The Stakeholder Theory

717 Words 3 Pages
The stakeholder theory is a theory of organizational management and business ethics that address morals and values in managing an organization. It addresses the importance of how companies and corporations should empower the stakeholders, not only the shareholders. The stakeholder perspective is used in developing particular guidelines for assessing human resource management effectiveness, and how that should treat the individuals that are shareholders or stakeholders.
Freeman describes two definitions of what stakeholders are, a narrow definition and a wide definition. The narrow definition includes those groups who are vital to the success and survival of a corporation. The wide definition includes any group or individual in an organization
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This describes how the stakes of each are coordinated with one another, affecting the other in terms of harms, benefits, rights and/or duties.
The main idea behind the stakeholder theory is for a company or corporation to be successful I mean isn’t that what everyone would want a corporation that is helping them stay financially afloat. Owners and leader then must decide what opportunities to take and what factors work into bringing all the primary stakeholders together. It is then their responsibility to develop relationships with other stakeholders in order for their corporation to travel to new heights of success.
In traditional ways the shareholder view was viewed as only the owners or stockholders of a company or corporation and that no matter what that company put the needs of those people
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However, he argues that and I quote “management decision-making is an inefficient means of protecting the interests of nonshareholder, stakeholders and that a system of governance marked by shareholder primacy better serves the interests of all stakeholders.” Boatright argues that the theory actually compliments the stockholder view in 2 ways. First, he reminds managers that they have an obligation to correct for such things as market failures and externalities to ensure the markets work as they should to produce benefits for all. Second, that stakeholder management can be seen as a guide for the ethical management of the firm rather than as an alternative system of corporate

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