The Stakeholder Concept: A Mistaken Doctrine

Abstract

Stakeholding has been widely offered as a corrective perceived defects business ethics and corporate governance, and as a primary model business and social responsibility. It is indeed now advocated so commonly as have become a new orthodoxy. The purpose this paper is show that some the most popular usages 'stakeholding' are positively inimical responsible conduct. Two usages 'stakeholding' are commonplace and unobjectionable. The first is a conventional observation about motivation: people are more likely take an interest in a process when they consider that they have a stake in its outcome; the stake need not be financial. The second innocuous usage is simply a reminder that the world is complex: many factors must ordinarily be considered when pursuing even ostensibly simple outcomes. This is a basic truth that successful businesses have long understood and respected. There is, however, a third usage 'stakeholding' that is advocated by modern proponents stakeholder theory: this characteristic usage is not about motivation, or functional relationships, but about entitlements. Adding force the conventional notions, its central tenet is that organisations, and particularly businesses, must do more than just take their stakeholders into account. It maintains that organisations must instead be accountable all their stakeholders, and that the proper objective management is balance their competing interests. It is this third usage stakeholding that is being challenged here. Far from being a source improvements, this most distinctive stakeholder doctrine is fundamentally misguided, incapable providing better corporate governance, business performance or business conduct. It is intrinsically incompatible with business and all other substantive objectives, and systematically subverts rather than supports both social and business responsibility. Entitlement stakeholding undermines both private property and accountability; it can be used rationalise almost any kind government intervention, no matter however intrusive or restrictive. Fortunately, a better model business ethics and social responsibility is available. Unlike stakeholder theory, the Ethical Decision Model Elaine Sternberg's JUST BUSINESS: BUSINESS ETHICS IN ACTION (Second edition, Oxford University Press, 2000; first edition: Little, Brown & Co. (UK) Ltd. 1994, Warner paperback 1995) does justice the need treat all stakeholders ethically while recognising the distinctive role shareholders and the nature business. It offers a clear criterion ethical responsibility for business that respects both individual liberty and the rights business owners. JUST BUSINESS shows that when properly understood, 'social responsibility' is not a responsibility to stakeholders, but a responsibility of stakeholders. As 'conscientious stakeholding', it consists the strategic bestowal or withholding support for social and economic institutions on the basis stakeholders' values.