Stakeholders Theory

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The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization.[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. In short, it attempts to address the "Principle of Who or What Really Counts."[2]
In the traditional view of the firm, the shareholder view (the only one recognized in business law in most countries), the shareholders or stockholders are the owners of the company, and the firm has a binding
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In contrast, Stakeholder theory argues that every legimate person or group participating in the activities of a firm do so to obtain benefits and that the priority of the interests of all legitimate stakeholders is not self-evident.

Donaldson and Preston offer four central theses related to stakeholder theory.

1) Stakeholder Theory is descriptive in that it offers a model of the corporation.
2) Stakeholder Theory is instrumental in offering a framework for investigating the links between conventional firm performance and the practice of stakeholder management.
3) Although Stakeholder Theory is descriptive and instrumental, it is more fundamentally normative. Stakeholders are identified by their interests and all stakeholder interests are considered to be intrinsically valuable.
4) Stakeholder Theory is managerial in that it recommends attitudes, structures, and practices and requires that simultaneous attention be given to the interests of all legitimate stakeholders. | Diagram/schematic of theory | | Diagram/schematic of theory | | | | | |
At a minimum, stakeholders are those groups from whom the organization has voluntarily accepted benefits, and to whom the organization has therefore incurred obligations
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