Developments in Stakeholder Theory - Essay Example

Developments in Stakeholder Theory Contents Contents 2 Literature Review 3 Introduction 3 Theories 4 Implications 5 Issues in theories 7 Future development 9 Conclusion 11 References 12 Literature Review Introduction Literature review means finding and analysis of different article, journals, books, dissertation, conference proceedings and other sources related with research paper and particular issue. Many concepts and theories are involved in this part which is discussed in details. Literature review helps us to identify similar research paper from past. It made us understand about opinions of different authors. In this paper various researchers have produced their views regarding the development of stakeholder’s theory. They have focuses on different issues which are associated with stakeholder development. Literature review contributes lot in providing a clear picture about present scenario of the topic. This literature review focuses on different aspects of stakeholder theory. Different researchers have analysed these things in details. On the basis of different research methods authors have given their views on this particular topic. They have analysed stakeholders and their theories by implementing different research method. Literature review focuses on the results and finding of these research methods. The purpose of a literature review is to highlight theories of stakeholder, different issues associated with this theory and possible future development of stakeholder theories. Literature review helps to determine the background of the topic on which discussion is made. Different author suggested various opinions regarding theories which contribute a lot in development of stakeholders. This review focuses on the long term success of stakeholders by implementing different theories. On the basis of theoretical framework authors also recommend different things for stakeholders. Theories According to the authors Reinhard Steurer, Astrid Konrad, Markus E. Langer and André Martinuzzi relation management of stakeholders help to develop the ways which satisfy the aspirations and needs of current generations without making any adjustments of abilities of future generations. For managing different stakeholders and their relationship with the organization Stakeholder theory is established. The author states that this theory is implemented for managing business ethics and organization. Sustainable development of the company depends on stakeholder. This theory helps to focus on these issues. The theory of stakeholder was established by R.Edward Freeman. He had provided an outline of satisfying the needs of stakeholders by managing the business. This theory highlight internal and external environment of the organization and its relation with stakeholders. Stakeholders are the person who contributes a lot in development of an organization. Stakeholders can be employees, suppliers, customers, government bodies, trade associations, political group, trade unions etc. This theory was formed by Freeman for describing and recommending different methods by which the management can motivate and fulfil different interest of stakeholders. The authors states that different things are involved in this theory of stakeholder development. The major things this theory focuses are corporate planning, strategic management, organizational theory, system theory etc. All these things are developed and improved through stakeholder theory. Reinhard Steurer and other author provide the opinion that R.Edward Freeman established this theory to develop corporate social responsibility in the company. Another important objective of this theory is to highlight the importance of different stakeholders in performing business process. Freeman mentioned different characteristics and behaviour of firms in his theory. He shows possible effective ways of managing characteristics and behaviour of company for generating productive results. Stakeholders’ theory helps to manage group of stakeholders for achieving corporate goals. As per the authors this theory was developed for providing moral guidance to the company and its stakeholders for operating business process. The main idea of this theory is to manage relationship of different stakeholders in such a way that organizations can survive long in competitive environment and perform better. In this theory Freeman suggested that company should take part in developing certain competency of stakeholders (Steurer, Langer, Konrad and Martinuzzi, 2005). As per authors Laplume André, Reginald, Litz and Karan Sonpar, theory of stakeholder had started with an assumption that values plays an important role in determining the necessary things of doing business. Freeman rejects separation thesis because according to that that thesis economics and ethics of business can be sharply separated. Freeman produced the view that separating these two things becomes a tough task for business. He says that by following separation thesis shareholders produce single object views which results in narrowing business objectives and hamper value creation process in business. Expanding business objectives and enhancing value creation process contributes a lot in organisational development. For this reason he developed stakeholder theory which focuses on maximizing value and goal of shareholders (Laplume, Sonpar, and Litz, 2008). Implications As per the author Agle, Bradley R stake holder theory of Freeman has a strong implication on business and corporate organizations. Implication of this theory challenges different small business owners and corporate leaders to restructure their different approaches of management. Different new policies and strategies are implemented in organizational process for improving productivity of the company. Stakeholders values is analysed with this theory which contributes a lot in the process of dealing them. Implementing different approaches to management helps the business to accessing new opportunities for its growth. The author states that this theory guides manager in focusing on long term plan of the company. Earlier majority of the company were focused on achieving short term goal and were focused on organizations short