The Value of Stakeholder Theory: The Volkswagen Emission Debacle

Abstract

For many years, the political and public discourse of developed countries has seen an increase in the focus on ethical and moral principles in operational and organizational activities. There are plenty of examples of public arguments concerning organizational undertakings that have bearings on unethical practices such as those of Arthur Anderson and Enron, Lincoln Savings and Loan Association, WorldCom, Ahold, Parmalat, and Bernard L. Madoff Securities LLC. Many believe the previous and other scandals provide evidence that shareholder theory has failed and that stakeholder theory has been victorious, alluding that it is the manager’s role to create a balance between the financial interest of its shareholders and the interest of stakeholders even if it lessens shareholder returns (Smith, 2003a). However, in this context, current issues may have put additional pressures on organizations with added focus on matters such as the environment, taxation annulments, abuse of cheap labor in developing countries, the social role of organizations, integrity, and executive remunerations. On a global scale, many economic activities are under the control of large organizations, whereby, they call for a form of accountability in a democratic manner, but also in a manner that is in line with national governments (Mitchell & Sikka, 2005). Moreover, public opinion on policies plays an important part in democratic societies where the social role of organizations appears to directly affect how society is organized as well as the life prospects of individuals who largely depend on organizations for essential products and services.