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Stockholders and Stakeholders: A New Perspective on Corporate Governance

DOI:10.2307/41165018
Authors:
R. Edward Freeman at University of Virginia
R. Edward Freeman
Dl Reed
Dl Reed
Dl Reed
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Abstract

The purpose of this article is to show how the concept of stakeholders in an organization can be used to understand the tasks of the board of directors. The authors argue that a volunteeristic approach to questions of corporate governance which focuses on effective director behavior is preferable to structural change via legislation.
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Stockholders and Stakeholders: A New Perspective on Corporate Governance
Freeman, R. Edward
California Management Review (pre-1986); Spring 1983; 25, 000003; ABI/INFORM Global
pg. 88
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Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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... By extending EntREsilience findings and responding to the identified research gaps [5], the present article will show how entrepreneurial resilience manifestation includes stakeholder crisis-challenge awareness and theorise why Thai entrepreneurs considered stakeholder well-being as one of their strategies to achieve stability and growth. Guided by stakeholder theory [12][13][14] and applying grounded theory, the article explains how this awareness resulted in sustainable competencies within the entrepreneurs to innovate solutions to those challenges, thus transforming them into sustainable leaders. Replying to the research gaps [5], the present research proposes a transformation model, illustrating 'stakeholder challenges' to the 'sustainability competencies' relationship and how the internal and external contextual factors moderate this relationship. ...
... Stakeholder theory considers any business as a set of relationships among buyers, sellers, workers, investors, communities and executives who work together to create mutual value [13,21]. Stakeholders are "those groups and individuals who can affect or be affected" by business functions to create value [12] (p. ...
... From the beginning, the entrepreneurs adopted survival measures, revealing an awareness of the challenges faced by the enterprise's stakeholders [49]. Stakeholders affect and are affected by the value creation activities of a firm [12,13]. The relationships between the stakeholders and their joint effort are crucial for establishing and solidifying an enterprise's value creation network [14,50]. ...
How Has the COVID-19 Crisis Transformed Entrepreneurs into Sustainable Leaders?
Article
Full-text available
  • Mar 2023
EntREsilience, a five-country longitudinal qualitative study, was launched in 2020 in China, Malaysia, the Philippines, Thailand and the UK to understand how entrepreneurs manifested resilience in response to the COVID-19 pandemic crisis events from March 2020 to February 2022. EntREsilience proposed a resilience-manifestation process model describing how entrepreneurs responded to the COVID-19 disruption, aided by external and internal enablers, adjusting their businesses to stabilise and even hunting for opportunities to grow their businesses. The present research adds to the findings of EntREsilience by analysing the strategies applied by entrepreneurs in their response to the crisis. This exploratory study focused on the entrepreneurs’ community interactions and studied the effects of these interactions on the response measures adopted by the entrepreneurs. The results describe how the awareness of their stakeholder challenges shaped the entrepreneurial response. Realising the importance of stakeholder well-being to the sustainability of their enterprise motivated the entrepreneurs to develop sustainability competencies towards their stakeholder challenges, innovating solutions for their mutual well-being. By extending the resilience-manifestation process model, this paper proposes a transformation model depicting the process of entrepreneurs transforming into sustainable leaders triggered by stakeholder challenge awareness and moderated by contextual factors. Keywords: COVID-19 pandemic; entrepreneurial resilience; stakeholder theory; sustainable leadership
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... By extending EntREsilience findings and responding to the identified research gaps [5], the present article will show how entrepreneurial resilience manifestation includes stakeholder crisis-challenge awareness and theorise why Thai entrepreneurs considered stakeholder well-being as one of their strategies to achieve stability and growth. Guided by stakeholder theory [12][13][14] and applying grounded theory, the article explains how this awareness resulted in sustainable competencies within the entrepreneurs to innovate solutions to those challenges, thus transforming them into sustainable leaders. Replying to the research gaps [5], the present research proposes a transformation model, illustrating 'stakeholder challenges' to the 'sustainability competencies' relationship and how the internal and external contextual factors moderate this relationship. ...
... Stakeholder theory considers any business as a set of relationships among buyers, sellers, workers, investors, communities and executives who work together to create mutual value [13,21]. Stakeholders are "those groups and individuals who can affect or be affected" by business functions to create value [12] (p. ...
... From the beginning, the entrepreneurs adopted survival measures, revealing an awareness of the challenges faced by the enterprise's stakeholders [49]. Stakeholders affect and are affected by the value creation activities of a firm [12,13]. The relationships between the stakeholders and their joint effort are crucial for establishing and solidifying an enterprise's value creation network [14,50]. ...
