A significant amount of research and writings have been conducted by numerous researchers since the introduction of the theory in an attempt to measure its impact on the business environment. This research work is based on the concept of stakeholder theory and its practical applications in predicting the phenomena of corporate social disclosures (van der Laan 2009). However, some argue... ...STAKEHOLDER THEORY: A LIBERTARIAN DEFENSE the two branches of stakeholder theory in which the various stakeholder theories were to be seen as a ‘class of theories’. After all, it worked on Amazon. stakeholder theory with high academic legitimacy; Freeman (1984), Freeman et al. Stakeholder theory goes back to its roots in the early 30s of the twentieth century, the flowering times of large corporations and a significant increase in strength of public opinion. ← Can fast food related to eating healthy? Moral problems, according to this view, Vol. Positioning Stakeholder Theory within the Debate on Corporate Social Responsibility should be analyzed in terms of a set of fiduciary obligations toward 149-178. Stockholder theory and stakeholder theory map out these two paths, allowing each business to decide which ethical path it will choose to take. LO 7.2+3 1 Legitimacy theory Gerard Ilott. It is an The stakeholder theory suggests there are … Generous financial donations | |were reputed publications, for e.g. These stakeholders include: 1. The notion of CSR is one of ethical and moral issues surrounding corporate decision making and behaviour. They advocated the idea of ‘leave alone’ capitalism, which focuses on the importance of self-regulation among firms, with limited government intervention. S. Fernando, S. LawrenceA theoretical framework for CSR practices: Integrating legitimacy theory, stakeholder theory and institutional theory. This article develops a political stakeholder theory (political ST) by weaving together the political economy, stakeholder theory, and legitimacy literatures. The two major theories in decision-making are the Stockholder theory and the Stakeholder theory, both of which I will be explaining. Theories of Stakeholders and Stakeholder Legitimacy Stakeholder theory is “a theory of organizational management and ethics” (Phillips, Freeman, & Wicks, 2003). If not, why not? Another approach to the stakeholder concept is the so called descriptive stakeholder theory. In this sense, legitimacy theory and stakeholder theory enrich, rather than compete for, our understandings of corporate social disclosure practices. involve reconciling such obligations in cases where stakeholder groups necessarily intended to have any moral implications (e.g., in strategic management).' The suppliers enable Amazon to serve the customers and the customers enable all other stakeholders to stay happy! Stakeholder theory offers an explanation of accountability to stakeholders. Similarly, stakeholder theory is a theory which is used to explain the phenomena of motivation for corporate social disclosures. Environmental, Part Two: Both stockholder and stakeholder theories are normative theories of corporate social responsibility that outline the ethical responsibilities of a corporation. outline two other possible approaches to business ethics: one, a more “approximately 40 million credit and debit card accounts may” were potentially compromised (Target, 2013). The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. the concept of market failure. Political economic theory provides basis for Legitimacy theory and stakeholder theory: Fama (1993). Sentences, as well as arguments and theories, always import their background conditions and related theories with them. In contrast to the stakeholder theory, (Samuel Mansell, 2013) argued against the stakeholders’ approach. However, there has been Another approach to the stakeholder concept is the so called descriptive stakeholder theory. The concept of stakeholder theory has got popularity, Question: Taking into account Figure 3.4 on page 45 of your textbook (Stakeholder Typology: One, Two, or Three Attributes Present) discuss the ‘Ethics in Practice case’ on page 46 (Are Plants and Flowers Stakeholders? is given of normative theory from a critical theory perspective and its advantages over rival traditions. d. Direct involvement in community projects and affairs “Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman, 1995, p. 574, emphasis in original) Legitimacy theory has become one of the most cited theories within the social and environmental accounting area. In business ethics, however, the stakeholder approach is... ...Corporate Responsibility (2) Stakeholder perspective On the stakeholder theory side, ethical components can be drawn from several sources including the Principles of Corporate Rights and Corporate Effects (Evan and Free-man 1988), pragmatism (Freeman et al. The basic debate about shareholder theory vs. stakeholder theory becomes largely a debate about how one interprets liberalism and libertarianism, where the liberalism tends towards strong exogenous safeguards and the libertarianism tends towards weak exogenous safeguards or endogenous safeguards. "[2] Stakeholder theory vs shareholder theory and its impact on business ...The Stakeholder Theory: Aiding in the Long Term Success of Corporations Stakeholder theory • Stakeholder attributes Introduction Although much work has been done both theoretically and empirically on organizational legitimacy , the concept of stakeholder legitimacy has yet to be more widely explored (Parent and Deephouse 2007; Neville et al. Stakeholder theory views the corporation as part of a larger social body and not a separate entity. Financial Accounting Theory Craig Deegan 4th Edition 4E. | |article had a bibliography. Positive theory explain, predict organisations’ activities. Amazon has many stakeholders with varying levels of interests in the organization. 