Abstract
This paper outlines the history of debates about corporate purpose, calls out some myths that persist in the way that people think about corporate purpose, and introduces a view of business called “managing for stakeholders” that has become increasingly beneficial. Furthermore, the authors argue that to manage sustainable businesses, leaders need to pay careful attention to how stakeholder relationships are managed and how value gets created. This way, managers can ensure that all core stakeholders are receiving value for their efforts and choose to continue to support the firm.
This technical note was prepared by R. Edward Freeman, Elis & Signe Olsson Professor of Business Administration, and Bidhan (Bobby) L. Parmar, Associate Professor of Business Administration, Darden School of Business. It incorporates and expands on ideas outlined in Managing for Stakeholders, UVA-E-0383. Copyright © 2017 by R. Edward Freeman. All rights reserved. To order copies, send an e-mail to sales@dardenhusinesspnblishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Our goal is to publish materials of the highest quality, so please submit any errata to editorial@dardenbusinesspublishing.com.
Originally published by: Darden Business Publishing © 2017
Reprint by Springer, https://doi.org/10.1108/case.darden.2017.000415
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Lynn Stout, The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public (New York: Berrett-Koehler Publishers, 2012).
- 2.
Stout.
- 3.
Lawrence Mishel, “Economic Snapshot,” Economic Policy Institute, September 24, 2013, http://www.epi.org/publication/the-ceo-to-worker-compensation-ratio-in-2012-of-273/ (accessed Aug. 24, 2017).
- 4.
William Lazonick and Mary O’Sullivan, “Maximizing Shareholder Value: A New Ideology for Corporate Governance,” Economy and Society 29, no. 1 (2000): 13–35.
- 5.
GE annual report, 1971.
- 6.
Melanie Trottman, “Top CEOs Make 373 Times the Average U.S. Worker,” Wall Street Journal, May 13, 2015, https://blogs.wsj.com/economics/2015/05/13/top-ceos-now-make-373-times-the-average-rank-and-file-worker/ (accessed Aug. 24, 2017).
- 7.
Steve Denning, “The Dumbest Idea in the World: Maximizing Shareholder Value,” Forbes, November 28, 2011, https://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/#5037dQcf2287 (accessed Aug. 24, 2017).
- 8.
Stout.
- 9.
Hannah Roberts, “Snapchat isn’t Offering Voting Rights in its IPO—and Potential Investors are Furious,” Business Insider, February 3, 2017, http://www.businessinsider.com/snapchat-ipo-no-voting-rights-investor-letter-2017-2 (accessed Aug. 24, 2017).
- 10.
Stout, 29.
- 11.
Stout, 29–30.
- 12.
Marsh v. Alabama, 326 U.S. 501, 66 S. Ct. 276, 90 L. Ed. 265, 1946 U.S.
- 13.
John Hagel, John Seely Brown, and Lang Davison, “Shift Index 2011: The Most Important Business Study—Ever? Forbes, January 25, 2012, https://www.forbes.com/sites/stevedenning/2012/01/25/shift-index-2011-the-most-important-business-study-ever/#4abb20743a6e (accessed Aug. 25, 2017).
- 14.
Barry Ritholtz, “Where Have All the Public Companies Gone?,” Bloomberg View, June 24, 2015, https://www.bloomberg.com/view/articles/2015-06-24/where-have-all-the-publicly-traded-companies-gone- (accessed Aug. 25, 2017).
- 15.
Rishi Iyengar, “This is How Long Your Business Will Last, according to Science,” Fortune, April 2, 2015, http://fortune.com/2015/04/02/this-is-how-long-your-business-will-last-according-to-science/ (accessed Aug. 25, 2017).
- 16.
Lalin Anik, Ryan Hauser, and Dan Ariely, “The Shareholder Value Heuristic: Examining the Automatic Process of Ethical Transgressions that Benefit Others” (Fuqua School of Business, Duke University, working paper).
- 17.
Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times, September 13, 1970, 17.
- 18.
R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan L. Parmar, Simone DeColle, Stakeholder Theory: The State of the Art (New York: Cambridge University Press, 2010), 26.
- 19.
S. Venkataraman, “Stakeholder Value Equilibration and the Entrepreneurial Process,” Ethics and Entrepreneurship, Ruffin Series, no. 3 (Charlottesville, VA: Society of Business Ethics, 2002), 45–57.
- 20.
“Sustainable and Impact Investing in the United States Overview,” US/SIF Foundation, http://www.ussif.org/files/Infographics/Qverview%201nfographic.pdf (accessed Aug. 25, 2017).
- 21.
Alex Edmans, “28 Years of Stock Market Data Show a Link between Employee Satisfaction and Long-Term Value,” Harvard Business Review, March 24, 2016, https://hbr.org/2016/03/28-years-of-stock-market-data-shows-a-link-between-employee-satisfaction-and-long-term-value (accessed Aug. 25, 2017).
- 22.
Claes Fornell, Sunil Mithas, Forrest V. Morgeson III, and M S. Krishnan, “Customer Satisfaction and Stock Prices: High Returns, Low Risk,” Journal of Marketing 70, no. 1 (January 2006): 3–14.
- 23.
Dominic Barton, James Manyika, Tim Koller, Robert Palter, Jonathan Godsall, and Josh Zoffer, “Where Companies with a Long-Term View Outperform Their Peers,” McKinsey&Company, February 2017, http://www.mckinsey.com/global-themes/long-term-capitalism/where-companies-with-a-long-term-view-outperform-their-peers (accessed Aug. 25,2017).
- 24.
Rajendra Sisodia, David Wolfe, and Jagdish N. Sheth, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (Upper Saddle River, NJ: Wharton School Publishing, 2014).
- 25.
Wayne F. Cascio, ‘Decency Means More than ‘Always Low Prices’: A Comparison of Costco to Walmart’s Sam’s Club,” Academy of Management Perspectives 20, 3 (2006): 2637.
- 26.
Mary Sully De Luque, Nathan T. Washburn, David A. Waldman, and Robert J. House, “Unrequited Profit: How Stakeholder and Economic Values Relate to Subordinates’ Perceptions of Leadership and Firm Performance,” Administrative Science Quarterly 53, 4 (2008): 626–54; Bidhan L. Parmar, Adrian Keevil, and Andrew C. Wicks, “People and Profits: The Impact of Corporate Objectives on Employees’ Need Satisfaction at Work Journal of Business Ethics (2017): 1–21.
- 27.
Witold J. Henisz, Sinziana Dorobantu, and Lite J. Nartey, “Spinning Gold: The Financial Returns to Stakeholder Engagement,” Strategic Management Journal 35, no. 12 (2014): 1727–748.
- 28.
Bill George, Authentic Leadership (San Francisco: Jossey-Bass Wiley, Inc., 2004), 104.
- 29.
Miguel Padró, “Unrealized Potential: Misconceptions about Corporate Purpose and New Opportunities for Business Education,” Aspen Institute Business & Society Program, May 28, 2014, https://assets.aspeninstitute.org/content/uploads/files/content/docs/pubs/Aspen%20BSP%20Unrealized%20Potential%20May2014v.2.pdf (accessed Aug. 25, 2017).
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2023 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Freeman, R.E., Parmar, B.L. (2023). Managing for Stakeholders and the Purpose of Business. 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_14
Download citation
DOI: https://doi.org/10.1007/978-3-031-04564-6_14
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-031-04563-9
Online ISBN: 978-3-031-04564-6
eBook Packages: Religion and PhilosophyPhilosophy and Religion (R0)