term profit. Therefore strategies of those organizations had a less contribution on creating and developing values of its stakeholders. But for the implication of stakeholder theory views and thinking of managers have entirely changed. Stakeholders and managers develop different plans and policies for achieving long term success (Agle, 2008). As per the authors Morsing and Schultz in the modern world for globalization companies are concentrating more on its corporate responsibilities and sustainable development. With the help of this theory they become aware of advanced business strategies, business requirements, economic uncertainty etc. The organization can frame up their entire business process with the help of its stakeholders by implementing this theory. The core principal of stakeholder theory is to build strong relationship with stakeholders with the management for growth and development of company. With this principal and applying the model of this theory many companies have started their business. More over the organizations which were incurring a huge loss or were having poor business condition have recovered its position by implementing this theory (Morsing, and Schultz, 2006). As per the author Russo Angeloantonio and Francesco Perrini, by implying stakeholder theory company establish a high level of trust and value among the stakeholders. It is the most important thing for making a company successful. These authors state that the theory of stakeholders has enabled managers to achieve more profit. Employees get highly motivated in their works for different factors of this theory. Organizations can analyse various ways of benefiting the society by implementing this theory in their organizational process. Corporate firms analyze its different objectives and purpose by this theory. They are able to take effective decisions which enhance the value of company (Russo and Perrini, 2010). According to authors Parmar, Bidhan and some others implication of this theory influences stakeholders to help the company for fulfilling its goal and objectives. Business ethics of organization is enhanced for this theory. It contributes a lot in maintaining in handling different organizational challenges. Many modern systems have been introduced in companies to improving its business process. In the competitive business environment external stakeholders are given more importance for this theory. The stakeholder theory highlights different important roles of external stakeholders and their contribution in organizational development. Social partnership of the company is enhanced by implementing this theory. Organizational member learn to focus on collective goals and objectives on the company (Parmar, Freeman, Harrison, Wicks, Purnell and De Colle, 2010). Issues in theories According to Branco and Rodrigues One of the most intriguing problems with stakeholders’ theory is the question of how to consider the viewpoints of the stakeholders who are either mute or do not take part in discussion (Branco and Rodrigues, 2007). Among the mute stakeholders is the natural environment and the absent stakeholder is characterised by future generation. According to the stakeholder theory the company should take into consideration the effect of these two types of stakeholders. However there are other theories of definition of stakeholder theory who state that only individuals or person who can voice their opinion should be considered as stakeholders. This definition of stakeholders effectively excludes the natural environment from the list of stakeholders as they unlike humans cannot voice their opinions. There are certain researchers in this field who consider that only humans should be given the status of stakeholders of a company and criticize attempts at including the natural environment in the definition of stakeholders. The authors Branco and Rodrigues also subscribe to this view. In their research paper however they argue that one way of judging taking into consideration environment as a stakeholder is through the impact it will have on future generation. However in this case too there is a problem. The problem is how the company can ask the opinion of future generation. These future generations falls in the list of absent stakeholders. The problem is that as per the definitions associated with the stakeholder theory only those persons whose opinion can be taken into account should be considered but if the legitimate stakeholders care for the environment then the company should care for the environment. In this line another problem that exists from the company’s viewpoint in respect of the stakeholder theory is among the various stakeholders that are present whose viewpoints should the company actually consider. The question that arises is that should the status of stakeholders be reserved for a select few who have direct relationship with the company or should the definition of stakeholders encompass all the individuals or groups on whom and who in turn can have an effect on the organization. As per the author Philips stakeholders by definition includes those from whom the organization has accepted some benefits and there the organization by obligation owes them (Philips, 2004). This list of stakeholders includes the shareholders, suppliers, customers, employees, local community etc. The problem is not with this group of stakeholders. The problem is associated with more complex group of stakeholders who share a controversial relationship with the company. There are thus two distinct groups of stakeholders. One group is the legitimate group of stakeholders who have a direct influence on the company while another group of stakeholders is the derivative stakeholders who can exert an indirect influence and pressure on the company. Competitors for example fall in the category of legitimate stakeholders as they have a direct influence on the company. However the managers of the company cannot be held responsible to look after their wellbeing. The company should selectively deal with different groups of stakeholders. Future development The authors Freeman and Vea in their research paper has emphasized on the development of the stakeholder theory which explains that the concept of the stakeholder has been developed