Issues with the Stakeholder's Theory

885 Words4 Pages
In his writing Edward Freeman gave detailed explanation of the “Stakeholder’s Theory” of organizational management and business ethics. Through the theory he gave his view on the ethics and values in managing a corporation as well as defining the role of management. In his “Stakeholder’s Theory” Freeman said that it is management’s duty to protect and take care of the welfare of the corporation. He mention the top management to take care of the corporation that involves managing the different claims of the conflicting stakeholders. According to Phillips, the three issues that “Stakeholder Theory” must address in order to be a compelling alternative to the stakeholder theory of management are: 1. The lack of a coherent justificatory network: In his theory, Freeman limited the stakeholder’s effect by quoting that, “those groups who are affected by the corporation are stakeholders”. This definition just indicates that a corporation’s sole purpose is only about increasing the profits of the shareholders and it forgets about the insufficiency the base of the normative organizational ethics study. For example, a stakeholder should have the scope of being a part of the higher level decision making for pursuing certain goals that affect their stake. 2. Identifying the stakeholders: According to Phillips, the stakeholder’s theory does not specify the stakeholders’ identity in the moral sense. In the theory it was suggested that “groups as disparate as terrorists, competitors and
Open Document