Stakeholder Theory: The Balancing Act
The Stakeholder Theory of Corporate Social Responsibility is now in the forefront of practiced theories in business. In my opinion, the Stakeholder Theory has a long and complicated definition, but can be streamlined to be a principle stressing what and who really counts. It is a theory of management that uses morals and values with the realization that all decisions affect many groups and individuals. This theory does not give any groups including stockholders preferential treatment over others. Many times one group may receive a benefit while another sees an expense. The true job of this theory is to balance the relationships of all the stakeholders.
There are many problems that result in pursuing the Stakeholder Theory. Much difficulty can arise from trying to identify stakeholders and their interests. Also, the balancing of the relationships in view of determining actions can cause much deliberation. Another problem revolves around the times when one group benefits at the expense of others. This problem can cause hard feelings between groups. Lastly, the theory does not give clear cut guidance to help managers determine decisions.
I believe there are two main benefits of stakeholder corporate social responsibility projects. First, I believe the Stakeholder Theory can help generate trust between consumers and providers if the consideration of consumers as stakeholders is apparent. Secondly, stockholders do not have the only claim upon managers and thus, their attention is not devoted to making money for them. Their attention can be diverted to providing for the community in the way of jobs and products while helping the community through projects such as land-fill cleanup or alternate energy initiatives. While the opposition by classical corporate social responsibility people is strong, I believe these benefits are colossal.
The opposition to the Stakeholder Theory do have a strong argument. Classical corporate social responsibility people want stockholders to have a privileged position which managers attend to first. They believe maximizing profits should be the first goal of managers instead of losing some profits to ensure other stakeholders are provided equal benefits. Another viewpoint is that it is preferable to find cheaper ways to produce goods even if that means the production of those goods be moved from one community to another. The market determines this and we should get out of the way. Finally, they believe the Stakeholder Theory is more expensive reducing profits which results in unethical treatment of the stockholder.
I believe both present good points, but I think the Stakeholder Theory ultimately wins. The stakeholder theory’s use of consideration of all involved parties builds a more symbiotic relationship. Employees, consumers and the community can better trust the corporation to provide jobs and products while the corporation can expect hard work from its employees and the purchase of its good by the community. This benefit is at the cost of the stockholder who receives less profit, but may receive more political and social influence in the community. I believe that this symbiotic relationship tips the scale to the side of the Stakeholder Theory. I think building a two way street between the corporation and stakeholders leads to a long relationship that helps the community and the stockholders in the long run.
Desjardins, Joseph. An Introduction to Business Ethics. 3rd ed. New York: McGraw-Hill, 2009.