 5. Formulating strategies for stakeholders 6. Implementing and monitoring stakeholder strategies Part III. Implications for Theory and Practice: 7. Conflict at the board level 8. The functional disciplines of management 9. The role of the executive.

17,390 citations


Journal ArticleDOI
Abstract: (1987). The Economic Institutions of Capitalism. Journal of Economic Issues: Vol. 21, No. 1, pp. 528-530.

16,753 citations