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

doi:10.5465/AMR.1995.9503271992

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

Journal Article•DOI•

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

Thomas Donaldson¹, Lee E. Preston²•Institutions (2)

Georgetown University¹, University of Maryland, College Park²

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

TL;DR: In this article, the authors examine three aspects of the stakeholder theory and critique and integrate important contributions to the literature related to each, concluding that the three aspects are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental.

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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.

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Journal Article•DOI•

Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of who and What Really Counts

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Ronald K. Mitchell¹, Bradley R. Agle², Donna J. Wood²•Institutions (2)

University of Victoria¹, University of Pittsburgh²

01 Oct 1997-Academy of Management Review

TL;DR: In this paper, a theory of stakeholder identification and saliency based on stakeholders possessing one or more of three relationship attributes (power, legitimacy, and urgency) is proposed, and a typology of stakeholders, propositions concerning their saliency to managers of the firm, and research and management implications.

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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.

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10,630 citations

Journal Article•DOI•

Corporate Social and Financial Performance: A Meta-Analysis

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Marc Orlitzky¹, Frank L. Schmidt², Sara L. Rynes²•Institutions (2)

University of New South Wales¹, University of Iowa²

01 Mar 2003-Organization Studies

TL;DR: This article conducted a meta-analysis of 52 studies and found 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.

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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 ...

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6,493 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 Article•DOI•

Corporate Social Responsibility: a Theory of the Firm Perspective

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Abagail McWilliams¹, Donald S. Siegel²•Institutions (2)

University of Illinois at Chicago¹, University of Nottingham²

01 Jan 2001-Academy of Management Review

TL;DR: In this article, the authors outline a supply and demand model of corporate social responsibility (CSR) and conclude that there is an "ideal" level of CSR, which managers can determine via cost-benefit analysis.

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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.

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6,305 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 Article•DOI•

Misery Loves Companies: Rethinking Social Initiatives by Business:

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Joshua D. Margolis¹, James P. Walsh²•Institutions (2)

Harvard University¹, University of Michigan²

01 Jun 2003-Administrative Science Quarterly

TL;DR: The authors argue that 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.

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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

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4,666 citations

Journal Article•DOI•

Why would corporations behave in socially responsible ways? an institutional theory of corporate social responsibility

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John Campbell¹•Institutions (1)

Copenhagen Business School¹

01 Jul 2007-Academy of Management Review

TL;DR: In this paper, the authors propose an institutional theory of corporate social responsibility consisting of a series of propositions specifying the conditions under which corporations are likely to behave in socially responsible ways, and argue that the relationship between basic economic conditions and corporate behavior is mediated by several institutional conditions: public and private regulation, the presence of nongovernmental and other independent organizations that monitor corporate behaviour, institutionalized norms regarding appropriate corporate behavior, associative behavior among corporations themselves, and organized dialogues among corporations and their stakeholders.

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Abstract: I offer an institutional theory of corporate social responsibility consisting of a series of propositions specifying the conditions under which corporations are likely to behave in socially responsible ways. I argue that the relationship between basic economic conditions and corporate behavior is mediated by several institutional conditions: public and private regulation, the presence of nongovernmental and other independent organizations that monitor corporate behavior, institutionalized norms regarding appropriate corporate behavior, associative behavior among corporations themselves, and organized dialogues among corporations and their stakeholders. Concerns about corporate social responsibility have grown significantly during the last two decades. Not only has the issue become commonplace in the business press and among business and political leaders (Buhr & Graf

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3,806 citations

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

...Indeed, whole fields of economic inquiry, such as the study of economic regulation (e.g., Demsetz, 1968; Stigler,...
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...Instead, most of the stakeholder literature focuses on four other issues (Donaldson & Preston, 1995)....
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References

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Journal Article•DOI•

Toward A Unified Conception Of Business Ethics: Integrative Social Contracts Theory

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Thomas Donaldson¹, Thomas W. Dunfee²•Institutions (2)

Georgetown University¹, University of Pennsylvania²

01 Apr 1994-Academy of Management Review

TL;DR: In this article, Alice asked the Cheshire Cat to tell her which way she ought to go from here, and the Cat said that depends a good deal on where you want to get to, and then it doesn't matter which way you go.

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Abstract: “Would you tell me, please, which way I ought to go from here?” Alice asked the Cheshire Cat. “That depends a good deal on where you want to get to,” said the Cat. “I don't much care where...” said Alice. “Then it doesn't matter which way you go,” said the Cat. (Carroll, 1983: 72)

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1,476 citations

Journal Article•DOI•

Strategies for assessing and managing organizational stakeholders

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Grant T. Savage¹, Timothy W. Nix¹, Carlton J. Whitehead¹, John D. Blair¹•Institutions (1)

Texas Tech University¹

01 Feb 1991-The Executive

TL;DR: The stakeholder approach systematically integrates executives' concerns about organizational strategy with the organization's interests in marketing, human resource management, public relations, organizational politics, and social responsibility.

