Thursday, March 16, 2006

Cracks in the Foundation of Stakeholder Theory by: Andrew R. Weiss Introduction

Cracks in the Foundation of Stakeholder Theory by: Andrew R. Weiss Introduction

"Stakeholder Theory has become an established framework within which to identify and examine the impact of organization action. It has been used to inform discussion of corporate governance, business ethics, strategic management and organizational effectiveness. Donaldson and Preston note that 'a dozen books and more than 100 articles with primary emphasis on the stakeholder concept have appeared and that 'the stakeholder model has become a standard element of 'Introduction toManagement' lectures and writings' (1995:65-66). In fact, one might argue that Stakeholder Theory is approaching paradigm status. It consists of a general system of ideas and assumptions, standard examples and established assertions. Given its broad impact, the general foundation and assumptions on which the broad outlines of Stakeholder Theory rest warrant examination.Stakeholder Theory posits a model of the enterprise in which 'all persons or groups with legitimate interests participating in an enterprise do so to obtain benefits, and there is no prima facie priority of one set of interests and benefits over another' (Donaldson and Preston, 1995:68). The model rejects the idea that the enterprise exists to serve the interest of its owners, be that maximizing their wealth or some other reason for being in business. Rather, the model is based on the idea that the enterprise exists to serve the many stakeholders who have an interest in it or who in some way may be harmed or benefitted by it.Stakeholder Theory may, as Donaldson and Preston (1995) point out, be stated in descriptive,instrumental or normative terms. For example, Brenner and Cochran offer a Stakeholder Theory of the firm to 'describe how organizations operate and to help predict organizational behaviour' (1991:452). Freeman (1984, 1991), on the other hand, uses"

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