1984), that stakeholder theory exists in tension (at least) with shareholder theory (i.e., Friedman, 1970), that stakeholder theory provides a vehicle for connecting ethics and strategy (i.e., Phillips, 2003), and that firms that diligently seek to serve the interests of a broad group … present a, Managerial Stakeholder Theory Normative Stakeholder theory contains theories of how managers or stakeholders should act and should view the purpose of organization, based on some ethical principle (Friedman 2006). Shareholder Approach on Value Maximization: For example, consider a factory worker. The event’s high-impact (on stakeholder emotions and finances) demanded an immediate response. Manuel Castelo Branco Lúcia Lima Rodrigues Shareholder vs Stakeholder Theory As a philosophy PhD student in the late 1970s, Freeman did not know much about business or business theory. * Suppliers - These stakeholders must inform Amazon of any upcoming changes so that Amazon may inform its customers far in advance. Both the agency theory and stakeholder’s theory, regardless of their respective pros and cons, have contributed in explaining the actions of interest groups in the corporate governance debates. Loading... Unsubscribe from Gerard Ilott? ← Who is responsible for the obesity problem of the society? The concept about stakeholders in an organisation is very paramount, however, far, Question 2 Few academics have done more to put stakeholder theory on the map over the past three decades than this prolific professor at the University of Virginia’s Darden School of Business. The agency theory looks to outline the interests of a principal and an agent, which can include an individual and a financial planner. | |prior to its publication. R. Edward Freeman and Robert A. Phillips I intend to prove that the Stakeholder theory could provide the best support for a corporation in both the ethical decision-making and optimal performance in the long run The first article “The Role of Theory in Explaining Motivation for Corporate Social Disclosures: Voluntary Disclosures vs. ‘Solicited’ Disclosure” examines the applicability of both Legitimacy and Managerial Stakeholder theory on voluntary disclosures .the article looks into the development of the theories, motivation and characteristics of voluntary disclosures made by different … Stakeholder theory, on the other hand, notes that it’s the business managers ethical duty to both corporate shareholders and the community at large that the activities that benefit the company don’t harm the community. At this time of rising public expectations in respect of undertakings were made basic assumptions of the theory known as the theory of stakeholders. Differences between the theories largely relate to issues of resolution: Stakeholder Theory focuses on how an organisation interacts with particular stakeholders, while Legitimacy Theory considers interactions with ‘society’ as a whole. The ‘invisible hand of self-regulation’ and The legitimacy theory has a very rich disciplinary background based on management theory, institutional theory, and stakeholder theory (Burlea and Popa, 2013, p. 1579). | | |Business Ethics, Academy of Management | 1 (Jan., 1995), pp. For each issue, you stakeholder theory relate to each other. From his outsider’s perspective, it seemed obvious that businesses should care about groups beyond their investors , particularly in an increasingly complex and interconnected world. are commonly offered as explanations of motivations for social disclosures. /. Accounting Research |cited and the article had a bibliography.| And, he might have added, "nor do arguments and theories?' (1)Community | | |Review, California Management, Challenges of Sustainability Within the Hospitality Industry, Spur Steak Ranches Pestle Analysisand Porters Five Forces Model. Many of the sources cited |indication of which sources had been | from Part III - Stakeholder Theory in the Business Disciplines By Samantha Miles; Edited by Jeffrey S. Harrison, University of Richmond, Jay B. Barney, University of Utah, R. Edward Freeman, University of Virginia, Robert A. Phillips, York University, Toronto; (1997). Stakeholder theory vs shareholder theory and its impact on business Explain your answer. [1] It was originally detailed by R. Edward Freeman in the book Strategic Management: A Stakeholder Approach, and identifies and models the groups which are stakeholders of a corporation, and both describes and recommends methods by which management can give due regard to the interests of those groups. Legitimacy Theory & Stakeholder Theory 3298 Words 14 Pages Part A Section (i) The articles chosen for this essay paper were “Corporate Environmental Reporting: A test of legitimacy theory” by Trevor D. Wilmshurst and Geoffrey R. Frost and “The Stakeholder Theory: Concepts, Evidence and Implications” by Thomas Donaldson and Preston Lee. ← Is that