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Abstract: Executive Overview To cope with the environmental turbulence and uncertainty facing many U.S. industries, business executives must effectively manage their stakeholders. Stakeholders include those individuals, groups, and other organizations who have an interest in the actions of an organization and who have the ability to influence it. The stakeholder approach systematically integrates executives' concerns about organizational strategy with the organization's interests in marketing, human resource management, public relations, organizational politics, and social responsibility. This integrative perspective assumes that an effective organization strategy requires consensus from a plurality of key stakeholders about what it should be doing and how these things should be done. By assessing each stakeholder's potential to threaten or to cooperate with the organization, managers' may identify supportive, mixed blessing. nonsupportive, and marginal stakeholders. The 1989 strike at Eastern Airlines illustrates ...

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1,143 citations

Journal Article•DOI•

Business Ethics and Stakeholder Analysis

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Kenneth E. Goodpaster

01 Feb 1991-Business Ethics Quarterly

TL;DR: In this article, a critical look at the assumptions behind this idea, in an effort to understand better the meaning of ethical management decisions, is taken, and a distinction is made between stakeholder analysis and stakeholder synthesis.

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Abstract: Much has been written about stakeholder analysis as a process by which to introduce ethical values into management decision-making. This paper takes a critical look at the assumptions behind this idea, in an effort to understand better the meaning of ethical management decisions.A distinction is made between stakeholder analysis and stakeholder synthesis. The two most natural kinds of stakeholder synthesis are then defined and discussed: strategic and multi-fiduciary. Paradoxically, the former appears to yield business without ethics and the latter appears to yield ethics without business. The paper concludes by suggesting that a third approach to stakeholder thinking needs to be developed, one that avoids the paradox just mentioned and that clarifies for managers (and directors) the legitimate role of ethical considerations in decision-making.So we must think through what management should be accountable for; and how and through whom its accountability can be discharged. The stockholders’ interest, both short- and long-term, is one of the areas. But it is only one.Peter Drucker, 1988Harvard Business Review

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1,101 citations

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

...(Significant recent examples include books by Alkhafaji, 1989; Anderson, 1989; and Brummer, 1991; and articles by Brenner & Cochran, 1991; Clarkson, 1991; Goodpaster, 1991; Hill & Jones, 1992; and Wood, 1991a,b; plus numerous papers by Freeman and various collaborators,...
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Journal Article•DOI•

Corporate Stakeholders and Corporate Finance

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Bradford Cornell, Alan C. Shapiro

21 Jan 1987-Financial Management

1,082 citations

Additional excerpts

...Many recent instrumental studies of corporate social responsibility, all of which make explicit or implicit reference to stakeholder perspectives, use conventional statistical methodologies (Aupperle, Carroll, & Hatfield, 1985; Barton, Hill, & Sundaram, 1989; Cochran & Wood, 1984; Cornell & Shapiro, 1987; McGuire, Sundgren, & Schneeweis, 1988; Preston & Sapienza, 1990; Preston, Sapienza, & Miller, 1991)....
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Journal Article•DOI•

Environment as an Influence on Managerial Autonomy

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William R. Dill

01 Mar 1958-Administrative Science Quarterly

TL;DR: In this article, a study of two Norwegian firms shows how the autonomy of managerial personnel-their decisions for and against independent action-may be influenced by the structure of the environment, by the accessibility of information about the environment and by managerial perceptions of the meaning of environmental information.

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Abstract: Propositions about the influence of environmental constraints on organizational behavior are rare, but they are essential in administrative science. Behavior depends on the patterns of inputs from the environment to an organization and on the interpretation of these inputs as tasks by members of the organization. A study of two Norwegian firms shows how the autonomy of managerial personnel-their decisions for and against independent action-may be influenced by the structure of the environment, by the accessibility of information about the environment, and by managerial perceptions of the meaning of environmental information.1 William R. Dill is on the faculty of the Graduate School of Industrial Administration, Carnegie Institute of Technology.

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1,055 citations

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

...Competitors were introduced as factors that have "an influence on managerial autonomy" in Dill's (1958) article, which is appropriately cited in the literature as a precursor of stakeholder analysis. However, neither the term stakeholder nor the notion of a stake (i.e., potential benefit) was explicitly introduced in Dill's analysis. In any event, in the normal course of events, competitors do not seek benefits from the focal firm's success; on the contrary, they may stand to lose whatever the focal firm gains. Competitive firms may, of course, join in common collaborative activities (e.g., through trade associations), but here the shared (noncompetitive) interests account for the stakeholder relationship. The notion that the media should be routinely recognized as stakeholders was originally introduced by Freeman (1984), but it seems to have been eliminated (without explicit explanation) from his later writings....
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...Competitors were introduced as factors that have "an influence on managerial autonomy" in Dill's (1958) article, which is appropriately cited in the literature as a precursor of stakeholder analysis....
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