Stakeholder Theory Of The Firm

What is the corporation’s social responsibility? Many might say the main idea is that a corporation must go further than carrying out their basic function of purely making profits. A corporation must create wealth in ways that avoid under minding society, and instead enrich the society it operates in. The term “corporate social responsibility” has been defined in numerous ways; from the constricted economic perception of increasing stockholder wealth (Friedman, 1962), to economic, legal, ethical and flexible strands of accountability (Carroll, 1979) to good corporate social responsibility to citizens (Hemphill, 2004). These disparities differ from fundamental assumptions of what corporate social responsibility involves. However, one has to keep in mind that the CEO of any corporation is legally the agent of the stockholder, and must focus on what the shareholder wants. More often than not, the shareholder would prefer profits for individual gain rather than spending their money on social projects. Stakeholder groups have increased their influence to enact their agendas. Using profits to fund schools and partake in fixing the environment are all great and wonderful things, but this social tax of using profits for social ends projects goes entirely against democracy. Or does it? Who should truly be held responsible for stakeholders around the corporation? Is it the responsibility of the government, philanthropists, employees, its

Corporate Social Responsibility is a philosophy that relates to a business being a part of the society, so acts in a way that not only advances its own firm but also serves the society as well. Good ethics is the cornerstone of sustainable development. In the long run, unethical behavior may harm customers and the society as a whole. Furthermore, it damages a company’s image, efficiency and effectiveness in operations. In some extreme cases, it may jeopardize the company’s survival. As a matter of fact, the behavior of a firm will be judged by the groups of the society. Their judgments and responses will have an impact on the performance of the

Garriga, E., & Melé, D. (2004). Corporate social responsibility theories: Mapping the territory. In Journal of business ethics (p. 53).

Corporate social responsibility is the responsibility a company takes on beyond its own economic benefit. Wikepedia (2006) states that it is "a company 's obligation to be sensitive to the needs of all of the stakeholders in its business operations" (Corporate social responsibility, para. 1). Stakeholders according to Wikepedia (2006) are all entities that might have influence on a company 's decisions. However, it should be pointed out that corporate social responsibility surpasses charitable donations and

A dilemma in today’s society is how certain individuals, lawyers, defend guilty criminals. In each law case, there is a lawyer who is defending a guilty client. Ethically, most individuals in everyday society would agree that guilty parties should end up in prison; however, it is the lawyer’s job to defend that party, guilty or not, and keep them out of prison.

Consequently, the model of stakeholder by Edward Freeman has broadly considered as the strongest theory regarding responsibilities of a company towards society where the company is located (Freeman 2008 pp. 162-165).

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. 20, No. 1 (Jan., 1995), pp. 65-91 Published by: Academy of Management Stable URL: http://www.jstor.org/stable/258887 Accessed: 20/04/2010 23:08

“There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” (Friedman) Friedman’s word perfectly defines the shareholder theory. However, stakeholder theorists, like John Mackey or Edward Freeman, argue that business has an ethical obligation to all stakeholders, including employees, suppliers, costumers, society and any other groups of people that the business has a relationship with. Personally, I am more inclined to Milton Friedman’s sentiment for various reasons demonstrated as below.

The aim of stakeholder management and reporting plan is to summarize and communicate project progress and issues to the various stakeholders. Reporting the progress of the event accurately and regularly allows for better quality decision-making. There would like to discuss with the key stakeholder in following sections.

The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization 's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984.[2] Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

As mentioned earlier, ethical approaches toward the concept of CSR emphasize the point that the corporation has an moral responsibility toward its stakeholders. As total opposite toward the more profit oriented theories, the ethical perspectives toward the concept of CSR emphasizes the fact that the corporation should have responsibility towards its stakeholders, not with the overall aim of making profit but rather with the purpose of creating a better society. Therefore the relationship between the corporation and society should be based according to the ethical responsibility the corporations has as its overall aim.

There has been a shift in managerial attitudes toward, and consideration for, social and environmental issues in recent decades (Parnell, Scott, & Angelopoulos, 2013). While mangers have traditionally been obligated to work for the good of the shareholder, widespread adoption of the stakeholder theory demands that managers seriously consider the impacts of the firm’s decisions on all affected outside parties, or stakeholders (Boatright, 1994; Parnell et al., 2013). However, purchasing and supply chain management (PSCM) in practice seems to remain oriented toward profit maximization, though interest in social responsibility is growing (Ferrell, Rogers, Ferrell, & Sawayda, 2013). The managerial shift toward stakeholder relationship management has been evident, yet the extent to which PSCM departments have embraced stakeholder theory is less obvious.

INTRODUCTIONThe introduction of the concept of stakeholder theory can be traced back in the 1960s (Stoney and Winstanley, 2001),however the concept gained grounds with the publication of Freeman’s (1984) book, Strategic Management: A Stakeholder Approach. Till now most writers with stakeholders as a central theme have shown numerous theoretical and empirical studies about this concept (Donaldson and Preston, 1995). The concept about stakeholders in an organisation is very paramount, however, far too less work have been shown to consolidate and implement the study, that can help the realistic use of stakeholder management in our contemporary firms (Donaldson and Preston, 1995). This essay strive to critically evaluate how stakeholder management can have impact on business and management practices and decision making. In answering this question, this paper will attempt to air the view of other relevant articles or authors to solidify, yet a demonstrative approach to successfully manage stakeholder relations. HOW TO IDENTIFY A STAKEHOLDER AND IT’S IMPORTANCEThe first issue under stakeholder management is to identify your stakeholders, in short, who are the relevant stakeholders in an organisation?…..ref.. (Mitchell et al., 1997) in their previous work has identified stakeholders in different and various ways, nevertheless, Freeman (1984, p. 46): has given a well noticed definition for as “A stakeholder in an organisation is (by definition) any group or individual who can

This report focuses on social responsibility issue focusing on stakeholder theory. Social responsibility will be introduced and defined based on stakeholder theory. Next, analysis on the importance and limitations of social responsibility will be shown based on reputable published articles, followed by examples of two successful companies on how social responsibility affects their business. Lastly, conclusion will be concluded based on findings on

Diagram 1: Social Benefit-Cost Framework C. Historical Pattern of Managing Stakeholder Capital in the Philippines