Business Ethics and Sustainability

(BUSI3182)

Lecture 3 Stakeholder Theory

Part 1 – Who is a stakeholder?

Dr Claire Ingram
Lecture 3

2
 Reading

Required reading:

Core textbook, Chapter 2.

Further reading:

• Donaldson, T. and Preston L.E. (1995). The Stakeholder Theory of

the Corporation: Concepts, Evidence, and Implications, Academy
of Management Review, 20(1): 65-91.

• Orts, E.W. and Strudler, A. (2009). Putting a Stake in Stakeholder

Theory, Journal of Business Ethics, 88(4): 605–615.

3
 Lecture Outline
• Understand what a stakeholder is
and why they matter

• Understand the stakeholder theory

of the firm and its forms

• Critically examine stakeholder

theory

Please see Moodle activities in

conjunction – thank you! 4
Who is a stakeholder?
 Who is a stakeholder?
Evan & Freeman (1993) suggest two principles for determining who is a stakeholder.

Principle of Corporate Principle of Corporate

Effect Rights

Corporations are responsible Corporations have an

for the effects that their obligation to not violate the
actions have on others. rights of others.

Consequentialist view Deontological view

(outcome-based) (duty-based) 6
Who is a stakeholder?

“any group or individual who can affect or is affected by the

achievement of the organization’s objectives”

Edward Freeman, Strategic Management: A Stakeholder Approach

(1984: 46)

***

A stakeholder is: “an individual or group that, in the context of a

specific situation, is either harmed by, or benefits from, the
corporation, or whose rights the corporation should respect”

Crane et al (2019: 60)

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 Stakeholder theories of the firm
Traditional management model

Shareholders Customers

Firm

Suppliers Employees

Crane et al (2019: 60)

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 Stakeholder theories of the firm
Stakeholder model

Competitors
Government

Customers
Shareholders

Firm

Suppliers Employees

Civil

society
Crane et al (2019: 60)
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 Stakeholder theories of the firm
Network model

Government
Customer
stakeholder 1 Customer
Government Competitors stakeholder 1
stakeholder 2
Stakeholder of
Customer
Shareholders Customers
government
Firm stakeholder 3
stakeholder 1

Suppliers Employee
Employees
Civil society stakeholder 1

Supplier Employee

Civil society stakeholder 2

stakeholder 1
Civil society
stakeholder 1
Stakeholder 1 of stakeholder 2 Stakeholder of

supplier stakeholder 1 Stakeholder of civil employee stakeholder 2

Stakeholder 2 of
society stakeholder 1
supplier stakeholder 1
Crane et al (2019: 60)
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drawing on Rowley (1997)
 Why do
stakeholders
matter?

Legal perspective
 Legally binding contracts
 Laws and regulations

Economic perspective
 Agency problem

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Next up…
Lecture 3 Stakeholder Theory
Part 2 – Forms of stakeholder theory