ethical for communication companies to make junk food advertisement during the time of the children’s TV program? Applying research from many related disciplines, Stakeholder Theory and Organizational Ethics is an overdue response to several long-standing and fundamental points of contention within business ethics and management theory. According to legitimacy theory, companies disclose social responsibility information to present a socially responsible image so that they can legitimize their behaviours to their stakeholder groups.Legitimacy theory is based on the idea that a social contract exists between business and society. In short, it attempts to address the "Principle of Who or What Really Counts. From his outsider’s perspective, it seemed obvious that businesses should care about groups beyond their investors , particularly in an increasingly complex and interconnected world. Abstract: The purpose of this paper is to suggest that at least one strain of what has come to be called "stakeholder theory" has roots that are deeply libertarian We begin by explicating both "stakeholder theory" and "libertarian arguments " We show how there are libertarian arguments for both instrumental and normative stakeholder theory, and we construct a version of capitalism, called "stakeholder capitalism," that builds on these libertarian ideas We argue throughout that strong notions of "freedom" and "voluntary action" are the best possible underpinnings for stakeholder theory, and in doing so, seek to return "stakeholder theory" to its managerial and libertarian roots found in Freeman (1984). The Relation between CSR and Stakeholder Theory Whenever one talks about business ethics – either in terms of scholarship, or the discipline taught in business schools, or organizational norms applied in companies – both CSR and stakeholder theory come as two major concepts. An individual worker has large interests in the company, in terms of working conditions, salary, and benefits. | Your use of the JSTOR archive indicates your acceptance of JSTOR 's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. Shareholder approach supporters defend the idea that excessive oversight and regulation of industry is unnecessary. Context plays a crucial role in social phenomena, and sometimes we need to resist the efforts of greedy reductionists (Dennett. Legitimacy theory, on the other hand, suggests voluntary disclosures are part of a process of legitimation. 3. Social issues deserve moral consideration of their own and should lead managers to consider the social impacts of corporate activities in decision making. TIPS for one of the most powerful currents of thinking in the field of business ethics. What does this mean? A manager can treat value maximization and stakeholder theory as two theories that explain how to answer different sets of questions. | |information has already been verified by third parties |such, its factual information has already| Stakeholder Theory History and overview Stakeholder theory was first advanced by R. Edward Freeman in 1984 (Emerson, Alves, & Raposo, 2011). As with Freeman [1999] they recognized that “neither of the convergent forms of stakeholder theory is complete without the other” [p.206]. Different stakeholders can hold varying amounts of influence and interest, within the organization. 1 (2007) First and foremost, these articles were both peer reviewed and the journals they were sourced from, namely the Academy of Management Review (AMR) and the Accounting, Auditing & Accountability (AAA) Journal are both journals that currently publish research articles on papers concerning environmental and social reporting, the foundation on which my, |arguments underlying these aspects and | of business. ). So, firstly both approaches are defined briefly. The Shareholder and Stakeholder Approach - Duration: 7:44. Any kinds of means that stakeholders have and can use to impose their will on the firm. Use the stakeholder analysis to look at the impact of fast food (eg MacDonald’s) on each stakeholder group. 12, No. It therefore needs to disclose enough social information for society to assess whether it is a good corporate citizen. have conflicting interests. Alanis Business Academy 81,557 views. Legitimacy Theory & Stakeholder Theory 3298 Words 14 Pages Part A Section (i) The articles chosen for this essay paper were “Corporate Environmental Reporting: A test of legitimacy theory” by Trevor D. Wilmshurst and Geoffrey R. Frost and “The Stakeholder Theory: Concepts, Evidence and Implications” by Thomas Donaldson and Preston Lee. What is the relationship between stakeholder theory and other moral, political, and business ethical theories? We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. LO 8.2 8.17 Legitimacy Theory, Stakeholder Theory and Institutional Theory are considered to be systems-oriented theories. LO 8.8 8.18 Is Stakeholder Theory a single well-defined theory or a broad umbrella term for a whole lot of different theories? It impacts the lives of individuals like customers and especially employees, who are dependent on the firm.. Through clever relations with suppliers, Amazon is able to keep its prices low and its selection vast. Stakeholders can have a significant impact on decisions regarding the … 2011). 2013). 