Crossroads of Philosophy and Economics

Pocket Reference of Business Ethics Theories


Stakeholder Theory (soft)
The welfare of all those individuals and organizations affected by the business.
(Note: Because it’s practically impossible to respect as valuable the entire multitude affected by a company’s actions, attention generally limits to a reduced group of cardinal stakeholders, frequently including: shareholders, workers, customers, suppliers and local community).
Corporate officers should respect all stakeholders’ interests when making decisions: they should be taken account of in a way comparable with the deference and obligation traditionally associated with shareholder interests.
Key concepts
Stakeholder: an individual or organization affected by a company’s actions
Business obligation to stakeholder: Derived from the stakeholders’ existence, their interests are to be valued, but are different in kind, and inferior to those of shareholders.
The collective bottom line: the summed affect of a company’s actions on all stakeholders.
The reversal of CSR theory: instead of starting with a business and looking out into the world to see what ethical obligations are there, stakeholder theory starts in the world. It lists and describes 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?
Hard questions
Who counts as a stakeholder?
How heavily should the interests of stakeholders who are not owners be weighed against the interests of stakeholders who are owners?
In soft form, stakeholder theory only requires taking account of stakeholder interests in some vague sense: is this too wishy-washy to actually do anything serious?

In its soft form, Stakeholder theory is easy to implement, and is implemented to some extent by most businesses. The law office granting generous maternity leaves, the toymaker adding labeling information going beyond the law’s requirements, the cellphone company that spends a little extra to camouflage antennas as less ugly trees, the construction crew that avoids making loud noise in the street before 9am, all these may be examples of businesses taking seriously the claims made by their stakeholders. In every case, however, it’s important to distinguish gestures responding to claims made by stakeholders, from responses owed to other motivations (including profit, increasing brand value and similar).

Prime philosophical
theory compatibilities
Duty theory, Rights theory, Utilitarianism, Culturalism
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