Stakeholders are groups and individuals that have an interest in the actions and outcomes of an organization and upon whom the organization relies to achieve its own objectives. Note in this definition that there is a two-way interdependent relationship. It is not enough for a particular group or individual to claim a “stake” in the firm, such as suppliers, financiers, customers, shareholders, and communities. Genuine stakeholders are those that either contribute to or have the ability to undermine the productive activities of an organization. Because of its breadth, stakeholder theory holds multiple interpretations, but at its heart the theory suggests that firms that take excellent care of a broad group of these stakeholders (as opposed to focusing on one group, such as shareholders or customers) will gain benefits that are not available to other organizations. For example, employees are expected to work harder, customers to buy more, suppliers to provide the best resources and terms, financiers to offer the best interest rates, and so forth. These sorts of benefits lead an organization to create more value, which is then distributed back to the stakeholders that helped to create it. In spite of what many scholars and practitioners might think, this theory is not the same as corporate social responsibility (CSR), which tends to focus on social issues such as the environment or sustainability. While it may be true that firms that take exceptionally good care of their stakeholders may also be good corporate citizens, the objective behind stakeholder theory is on effective and efficient management in an increasingly turbulent business environment rather than pursuing social welfare for its own sake.
These are the classic books on the topic of stakeholder theory. Freeman 2011 (originally published in 1984) provides a foundational overview upon which most of the scholarship on stakeholder theory rests. Freeman, et al. 2007 provides an update to Freeman 2011, the classic text. Freeman, et al. 2010 provides a thorough review of the entire body of stakeholder literature through 2009. Friedman and Miles 2006 provides a less comprehensive but meaningful review of that same body of literature up to about 2005, emphasizing the practical implications of the work. Phillips 2011 collects original papers from some of the most prolific authors on stakeholder theory on topics that are critical to the advancement of the stakeholder concept. Phillips and Freeman 2010 compiles many of the most important previously published papers into one volume. Phillips 2003 examines and develops the relationship between stakeholder theory and ethics. Finally, Post, et al. 2002 demonstrates the efficacy of a stakeholder management approach to the modern corporation.
Freeman, R. Edward. Strategic Management: A Stakeholder Approach. Cambridge, UK: Cambridge University Press, 2011.
Originally published in 1984, this is the most important and foundational work on the topic. It argues that a turbulent and complex business environment requires a new management approach. It outlines the basic tools for determining the power and influence of particular stakeholders and provides several chapters on how to manage stakeholders (and the firm) effectively. Everyone who wants to do any work on stakeholder theory should feel obligated to read it.
Freeman, R. Edward, Jeffrey S. Harrison, and Andrew C. Wicks. Managing for Stakeholders: Survival, Reputation, and Success. New Haven, CT: Yale University Press, 2007.
This book was written by Ed Freeman and his colleagues as an update to the Freeman’s 1984 classic. It is a practical guide intended to help practitioners as well as academics. It contains numerous exhibits and is written in a very accessible style.
Freeman, R. Edward, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan Parmar, and Simone de Colle. Stakeholder Theory: The State of the Art. Cambridge, UK: Cambridge University Press, 2010.
This book contains a summary of practically all of the important work on stakeholder theory up to 2009 across disciplines as diverse as business ethics, strategic management, economics, operations, marketing, finance, accounting, public administration, and law. This book provides an encyclopedia of information to the reader, as well as helpful critiques and commentaries. In addition, it includes an important chapter on stakeholder capitalism.
Friedman, Andrew L., and Samantha Miles. Stakeholders: Theory and Practice. Oxford: Oxford University Press, 2006.
The authors provide an overview of work on stakeholder theory up to the date of publication. The book connects theory with practice. Central ideas are supported by their philosophical underpinnings. Policy implications are also discussed.
Phillips, Robert. Stakeholder Theory and Organizational Ethics. San Francisco: Berrett-Koehler, 2003.
Stakeholder theory is built on an ethical foundation, and this book does an excellent job of connecting stakeholder theory with ethics. Especially important are Phillips’s ideas regarding how to categorize stakeholders, and the implications of those categories for theory and practice.
Phillips, Robert A., ed. Stakeholder Theory: Impact and Prospects. Cheltenham, UK: Edward Elgar, 2011.
This book contains original articles written by some of the major scholars on stakeholder theory, collected and edited by Phillips, himself a very important scholar. They both critique the theory and advance it. Topics include managerial discretion, the common good, firm-stakeholder relationships, social welfare, mental models, globalization, and pluralism.
Phillips, Robert A., and R. Edward Freeman. Stakeholders. Cheltenham, UK: Edward Elgar, 2010.
For this book, the authors collected some of the most influential and important papers published on stakeholder theory. Almost all of these papers are also described in this article, so this book can provide a reader with a very solid foundation on stakeholder theory from which to build, without having to track down the individual articles.
Post, James E., Lee E. Preston, and Sybille Sachs. Redefining the Corporation: Stakeholder Management and Organizational Wealth. Stanford, CA: Stanford University Press, 2002.
The legitimacy of the modern corporation is examined in this book. Stakeholder theory is promoted as a viable foundation for organizing and managing corporations. Also included are case studies of three major corporations: Cummins Engine, Motorola, and Royal Dutch/Shell Group.
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