Abstract
The purpose of this paper is to suggest that at least one strain of what has come to be called “stakeholder theory” has roots that are deeply libertarian. We begin by explicating both “stakeholder theory” and “libertarian arguments”. We show how there are libertarian arguments for both instrumental and normative stakeholder theory, and we construct a version of capitalism, called “stakeholder capitalism,” that builds on these libertarian ideas. We argue throughout that strong notions of “freedom” and “voluntary action” are the best possible underpinnings for stakeholder theory, and in doing so, seek to return “stakeholder theory” to its managerial and libertarian roots found in Freeman (Strategic management: a stakeholder approach. Pitman Publishing Inc., Boston, 1984).
Originally published in: Business Ethics Quarterly, 12(3), 331–349 © Cambridge University Press, 2002
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Notes
- 1.
Dennett (1995) distinguishes between “reductionism” and “greedy reductionism”
- 2.
Wisdom (1970) argues that philosophy’s unique contribution to intellectual life is to illuminate such hidden features.
- 3.
See for instance the work of Bowie. Brenkert, Donaldson and Dunfee. Solomon. Werhane to name but a few.
- 4.
See for instance the work of Carroll. Cochran, Post, Wood. Waddock and others.
- 5.
Many of the works exemplifying the various categories are cross-disciplinary, so neither the works cited nor the categories themselves should be construed as mutually exclusive.
- 6.
We owe a great debt to Gordon Sollars in the following paragraphs, though this interpretation of what counts as libertarian is our own.
- 7.
See the work of James Buchanan Buchanan argued that developing an “attitude of liberty” was the central hope for democratic societies at a Liberty Fund Conference at George Mason University in 1986.
- 8.
There have been many thousands of journal pages devoted to Rawls’s second principle, The Difference Principle, but relatively little attention paid to the Equal Liberty Principle, the first principle. This is quite odd given that the first principle is supposed to be lexically ordered with the second, i.e., there is an absolute priority of equal liberty over the difference principle. It is interesting to speculate that if one fully works out the best mechanisms for assuring equal liberty, those same mechanisms may also promote equality as far as possible. Get the first principle right, in the details, and one may not need the second principle. This is the spirit of the argument of Lomasky (1987).
- 9.
Some libertarians take issue with the distinction between liberalism and libertarianism claiming that the term “liberal” originally applied to what is today termed libertarianism and the advocates of current “liberalism” co-opted the term from “classical liberals” (i.e., libertarians) like Locke. See Lomasky (1987). For the sake of clarity we will employ the more common contemporary usage.
- 10.
To say there are differences of “fact” is not to countenance the fact-value distinction. More carefully we might say that libertarians and liberals tell different stories about our relationship to our history, and indeed, even write quite different histories.
- 11.
We need appeal to nothing more here than a standard Darwinian account, a la Daniel Dennet (1995) that the “responsibility meme” is evolutionarily stable. However there is a deeper connection worth exploring among libertarians, existentialists, and pragmatists.
- 12.
- 13.
Now any libertarian would severely constrain the interpretations of this statement, but however it turns out, even if it is analyzed away as public goods are turned into private goods the point still stands, as some system of property rights will hold sway.
- 14.
This seems to be the general approach of Donaldson and Preston 1995.
- 15.
That business is in fact “beyond the pale” at least in its perception is precisely the claim that the Separation Thesis is at the heart of this debate about the proper role of stakeholder theory.
- 16.
The limiting case of whether or not a libertarian theory countenances “selling oneself into slavery” is beyond our scope here, and is probably uninteresting.
- 17.
We use “substantially” here because we note that counterexamples are easy to come by, but as Rawls. cautions us, we shouldn’t always give in to them.
- 18.
The following sections contain some paragraphs from R. Edward Freeman, “Stakeholder Capitalism.” Financial Times, July 26, 1996. We are grateful to the editors and publisher for permission to use this material here.
- 19.
Whether these goods could be provided by private means, as some libertarians argue, is not at stake here.
- 20.
We are grateful to an anonymous referee for the suggestion of this principle.
- 21.
Recent attention to “sweat-shop” working conditions in the developing world has raised questions regarding the responsibility of corporations for the actions of their sub-contractors as well those farther removed in the supply chain (sub-sub-contractors) both “upstream” and “downstream.” This is an interesting stakeholder question, but one outside the scope of the present inquiry.
- 22.
Some might argue that we have committed the naturalistic fallacy here—that we have mistaken how businesses do act with how they should. To begin, we pragmatists will have none of the prescriptive-descriptive, or fact-value distinction. Wicks and Freeman (1998) tries to outline how such a pragmatist view of management theory would work. The story of business that is deeply embedded in our society is not the story of stakeholder capitalism. Thus, it is important to clearly set forth the underlying principles on which this new story, the story of stakeholder capitalism, rests.
- 23.
That there are many ways to run a business is the insight behind the often ignored idea of “enterprise strategy” and its theoretical analog “normative core” It is a separate story whether or not “being an ethical person” makes any sense in isolation from the ideas of value creation and trade. If value creation and trade are fundamental to the human experience, then separating out “ethical person” as the above sentence does, is also illegitimate. Another way to say this is that our analysis points out the need for a political philosophy or a conception of ethics where value creation and trade, rather than the state, play a central role.
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Freeman, R.E., Phillips, R.A. (2023). Stakeholder Theory: A Libertarian Defense. In: Dmytriyev, S.D., Freeman, R.E. (eds) R. Edward Freeman’s Selected Works on Stakeholder Theory and Business Ethics. Issues in Business Ethics(), vol 53. Springer, Cham. https://doi.org/10.1007/978-3-031-04564-6_7
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