handbook corporate social responisbility
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Theories of corporate social responsibility
space
Pure Marketplace Ethics Libertarian Marketplace
(Shareholder Theory)
Social Marketplace
(Shareholder Theory)
Shared Value Ethics Stakeholder Theory - Soft Progressive Corporate Social Responsibility Triple Bottom Line / Sustainability Stakeholder Theory - Hard
 
Theories of corporate social responsibility distributed across tensions
space
Profit
versus
social and
environmental engagement
Freedom versus happiness Individualism versus collectivism Independence versus belonging Dignity
versus compassion
Opportunity
versus
equality
Shareholder
versus
stakeholder
 
 
Stakeholder Theory - Hard
stake holder theory hard
  Overview Businesses are fundamentally obligated to respect the rights and welfare of all those affected by its operations. The obligations are identical in kind, though they may very in degree.  
  Values

The welfare of all those individuals and organizations affected by the business. (Cardinal stakeholders typically include: shareholders, workers, customers, suppliers and community taken to incorporate broader humanistic and environmental concerns).

 
  Responsibilities

Stakeholders’ interests are acknowledged and respected when making decisions: the interests are weighed alongside - and according to the same logic - as obligations traditionally associated with shareholder (profit) interests.

 
  Key concepts

Stakeholder: an individual or organization affected by a company’s actions.

All stakeholders hold autonomous value, independent of a business's economic existence.

As opposed to the idea that a business is first an economic entity that operates in society and so acquires broader responsibilities, the idea here is that a business is fundamentally a social and ethical operation, and economic activity is only one facet of it's existence.

Shareholder value is not different in kind from other stakeholder value. Stated inversely, all stakeholders are owners in ethical terms.

The collective bottom line: the summed affect of a company’s actions on all stakeholders.

The reversal of marketplace ethics: instead of starting with a business and looking out into the world to see what obligations exist, stakeholder theory starts in the world. It recognizes those individuals and groups who will be affected by - or affect - the company’s actions and asks: what are their legitimate claims on the business? What rights do they have with respect to the company’s actions? What kind of responsibilities and obligations can they justifiably impose on the business?

Proponents of marketplace ethics recognize no extra-economic ethical responsibilities (all ethical responsibilities include consideration of bottom-line affects). Proponents of stakeholder theory and other social business ethics do recognize extra-economic responsibilities: they begin with that recognition: a company is part of society before it's part of economics.

In actual practice, stakeholder theory in its hard form may be indistinguishable from political socialism or communism: ownership of property in the legal sense is conditioned by the ethical premise that all stakeholders are identical in kind.

 
  Hard questions

In practical terms, who counts as a stakeholder?

Even though all stakeholders have rights and responsibilities resembling those customarily connected with shareholders, shareholders have a way of weighing the influence of each individual: number of shares owned (translating into shareholder meeting votes). Now that all stakeholders have a direct vote in corporate decisions, how should their value and influence be measured and allotted?

Does the requirement to treat all stakeholders as, in essence, owners leave the theory inoperable within a capitalism? Is it simply inoperable, period? (When all stakeholders - including owners - are valued in the same way, what is a business, and what drives an economy?)

 
  Examples

Hard stakeholder theory is not currently implemented in advanced societies because it requires eliminating the right to private property ownership as normally instantiated by law, custom and tradition.

Hard stakeholder theory could, in a sense, be understood to function with respect to government entities when viewed as business (as opposed to social) organizations.

Outside the United States, one example of strong stakeholder theory is embedded in the Mexican Constitution. When the indigenous people overthrew the Spaniards and claimed independence in the early 19th century, what they especially detested were the absentee landlords. The Spanish owned the farm lands, but lived in the cities, leaving locals to do the work. As a response to the indignation, the new constitution stipulated that those who work the land own it. Ownership and control over land, in other words, is not guaranteed through time. Instead, it depends on the extent of your personal interaction with the soil. Legal ownership derives from personal involvement. In the world of strong stakeholder theory, the corporation would be like that: essentially owned by those who are affected by it. (Note: Contemporary reality has forced modification of the Mexican constitution. Still, in the provinces people are reluctant to rent properties for long terms because courts away from the capital occasionally recognize the original, constitutional stipulation.)

 
  Prime philosophical theory compatibilities Duty theory (within a Marxist perspective), Utilitarianism  
  Human values

Human dignity derived from compassion (as opposed to dignity as foundational and compassion deriving from dignity)

Harmony and fitting into society valued above individual freedom and independence (autonomy exists only through the community)

Collective welfare valued more highly than individual opportunity (opportunity is enabled by collective welfare)

 
  Associated notable figures Karl Marx, Friedrich Engels, Che Guevara, Subcomandante Marcos (Rafael Sebastián Guillén)  
  Branding connect

Soviet art
worker

Che
stakeholder theory strong

Diego Rivera
stakeholder theory strong

Tu Eliges (A good documentation of individualism as conditioned by the collective. The cry to Rebel! (aimed at individuals) exists in the name of the collective)

 
  Intellectual advocacy Contemporary argument in favor of strong stakeholder theory (socialism)
 
 
 
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