Customer Reviews

Stakeholder Theory and Organizational Ethics

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This book is a very thorough scholarly work on organizational ethics that also contains practical advice for the manager. The specific question addressed is whether and in what way organizational ethical responsibilities extend beyond stockholders to other stakeholders.

The first and last chapters provide an overview of the issues and the implications for a practical manager: the other chapters provide thorough coverage of the range of alternative theories offered as to the ethical duty of an organization and the detailed arguments for the author's stakeholder theory.

The author's practical conclusions are that:
* The obligations to all stakeholders are fairness based and that the corporation, being recognized as a separate entity and capable of bearing legal obligations is also capable of bearing moral obligations;
* At minimum, stakeholders are those groups from whom the organization has voluntarily accepted benefits. On this definition stakeholders include financiers, employees, customers, suppliers and local communities. The author describes these as normative stakeholders and distinguishes them from derivative stakeholders, groups such as interest groups, the media and competitors who have an ability to exert influence over the organization but to whom it owes no moral obligation. He argues (perhaps controversially, as it is difficult to argue that any organization does not 'voluntarily accept benefits' from the environment) that the natural environment is not a stakeholder, but that normative stakeholders may care deeply about it, thereby making it managerially legitimate to include it;
* In answer to the question 'what do stakeholders want?', he argues that many stakeholders want some voice in organizational decision making, and should have it. Their desires can not be assumed but must be identified, which implies an obligation for open communication (without specifying any particular structures for doing so);
* The issue of priority, particularly as between normative stakeholders is a somewhat intractable issue with no clear quantitative guidelines, other than an aim at equity (rather than necessarily equality;
* The theory dismisses the idea that the ethical obligations of business are lower than those of persons and argues the exact reverse, that the nature of organizations is such that obligations are added, being to a wider range of stakeholders.

This is a book that is just right for its time. Robert Phillips (not R. Edward Freeman, who wrote the foreword to the book)has taken stakeholder theory into a new dimension by grounding it in theories of organizational ethics. He makes a strong case for managing for stakeholders rather than shareholders, but more than that, discusses relevant issues such as stakeholder identity, stakeholder legitimacy and stakeholder fairness. Given the intense global interest in good corporate governance and renewed scholarly interest in business ethics, Phillips makes a meaningful contribution to the debates and to management practice by suggesting that stakeholder theory be grounded in a moral foundation. His notion of business ethics is drawn from the work of John Rawls, which suggests that companies have obligations to stakeholders based on the principles of fairness and reciprocity. An excellent and well-researched work which should help business move forward with greater confidence to create more value.