2. Journal of Theoretical Accounting Research, 10 (1) (2014), pp. Using different ethical model, advertising junk food to children can be seen as morally ethical or morally unethical. Freeman [1994] had argued against the notion of convergent stakeholder theory, face. It can be physical, material, or social means that can impact the firm’s performance, reputation, or relationships with other stakeholders.Legitimacy: the type of relationship of the stakeholders with the firm. Analysis of the institutional theory and stakeholder theory with relation to interpret the issues in the Case study. Theories of Stakeholders and Stakeholder Legitimacy Stakeholder theory is “a theory of organizational management and ethics” (Phillips, Freeman, & Wicks, 2003). Provide a detailed example reflecting the positives and negatives of a proactive approach to disaster risk reduction. . Financial Accounting Theory Craig Deegan 4th Edition 4E. to consider the stakeholders theory. Stakeholder theory • Stakeholder attributes Introduction Although much work has been done both theoretically and empirically on organizational legitimacy , the concept of stakeholder legitimacy has yet to be more widely explored (Parent and Deephouse 2007; Neville et al. Till now most writers with stakeholders as a central theme have shown numerous theoretical and empirical studies about this concept (Donaldson and Preston, 1995). toward shareholders; and the other, a broader conception, focused on 3. Disclosure of environmental and social performance From a consequentialist perspective, ethical rightness and wrongness of actions are determined by the... StudyMode - Premium and Free Essays, Term Papers & Book Notes. His 1984 book on strategic management, subtitled A Stakeholder Approach, is now widely recognised as a founding text on the subject. The Stakeholder Theory of corporate governance has been developed extensively in the UK, and has even been enshrined into law (Companies Act 2006). Basically, legitimacy theory focuses on how company reacts to particular society (Sulaiman, Abdullah and Fatima, 2014). Obesity and fast food The Relation between CSR and Stakeholder Theory Whenever one talks about business ethics – either in terms of scholarship, or the discipline taught in business schools, or organizational norms applied in companies – both CSR and stakeholder theory come as two major concepts. O Stakeholder theory goes back to its roots in the early 30s of the twentieth century, the flowering times of large corporations and a significant increase in strength of public opinion. The first person to define stakeholder theory was organizational theorist Ian Mitroff in his book Stakeholders of the Organizational Mind, which came out in 1983. The theory argues that a firm should create value for all stakeholders, not just shareholders. | |Accounting, etc. STAKEHOLDER LEGITIMACY Robert Phillips Abstract: This paper is a preliminary attempt to better understand the concept of legitimacy in stakeholder theory. “If Amazon are so uncomfortable with the first amendment, they should get out of the business of selling books,” WikiLeaks said in another tweet. As per Ownes (1996), political theory provides framework for the social, economical and political issue. Please join StudyMode to read the full document. Should the sale/marketing of fast food be regulated/ restricted? First, I will explain the Stockholder theory as a short-term profit oriented model with regards to business ethics decisions. 3. I then argue that the latter offers a more Stakeholder Theory vs. 42 million of the children under five years old are overweight all over the world, in Australia, there is a number shows 17% of the children are deemed to be overweight, which is quite a high figure and a lot public controversy surrounding this issue. 65-91 Published by: Academy of Management Stable URL: http://www.jstor.org/stable/258887 Accessed: 20/04/2010 23:08 It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory. This … The European Commission defines it as “a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment.” (European Commission, 2001, p. 5) It is related to complex issues such as environmental protection, human resources management, health and safety at work, relations with local communities, relations with suppliers and consumers. |Accuracy |This article is peer reviewed and as such, its factual |This article is peer reviewed and as | |publications, for e.g. ...The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. A consideration of both theories is deemed to provide a fuller explanation of management’s actions. legitimacy theory, a company operates in society where it agrees to perform various socially desired actions in return for approval of its objectives, other rewards, and its ultimate survival. Childhood obesity has been labeled one of the most serious public health issues if the 21st century. The Dutch are fully aware or their risk and vulnerabilities which includes global warming, flooding, The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications Author(s): Thomas Donaldson and Lee E. Preston Source: The Academy of Management Review, Vol. ver the past two decades, the "stakeholder paradigm" has served as the basis Then, I will explain how the Stakeholder theory and how it could be applied in the business ethics decision process. His 1984 book on strategic management, subtitled A Stakeholder Approach, is now widely recognised as … Freeman, 1984. 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