within the perspective or the area of the four distinct management research streams. The corporate planning has been recognized as an important area of the stakeholder’s theory. Therefore it is required by the management to understand and deal with the needs and requirement of the stakeholders in the course of its operation and function. The corporate planning mainly has two important and vital elements such as the prediction and adaption. The prediction deals with identifying the trend in the market and scanning the environment for the future growth and development and the adaption in the corporate planning deals with identifying the most efficient and the effective means for future development. The stakeholder approach is mainly intended for providing a single and common strategic framework for dealing in the flexible environment and adopting changes according to the new and innovative strategic paradigms. The stakeholder approach is focussed on the survival of the firm. The authors in there paper has also explained that the stakeholder approach motivates or compels the management for developing the strategies required by the firm and investing and identifying the relationship for the long term growth and development. The stakeholder management develops the management strategies that are suitable for the stakeholders and can be applied by them in the long run. The stakeholder theory has been modified and developed and it can be explained both in prescriptive as well as descriptive approach. The stakeholder theory explains and implies that the stakeholder relationships can be created as well as influenced. The stakeholder theory emphasizes that the stakeholders firms can sustain only when the incentives of the leaders motivates the responsiveness of the stakeholders and the legitimacy of the stakeholders can be overcome (Freeman and Vea, 2013). The writer (Phillips) has highlighted in his study the development of the stakeholder theory in the perspective of business ethics and the business society. The writer has explained the importance of ethics and morality in the business environment and its importance in the growth and development of the business. The business ethics plays a major role in the stakeholder theory as it is considered as the most powerful and under developed theory for designing the business strategy. The writer explains that the main reason for the development of the stakeholder theory is that it connects different theories together which includes the transaction cost, agency theory, contract theory. The stakeholder theory mainly constitutes or includes the good management practices. The stakeholder theory generally adopts a pragmatic approach. The single framework has been designed explaining the stakeholder theory covering the areas of corporate social responsibility Thus the major contribution of the stakeholder theory in the corporate social responsibility is widening the scope of the analysis of stakeholder and the importance in building relationship. The stakeholder analysis and the theory are implemented at a generic level that is mainly independent to the strategies of the individual firm (Phillips, 1997). Conclusion Literature review of this paper focuses on opinions and views of different authors regarding developing stakeholder theory. As per some authors many processes and concepts are involves with this theory which plays an important role in growth and development of company. The literature review explains that the theory of stakeholders helps to increase productivity of companies. It highlights different aspects of the theory. Authors have produced the views that organizations have able to implement many changes in its business process with this theory. Strong relationship with different stakeholders of the company is formed on the basis of this theory. By implementing this theory effectively the company gets a guideline in performing different functions and implementing its strategies. In this section authors have focused on some objectives for which Freeman had developed this theory. Value creation is one of the important features of this theory. Some author states that benefiting the society has become major concerned for the companies. With the help of this theory the firms are able to make different plans which benefits the society and also business. Stakeholder theory helps to focus on long term plan s of the company. By implementing adaption and prediction element in this theory future development can be done. The author has also focused on different issues which affects development of stakeholder’s theory. References Agle, B. R., 2008. Dialogue: Toward superior stakeholder theory. Business Ethics Quarterly. 18(02). pp. 153-190. Branco, M. C. and Rodrigues, L. L. 2007. Positioning stakeholder theory within the debate on corporate social responsibility. Electronic Journal of Business Ethics and Organization Studies, 12(1). pp. 5-15. Freeman, R. E. And Vea, J.M., 2013. A Stakeholder Approach to Strategic Management. Available at: http://faculty.wwu.edu/dunnc3/rprnts.stakeholderapproach.pdf [Accessed on 18 February 2015]. Laplume, A. O., Sonpar, K. and Litz, R. A. 2008. Stakeholder theory: Reviewing a theory that moves us. Journal of management. 34(6). pp. 1152-1189. Morsing, M. and Schultz, M. 2006. Corporate social responsibility communication: stakeholder information, response and involvement strategies. Business Ethics: A European Review. 15(4). pp. 323-338. Parmar, B. L., Freeman, R. E., Harrison, J. S., Wicks, A. C., Purnell, L., and De Colle, S. (2010). Stakeholder theory: The state of the art. The Academy of Management Annals. 4(1). pp. 403-445. Phillips, R. 2004. Some key questions about stakeholder theory. Ivey business journal, 1(3) . Phillips, R., 1997. Stakeholder theory and a principle of fairness. Business Ethics Quarterly, 7(1). pp. 51-66. Russo, A., & Perrini, F., 2010. Investigating stakeholder theory and social capital: CSR in large firms and SMEs. Journal of Business Ethics. 91(2). pp. 207-221. Steurer, R., Langer, M. E., Konrad, A. and Martinuzzi, A., 2005. Corporations, stakeholders and sustainable development I: A theoretical exploration of business–society relations. Journal of Business Ethics. 61(3). pp. 263-281. Read More