Stakeholder Theory

Stakeholder Theory Synopsis Before it was thought that business and ethics were an oxymoron, two terms that could never coexist together in our society, however this video on Stakeholder Theory has proven otherwise. The video talked about various ideas/topics concerning Stakeholder Theory from what is a stakeholder to the effects of technology in our fast paced society today. R. Edward Freeman started the video by explaining how stakeholder theory started off.

He gave an example early in the video of himself and few colleagues who wanted to put out an article around 30 years ago presenting the dea of Stakeholder Theory through a local newspaper. The newspaper editor called back and advised Freeman he had a typo in the title from “Stakeholder” to “Shareholder. ” At that time the newspaper editor had no idea there was a difference between the two. Well what is the difference? A shareholder owns part of the company through stocks, or other various forms. Stakeholders are not products, or accounts, or assets, but rather they are actual living, breathing humans with faces.

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Since they are actual humans they are also customers who are directly affected by he behavior of an organization and they hold a stake in its performance. The Job of a stakeholder is to find an approach to value creation. In order to do so, they must find an intersection of interests; almost like a graph you would draw in economics where the supply and demand curve intersects creating equilibrium. To find intersects of interest it involves finding and searching for opportunity, or essentially the art of not having to make tradeoffs.

Freeman gave us an example of tradeoffs and searching for opportunity. It involved a chemical company who was notorious or an extreme amount of pollution. The CEO had a change of heart and wanted to completely eliminate pollution and advised his engineers that they needed to figure out a way to end it. The engineers immediately responded and advised there was no possible way, so the CEO stated that they would have to shut down the company. Eventually, the engineers found a plan to help eliminate the pollution. In this example the company did not accept the trade-off.

Long story short, if you look to see how interests go in the same direction, you might find a solution, but you might ot find one either, but it’s better than not trying at all. Another example would be to think about this idea in terms of music. It’s as if everyone was playing different notes and their own instruments, but when they all work together and go in the same direction they may create a harmony. Stakeholder Theory was developed as a business strategy; however there was a sense of integration missing between the term business and ethics.

This video helped explain that when thinking about stakeholders it’s thinking about business, but also when you’re thinking about takeholders you must also think about ethics. So the idea of business and ethics being an oxymoron is senseless. This relates back to a topic titled “Saints and Sinners” that was featured in the film with R. Edward Freeman. He discussed that saints ran business ethically and the sinners paid no attention to ethics. However, why does it have to be one or the other? A business involves human beings and ethics is the study ot human behavior. This is what Freeman was saying; these terms correspond with each other.

However, the Stakeholder Theory was also issing the integration among other areas. Managing for stakeholders is about what businesses and capitalism is. It’s also about ethics, strategy, corporate responsibility, civil society, but it’s mostly about all of that and how you put those things together and tell a new story about capitalism. In the end capitalism is about how we create value for each other, or our stakeholders, not about competition. How well we all cooperate with each other helps determine the amount of value we can create for each other, which in turn creates more trust, because when the public doesn’t trust a usiness, who does?

Stakeholder Theory is complex when you have to take the time to write it out and explain it, but if you take a step back and look at businesses today, you will see Stakeholder Theory is a very common, everyday theme, it is Just a matter of what you are looking for. If individuals are looking for tradeoffs, they will find a multitude of tradeoffs available for them, but the real success lies with those who achieve and find the integration and intersection point of everything that really matters in capitalism, creating Stakeholder Theory.


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