sustainability-15-05358-Published
Article
  • Mar 2023
EntREsilience, a five-country longitudinal qualitative study, was launched in 2020 in China, Malaysia, the Philippines, Thailand and the UK to understand how entrepreneurs manifested resilience in response to the COVID-19 pandemic crisis events from March 2020 to February 2022. EntREsilience proposed a resilience-manifestation process model describing how entrepreneurs responded to the COVID-19 disruption, aided by external and internal enablers, adjusting their businesses to stabilise and even hunting for opportunities to grow their businesses. The present research adds to the findings of EntREsilience by analysing the strategies applied by entrepreneurs in their response to the crisis. This exploratory study focused on the entrepreneurs’ community interactions and studied the effects of these interactions on the response measures adopted by the entrepreneurs. The results describe how the awareness of their stakeholder challenges shaped the entrepreneurial response. Realising the importance of stakeholder well-being to the sustainability of their enterprise motivated the entrepreneurs to develop sustainability competencies towards their stakeholder challenges, innovating solutions for their mutual well-being. By extending the resilience-manifestation process model, this paper proposes a transformation model depicting the process of entrepreneurs transforming into sustainable leaders triggered by stakeholder challenge awareness and moderated by contextual factors.
View
... By extending EntREsilience findings and responding to the identified research gaps [5], the present article will show how entrepreneurial resilience manifestation includes stakeholder crisis-challenge awareness and theorise why Thai entrepreneurs considered stakeholder well-being as one of their strategies to achieve stability and growth. Guided by stakeholder theory [12][13][14] and applying grounded theory, the article explains how this awareness resulted in sustainable competencies within the entrepreneurs to innovate solutions to those challenges, thus transforming them into sustainable leaders. Replying to the research gaps [5], the present research proposes a transformation model, illustrating 'stakeholder challenges' to the 'sustainability competencies' relationship and how the internal and external contextual factors moderate this relationship. ...
... Stakeholder theory considers any business as a set of relationships among buyers, sellers, workers, investors, communities and executives who work together to create mutual value [13,21]. Stakeholders are "those groups and individuals who can affect or be affected" by business functions to create value [12] (p. ...
... From the beginning, the entrepreneurs adopted survival measures, revealing an awareness of the challenges faced by the enterprise's stakeholders [49]. Stakeholders affect and are affected by the value creation activities of a firm [12,13]. The relationships between the stakeholders and their joint effort are crucial for establishing and solidifying an enterprise's value creation network [14,50]. ...
sustainability-15-05358
Article
Full-text available
  • Mar 2023
EntREsilience, a five-country longitudinal qualitative study, was launched in 2020 in China, Malaysia, the Philippines, Thailand and the UK to understand how entrepreneurs manifested resilience in response to the COVID-19 pandemic crisis events from March 2020 to February 2022. EntREsilience proposed a resilience-manifestation process model describing how entrepreneurs responded to the COVID-19 disruption, aided by external and internal enablers, adjusting their businesses to stabilise and even hunting for opportunities to grow their businesses. The present research adds to the findings of EntREsilience by analysing the strategies applied by entrepreneurs in their response to the crisis. This exploratory study focused on the entrepreneurs’ community interactions and studied the effects of these interactions on the response measures adopted by the entrepreneurs. The results describe how the awareness of their stakeholder challenges shaped the entrepreneurial response. Realising the importance of stakeholder well-being to the sustainability of their enterprise motivated the entrepreneurs to develop sustainability competencies towards their stakeholder challenges, innovating solutions for their mutual well-being. By extending the resilience-manifestation process model, this paper proposes a transformation model depicting the process of entrepreneurs transforming into sustainable leaders triggered by stakeholder challenge awareness and moderated by contextual factors.
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... According to Freeman, stakeholders are able to influence and orient a company's activities towards the satisfaction of their requests and the protection of their interests (stakes). In general, broad classifications consider a stakeholder as 'any identifiable group or individual who can affect the achievement of an organization's objective or who is affected by the achievement of an organization's objective' (Freeman & Reed, 1983). On the contrary, narrow classifications identify the different categories of stakeholders through principles that significantly limit the number of categories identified (Freeman & Reed, 1983). ...
... In general, broad classifications consider a stakeholder as 'any identifiable group or individual who can affect the achievement of an organization's objective or who is affected by the achievement of an organization's objective' (Freeman & Reed, 1983). On the contrary, narrow classifications identify the different categories of stakeholders through principles that significantly limit the number of categories identified (Freeman & Reed, 1983). Regardless of adopting a wide or narrow stakeholder classification, the literature emphasizes the need for managers to understand the role and evaluate the influence of different categories of stakeholders as well as to define adequate communication and coordination mechanisms (Behnam et al., 2018;Perrini et al., 2011). ...
How open innovation can improve companies' corporate social responsibility performance?
Article
Full-text available
Open Innovation (OI) allows companies to develop innovative solutions more effectively, with lower costs and risks. The economic benefits of OI have been thoroughly investigated in prior research. More recent literature suggests that OI can help companies also improve their Corporate Social Responsibility (CSR) performance. Contributions on how open innovation can help companies improve their CSR performance , however, are fragmented and lack strong theoretical foundations. In this study, we perform a systematic literature review to synthesize the main findings and provide a theoretical framework to explain how companies can simultaneously improve OI and CSR through the management of relationships with stakeholders. The framework is then used to investigate how OI projects favour the achievement of CSR objectives, by referencing the 17 United Nations (UN) Sustainable Development Goals (SDGs). Results show that the stakeholders' theory can be used to explain the connection between OI and CSR performance. We also find that companies can collaborate with different stakeholders' categories to achieve a variety of CSR goals. We suggest that companies adopt a long-term perspective and explicitly include sustainability objectives in their open innovation strategy to enhance their position as reliable partners and elicit favourable responses from the environment. Results also allow us to provide some suggestions for future research. First, we point out that literature currently lacks conceptual studies to help formalize the connection between OI and CSR. Secondly, we observe that the influence of some stakeholders' categories, such as governments and research organizations, on companies' OI and CSR efforts remains under-investigated.
