Stakeholder Theory: The State of the Art

by R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks

In 1984, R. Edward Freeman published his landmark book, Strategic Management: A Stakeholder Approach, a work that set the agenda for what we now call stakeholder theory. In the intervening years, the literature on stakeholder theory has become vast and diverse. This book examines this body of research and assesses its relevance for our understanding of modern business. Beginning with a discussion of the origins and development of stakeholder theory, it shows how this corpus of theory has influenced a variety of different fields, including strategic management, finance, accounting, management, marketing, law, health care, public policy, and environment. It also features in-depth discussions of two important areas that stakeholder theory has helped to shape and define: business ethics and corporate social responsibility. The book concludes by arguing that we should re-frame capitalism in the terms of stakeholder theory so that we come to see business as creating value for stakeholders.

Genres: Business, Software, Technology, Economics, Nonfiction

362 pages, Paperback

First published February 28, 2010

About the author

R. Edward Freeman is University Professor and Olsson Professor of Business Administration at the Darden School of the University of Virginia.

Reviews

[Fred Cheyunski · Rating 3 out of 5]

Academic Effort To Date and Further Exploration Needed - In 1984, Freeman formalized a theory based on the notion that developing strategy for business begins with understanding the “stakeholders it serves and those that serve the business.”

I was interested to learn of this book regarding “state of the art” of this theory as it relates to managerial and consulting activities encountered during my career. For example, my early efforts involved developing and writing about “Process-Oriented Organizational Diagnosis” and “Program Planning with Problem-Centered Constituency Groups” (e.g. see my review of A Common Struggle: A Personal Journey Through the Past and Future of Mental Illness and Addiction ). Later my concerns were focused on organizational change activities including stakeholder management for information system related projects (e.g. see my review of Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers (Collins Business Essentials) ).

The book itself is made up of 4 parts that progress from the precursors of stakeholder theory, to ways it has been used and studied so far, to some aspects to address and prospects for the future. In particular, Part 1 is about the origins of stakeholder theory, mention of Ansoff etc., Giles Slinger (now part of UK Consulting Firm Concentra with such offerings as OrgVue), Freeman’s personal history (academic vs managerial), pragmatism (updated Pierce), need to strengthen practice/theory links. Part 2 concerns ways stakeholder theory relates to traditional business disciplines including strategic management (e.g. references to many works such as Burke, Borucki and Hurley,1992 on work climate), finance/accounting, marketing and general management (including Info systems in there as well, but surprisingly not much there on application in that arena), more on use in other areas (see use in health care and policy making). Part 3 relates stakeholder theory to ethics, corporate and social responsibility (much work done here in recent years). Finally, Part 4 looks at some future possibilities for stakeholder theory (such as crossover with other disciplines and remaking business).

While the Part 1 overview was pretty complete, I was also compelled to read Freeman’s “Strategic Management: A Stakeholder Approach” as wanted more detail from the original source. From that reading I can see why it remains a classic and “go to” resource and more pertinent to my earlier work (references to Ansoff, Van de Ven, Schein etc) such as about managing relationships with stakeholder groups in an action oriented way; it was also informative to see his movement from concern with stakeholder differences and resolving conflicts to creating value as expressed in the preface to his 2010 edition.

To help fill the gaps in Part 2, I chose to look at books such as “Stakeholder Relationship Management” by Lynda Bourne for something more related to work done for enterprise system planning and implementation as it seemed more current and extensive references should be available. Furthermore. I went back to titles such as “Real-Time Strategic Change” by Robert Jacobs “Discovering Common Ground” and “Productive Workplaces” by Marvin Weisbord to look at other such stakeholder approaches not covered.

Regarding Part 3, I wondered how Freeman et al might address the way stakeholder theory will deal with works as “Management Reset: Organizing for Sustainable Effectiveness” by Edward Lawler and Christopher Worley as more such books started to appear after the publication date of this edition.

As to Part 4, it seems like concerns such as those mentioned above should be included as well as those suggested by Rana Foroohar’s “Makers vs. Takers” (see my review) where the prominence of shareholders vs broader stakeholders and other ills call out for further attention.

While stakeholder theory’s “state of the art” needs some expansion and updating, particularly in the managerial realm, this book remains an extensive record of academic effort to date and additional areas to be included and explored further.

[Geoffrey Kelley · Rating 4 out of 5]

This is a scholarly review of the development of stakeholder theory in business schools over the last fifty years or so. In terms of bibliographical content, much work has been done by the authors to explore many aspects of business stakeholder theory. It includes an interesting chapter on the applicability of these theories to other domains, including public policy debates. It has sections devoted to business ethics and corporate social responsibility concerns. Where it fell short in my estimation was it failed to give some concrete examples of the stakeholder theory in practice. A literature review is important, but for the general reader a better sense of how this should affect corporate behaviour would have been valuable. The authors mention in passing growing concerns about the environment, for example, and suggest that accounting practices need to be updated to take this into consideration. But the “how” is left out. Hiring practices, relations to the communities in which a corporation operates are other issues alluded to as part of a comprehensive stakeholder approach to management. But a few concrete examples would have helped the general reader who gets quite lost in the bibliographical review, as valuable as that may be to students of business management theories.