The stakeholder approach undoubtedly has value to business today. I would argue that our collective experience of stakeholder actions in the last 30 – 40 years, our knowledge of managing change and delivering projects and our understanding of fairness has built a collective view that considering stakeholders 'just makes sense'. stakeholdermap.com
In the constantly evolving landscape of business, the role and influence of stakeholders have become ever more pronounced. The rise in corporate social responsibility, the importance of ethical operations, and the push towards more inclusive governance structures underscore the growing prominence of the stakeholder approach. Rooted in a history that spans several decades, the stakeholder model has proved to be invaluable, echoing a sentiment that dealing with stakeholders is not just strategic but also 'just makes sense'.
Bucholtz and Carroll describe the three values of the stakeholder model that enable us to clearly articulate why a stakeholder approach is essential to business and society.
The three values of the stakeholder model are:
1. Descriptive value
One of the most fundamental aspects of the stakeholder model is its descriptive nature. This model presents a comprehensive lens through which the internal dynamics and external impacts of corporations can be understood. It provides a language and concepts to describe corporations, the way they work and their impacts on the wider environment. As Donaldson and Preston explain:
It [stakeholder theory] presents a model describing what the corporation is. It describes the corporation as a constellation of co-operative and competitive interests possessing intrinsic value. (Donaldson and Preston, pg.66).
Stakeholder Theory is useful in helping to understand, and manage organizations, which is why the language of stakeholder theory is used widely in business, not for profit, government etc. (Carroll pg. 70).
In essence the Stakeholder Model provides a nuanced understanding of the myriad entities and factors associated with a corporation – from employees and shareholders to the environment and community. As a result, organizations across various sectors, be it businesses, non-profits, or government, have increasingly adopted the language of stakeholder theory as a means to decipher and navigate the complexities inherent in their operations.
2. Instrumental value
The stakeholder model is instrumental, in that managing stakeholders should result in the achievement of business goals: increased profitability, growth, sustainability. The stakeholder model also allows for the testing of the connections between managing stakeholders and reaching business targets. stakeholdermap.com
By effectively managing stakeholder relationships and expectations, corporations can significantly enhance their prospects for success. This instrumental perspective links the act of stakeholder management directly to crucial business objectives, whether they are profit maximization, sustainable growth, or long-term viability. Moreover, the model provides a framework to empirically test the interplay between stakeholder management strategies and business outcomes.
3. Normative value
The third aspect of the stakeholder model is the presumption that stakeholders have inherent value. As Donaldson and Preston explain stakeholder theory accepts that stakeholders have legitimate stakes in corporate activity based on their interest in the corporation and that stakeholders have intrinsic value (Donaldson and Preston, pg. 67).
Both Donaldson, Preston, Carroll and Bucholtz agree that stakeholder theory is in a broad sense managerial because it is descriptive, it enables predictions to be made, and it makes recommendations that together constitute stakeholder management.
It is important to note that while stakeholder management requires an acceptance that a management should consider stakeholders rather than just shareholders, it doesn't require an undiscerning acceptance of all stakeholder interests and allows for the identification and analysis of importance and legitimacy of a stakeholder's 'stake' in the organization (Donaldson and Preston, p67.).
Conclusion
In a world where corporations increasingly bear social, environmental, and ethical responsibilities, the stakeholder model's centrality cannot be understated. As Donaldson, Preston, Carroll, and Bucholtz collectively argue, the stakeholder theory is fundamentally managerial. By describing corporate structures, facilitating the achievement of business goals, and recognizing the inherent value of stakeholders, the model provides a holistic framework for modern-day corporate governance. Embracing this model ensures that businesses remain attuned to the diverse interests that shape their existence and success, reaffirming the indispensable role of stakeholders in the corporate world.
Donaldson, T. and Preston, L., 1995. The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications. The Academy of Management Review, Vol. 20, No. 1. (Jan., 1995), pp. 65-69.