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... The theory underlying corporate value is the stakeholder theory of Freeman (1983), companies are not only responsible for share owners, but shift to the social realm, hereinafter referred to as social responsibility. CSR contributes to companies creating profits that have an impact on consumer loyalty for the products and services offered by the company (Prastuti & Budiasih, 2019). ...
The Effect of CSR, Intellectual Capital and GCG on Company Value with Financial Performance as a Moderating Variable in Food & Beverage Industry Companies Listed on the Indonesia Stock Exchange (IDX)
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  • Jan 2023
This study aims to examine the effect of Corporate Social Responsibility (CSR), Intellectual Capital and Good Corporate Governance (GCG) on company value with financial performance as a moderating variable in food and beverage industry companies listed on the IDX. This research is quantitative research, using secondary data obtained from the Indonesia Stock Exchange (IDX). The total population in this study is 54 companies listed on the Indonesia Stock Exchange in 2017 -2019. There are 11 companies that meet the criteria to be sampled in this company. The analysis technique used in this research is Descriptive Statistics test, Classical Assumption test, Multiple Linear Regression analysis, Hypothesis testing and MRA. The results of this study indicate that the CSR and Intellectual Capital variables have no significant effect on firm value, Good Corporate Governance and Financial Performance have a positive and significant effect on firm value. Indirectly, financial performance has succeeded in strengthening the relationship between CSR and Intellectual Capital on company value, while financial performance has not been able to moderate the relationship between Good Corporate Governance and company value.
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... For classic statements of these paradigms cf. Friedman 1970;Freeman/Reed 1983; Freeman 1984. 7 Roughly put there are two kinds of considerations that motivate the adoption of a professional ethics framework. ...
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Preprint
Full-text available
  • Mar 2023
p>According to the Market Failures Approach to business ethics, beyond-compliance duties can be derived by employing the same rationale and arguments that justify state regulation of economic conduct. Very roughly the idea is that managers have a duty to behave as if they were complying with an ideal regulatory regime ensuring Pareto-optimal market outcomes. Proponents of the approach argue that managers have a professional duty not to undermine the institutional setting that defines their role, namely the competitive market. This answer is inadequate, however, for it is the hierarchical firm, rather than the competitive market, that defines the role of corporate managers and shapes their professional obligations. Thus, if the obligations that the market failures approach generates are to apply to managers, they must do so in an indirect way. I suggest that the obligations the market failures approach generates directly apply to shareholders. Managers, in turn, inherit these obligations as part of their duties as loyal agents. </p
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How Does Multinational Corporations’ CSR Influence Purchase Intention? The Role of Consumer Ethnocentrism and Consumer Ambivalence
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Given the increasingly strained relationship between humans and the environment, green marketing has become a necessity for the sustainable development of society. In this context, this paper seeks to explore the influence of multinational enterprises’ green marketing behavior on Chinese consumers’ green consumption willingness. Through reviewing the related theories and deeply analyzing multinational corporations’ CSR, a theoretical model of multinational corporations’ CSR and consumer purchase intention has been built in this paper based on consumers’ perceptions. The paper provides empirical research on the multinational corporations’ CSR, corporate image, consumer ambivalence, and purchase intention, and offers a hypothesis of the relationship between the four. Consumer ethnocentrism can significantly negatively regulate the relationship between corporate image and consumers’ willingness to buy and further negatively regulate the process of establishing the corporate social responsibility system of multinational corporations.
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  • Mar 2023
This study is designed to provide empirical evidences on the conditional influence corporate social responsibility (CSR) on corporate accounting and market performance. This study considers risk management (RM) as a conditional or moderating variable. Accounting performance was proxied by return on assets (ROA), earnings per share (EPS), and net profit margin (NPM), while market performance was proxied by Tobin-Q and stock price. Furthermore, those proxies form corporate performance variable based on factor analysis. CSR measured using the Global Reporting Initiative (GRI G4) Index. Meanwhile, RM was measured using total risk management proxy. By applying purposive sampling method, 253 non-financial companies were selected as a sample of this study. The Structural Equation Modeling (SEM) with the WarpPLS approach was used for data analysis. This study found that the corporate social responsibility has a positive effect on corporate performance, and the relationship between corporate social responsibility and corporate performance will be stronger if corporate risk management is applied optimally. The findings of this study imply that the good corporate performance will be achieved since a company discloses more CSR information and runs effective risk management as well.
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For a discussion of the implications for corporate governance see Evan W., Organization Theory
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