Stakeholder Theory: The State of the Art

Abstract

For the last 30 years a growing number of scholars and practitioners have been experimenting with concepts and models that facilitate our understanding of the complexities of today’s business challenges. Among these, “stakeholder theory” or “stakeholder thinking” has emerged as a new narrative to understand and remedy three interconnected business problems—the problem of understanding how value is created and traded, the problem of connecting ethics and capitalism, and the problem of helping managers think about management such that the first two problems are addressed. In this article, we review the major uses and adaptations of stakeholder theory across a broad array of disciplines such as business ethics, corporate strategy, finance, accounting, management, and marketing. We also evaluate and suggest future directions in which research on stakeholder theory can continue to provide useful insights into the practice of sustainable and ethical value creation.

Acknowledgements

This article draws on Stakeholder Theory: The State of the Art, by R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan L. Parmar, and Simone de Colle © 2010, Cambridge University Press. We are grateful to our editor, Ms. Paula Parish, and to Cambridge University Press for permission to recast some of that material here. We would also like to thank our editors, Jim Walsh and Art Brief, for their helpful and constructive comments.

Notes

1. Throughout this article, we use the terms “stakeholder theory,” “stakeholder management,” and “stakeholder perspective” interchangeably.

2. See Freeman and colleagues (2010) for a detailed history of the stakeholder idea.

3. These relationships can be framed in a variety of ways: unilateral, bilateral or even multiparty. Each of these framings will be more or less useful for certain purposes.

4. A vast secondary literature has emerged on the search for the normative foundation of stakeholder theory led by philosophers in the Journal of Business Ethics.

5. See Orlitzky, Schmidt, and Rynes (2003) for a meta‐analysis of the literature on the link between corporate social performance and corporate financial performance.

6. For more on what we mean by “the pragmatic spirit of experimentalism,” see Freeman and colleagues (2010), ch. 3, where we explain our pragmatic approach to theory in detail.