What to Know About Stakeholder

Theory

Amelia Marlowe

Have you ever wondered why businesses care to do so much for their

consumers?

It’s because of Stakeholder theory!Duh…

What is it?

Stakeholder theory is an idea that businesses should not function only for financial benefit; they should run for the benefit of both their owners and stakeholders.

What is it?The idea is that when businesses pay attention to their stakeholders- customers, suppliers, employees, and investors- they will make a larger overall profit.

Who introduced it?

Edward Freeman

He began work on the Stakeholder Theory in 1984

Freeman received a B.A. in mathematics and philosophy from Duke.

Who uses it?

Businesses, organizations, and even the Government! Anyone who values morals and the relationship between the consumer and

corporation.

So what?The theory is important because it acts as a way to understand Corporate Social responsibility, or how a business regulates itself.

It promotes the ideology that businesses making a profit are dependent on behaving honorably and with morals.

No Morals + all about profit

= Bad Business!

CriticismHas to be narrowed down

to be useful

Some businesses can make more of a profit

while disregarding the opinions of the

public/stakeholders

Out of date and there have been

too many revisions to keep track of

Example- Greenpeace Organization

It was created in 1971. Realignment of the organization in 1985 created a less antagonistic group towards organizations, in order to be seen as a group to the people.

Membership in 1985 was around 2 million; following the realignment period, Greenpeace gained 5 million members by 1990.

It’s all about the people!

To Wrap it Up…Good business is a balance between the

relationship of companies and stakeholders, as well as the motivation to earn a profit.