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The stakeholder theory: corporate responsibility as the prime objective

management, business, administration, stakeholder, planning, directing, controlling, leading, staffing

A newer approach to the consideration of objectives is the ‘stakeholder’ theory which suggests that a company has responsibility to maintain an equitable and working balance among the claims of the interested groups, i.e. stockholders, employees, customers, suppliers, vendors, and the public.

The theory maintains that the objectives of the firm should be derived by balancing the conflicting claims of the various ‘stakeholders’. The firm has a responsibility to all these and must structure its objectives to give each a measure of satisfaction. In this context the ideas of Abraham Maslow seem relevant, that is, that managers have a hierarchy of goals or motives, and once managers have achieved one goal, e.g. x per cent profits, then they will turn to satisfy other goals, e.g. improved working conditions for employees.

Another related approach to the ‘stakeholder’ theory is suggesting that organizations do not have objectives, only people have objectives. They suggest a company’s objectives are in reality a consensus of objectives of the participants which have been negotiated.

They suggest that in large companies the task of decision making is distributed throughout the company and that companies have five main goals: sales, production, inventory, market share and profit.

These are target areas for managers who are aiming to achieve their particular goal. Managers therefore bargain among themselves and eventually this conflict will be resolved by compromise and the goals achieved by the organization may only then be satisfactory. This theory may be said to bring into the decision – making process social as well as economic variables.
Published: 2007-04-14
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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