What's Wrong—and What's Right— with Stakeholder Management

Abstract

The concept of a stakeholder is one of the more prominent contributions of recent business ethics. Since the introduction of this concept by R. Edward Freemen in Strategic Management: A Stakeholder Approach (1984), a concern for the interests of all stakeholder groups has become a widely recognized feature, if not the defining feature, of ethical management. Although the stakeholder concept has been developed in various ways (Donaldson and Preston, 1995; Jones and Wicks, 1999), it has been expressed most often in the moral prescription that managers, in making decisions, ought to consider the interests of all stakeholders. The list of stakeholders is commonly taken to include employees, customers, suppliers, and the community, as well as shareholders and other investors.i This obligation to serve all stakeholder interests, which is often called “stakeholder management (Post, Preston, and Sachs, 2002; Bowie, 2004), is generally contrasted with the standard form of corporate governance, in which shareholder interests are primary. This latter view—which might be called “stockholder management”—is regarded by advocates of stakeholder management as morally unjustified.ii To focus attention on only one stakeholder, they allege, is to ignore other important groups whose interests a business organization ought to serve. Advocates of stakeholder management get one point right: the modern for-profit corporation should serve the interests of all stakeholder groups. On this point, however, there is no conflict with the argument for the current system of corporate governance. Where stakeholder management goes wrong is in failing to recognize that a