Stakeholder Value Perspective

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Summary

Introduction

Over the last 200 years, the influence of business corporations on our society has grown quickly and tremendously. No wonder that the corporate purpose they should serve is discussed by many people with different backgrounds, including:

Academics in the fields of economics, law, political science and sociology,
Business ethics and philosophic scientists,
Political parties, labor unions, various communities, environmentalists, and
Media and the general public.

In countries with a market economy it is generally agreed that companies should pursue economic profitability. However many people would likewise agree that organizations also have certain social responsibilities. Profitability and responsibility can and should be combined in an ideal world, however it is clear that they are at least partially contradictory.

On the one hand, businesses must make profits for surviving. Specifically, corporations must provide a higher return on their equity capital than would be realized by the shareholders if they deposited their money on a risk-free bank account. The profits that are made create trust from investors and are usually reflected in higher share-prices, which make it easier for the company to realize its goals. The profits are not only a result, but also a source of corporate competitive health and wealth.

On the other hand, companies are networks of parties and people working together towards a shared goal and not merely 'economic machines'. Employees nowadays represent a major part of the value of any company (intellectual capital). To motivate people to work hard for the interests of the company, a level of trust must be built with them. Likewise it is important for trust to develop between the organization and its external environment (customers, suppliers, government, and interest groups). Such trust can only grow from the perceived secure feeling, that the interests of all individuals and stakeholders are taken into account.

The Stakeholder Value Perspective

The Stakeholder Value Perspective (also: Stakeholder Values Perspective) emphasizes responsibility over profitability and sees organizations primarily as coalitions which must serve all parties involved.

Stakeholder Value advocates believe that the success of an organization should be measured by the satisfaction among all stakeholders. And they see stakeholder management both as an end/purpose and as a means. They believe that social responsibility is an organizational matter. Also they claim that society is best served by organizations pursuing joint interests and economic symbiosis.

A company is not an instrument of its shareholders. But it is a coalition between various resource suppliers, with the intention of increasing their common wealth. Advocates of this perspective refuse to give shareholders a higher moral claim on the organization than providers of other resources.

Recognizing the moral claims of stakeholders other than the shareholders introduces other values than financial value in the spectrum of what needs to be pursued by the organization. Stakeholder management is not merely instrumental to create shareholder value, but normative. By posessing strongly motivated employees, and by nurturing high levels of trust with all parties surrounding the organization, the pursuing of the joint interests of all stakeholders is not only more fair, but it will also maximize the health of the society.

Special Interest Group

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🔥	NEW Reconciling Profitability and Responsibility Here’s a list of ways in which CEOs can deal with the trap of focusing solely on satisfying the shareholders or the stak (...) 3

High-Commitment High-Performance (HCHP) Leaders
How can CEOs under fierce pressure from capital markets avoid the trap of focusing solely on satisfying the shareholder (...)

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Best Practices

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Expert Tips

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	Stakeholder Capitalism (Freeman) Stakeholder Management Professor Freeman has recently published a formidable article about this subject in the Journal of Business Ethics (2007 (...)
	How to Articulate, Communicate and Deliver on a Corporate Purpose Statement How to Create a Corporate Purpose Statement, Corporate Mission, Organizational Purpose, Organizational Mission A Corporate Purpose Statement (CPS) has at least 3 major functions: market definition, employee motivation and external (...)
	4 Levers to Pursue a Dual Corporate Purpose CSR, Impact on Society, Balancing Financial and Social Goals, Dual Purpose These is a slow but steadily increasing trend for corporations to diminish their single-minded pursuit of shareholder va (...)
	7 Perspectives of Looking at Stakeholders Clustering Stakeholders Ian Mitroff, Emeritus Professor from the University of Southern California, identified seven categories of stakeholder p (...)
	Doing Well by Doing Good? The Correlation Between Corporate Social Responsibility and Corporate Financial Performance Since a long time ago it has been argued whether there is a link between corporate social responsibility and corporate f (...)
	Reasons Why People are Doing Voluntary Work Expectancy Theory, Corporate Social Responsibility, Stakeholder Perspective, Volunteers Voluntary work has long been seen as an activity performed mainly by unemployed individuals –mostly women, both in their (...)
	The Maturity Stages of Corporate Responsibility Organizational Development, Corporate Responsibility Maturity Simon Zadek provides a useful best practice five-stage maturity model of how organizations deal with Corporate Responsib (...)

Information Sources

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	The Purpose of Business: Stockholder versus Stakeholder Theories Stakeholder Analysis; Stakeholder Commitment This presentation elaborates on the objectives and purposes of businesses according to different views: those of stockho (...)
	What is a Business For? Definition of Corporate Succes Charles Handy is critical of overemphasis on share price as the metric for corporate success. He proposes that the purpo (...)
	Strategy, Society and CSR CSR Strategy, Competitive Advantage, Strategic Corporate Social Responsibility, Strategy and Society Presentation about the relationship between CSR and Competitive Advantage. It includes the following sections: - Busine (...)
	The Strategic Role of Public Relations and Communication in Business Public Relations, Strategic Management, Corporate Responsibility, Stakeholder Management, Stakeholder Analysis Presentation about the role public relations and communications in business strategy implementation and execution. The p (...)
	The Dawn of Conscious Capitalism Conscious Capitalism, Value-driven Consumer, Socially Responsible Investing, Corporate Responsibility This presentation provides an introduction into the concept of conscious capitalism, and includes the following sections (...)
	CSR Implementation and Communication Model (Schmeltz) CSR Communication, CSR Implementation, CSR Strategy, Corporate Identity, Corporate Values, CSR Stages, Because Corporate Social Responsibility is a value-based concept, it is highly connected with an organization’s values a (...)
	Introduction Into Welfarenomics Welfarenomics This presentation elaborates on the concept of welfarenomics. The presentation includes the following sections; 1. Cont (...)
	Ethics in Corporate Governance Ethics, Corporate Governance This presentation is about the role that ethics plays in corporate governance.The presentation includes the following se (...)
	Introduction to Stakeholder Management Introduction to Stakeholder Management David Butter explains what stakeholders are and their importance for organizations, distinguishing internal from externa (...)