Abstract
Donaldson and Preston (1995) assert the existence of an omnibus stakeholder theory, consisting of mutually supporting normative, instrumental, and descriptive theses, with the first as the theory’s core. I argue that: (i) Donaldson and Preston’s three theses, though perhaps mutually supporting, are not distinctly and genuinely normative, instrumental, and descriptive; (ii) their normative thesis is neither morally substantial nor their omnibus theory’s center; (iii) although one can construct distinctly and genuinely normative, instrumental, and descriptive theses, these reconstructed theses are neither mutually supportive of nor grounded in the normative; and (iv) Donaldson’s (1999) attempt to establish relations of mutual support between the normative and instrumental theses fails. Therefore, there is no omnibus theory and each kind of stakeholder thinking must stand or fall on its own merits. I draw the implications of this outcome for a meaningful normative corporate governance debate in business ethics.
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Notes
- 1.
An earlier and shorter version of this paper was presented at the Society for Business Ethics Annual Meeting, Washington, D.C., 3 August 2001. I thank Robert Audi, John Boatright, Tom Carson, Ian Maitland, Douglas Rasmussen, two anonymous referees, and the editor of this volume for their helpful comments on the original and subsequent drafts of this paper.
- 2.
Typical of the response are Jones and Wicks who credit Donaldson and Preston with adding “considerable coherence to the stakeholder concept as theory” (Jones and Wicks 1999, p. 206) and endorse Donaldson and Preston’s central theme in their own work. Although the approval is considerable, it is not universal – even among stakeholder theorists. In two different papers, R. Edward Freeman lodges two broad criticisms of Donaldson and Preston’s triadic interpretation. In his earlier paper, Freeman argues that the triadic interpretation fails to capture the diversity and complexity of both extant and possible stakeholder-theoretic constructions, which constitute “a genre of stories about how we could live” (Freeman 1994, p. 413). In his later paper, Freeman argues that the triadic interpretation rests on a “centuries-old philosophy of science” which, when rejected in favor of what he styles “modern pragmatism”, yields a stakeholder theory in which “[t]here is nothing to converge – no separate contributions for philosophers and management theorists. There are just narratives about stakeholders and narratives about narratives – that is, theory” (Freeman 1999, pp. 233f.).
- 3.
I reverse the order in which Donaldson and Preston advance the theses for reasons of explicatory economy. The argument of the present paper is expressed with greater felicity by considering the theses in reverse order.
- 4.
See Boatright (2002) for a comparatively rare contribution to the business ethics literature that recognizes the terms of the debate and is structured with those terms in mind.
- 5.
Goodpaster (perhaps owing to his idiosyncratic terminology) is frequently misidentified as a proponent of stakeholder theory despite his explicit endorsement of fiduciary duties to shareholders and his denial that non-shareholding stakeholders are owed fiduciary care. Indeed, Goodpaster’s “stakeholder theory” is basically Milton Friedman’s theory augmented by additional side constraints (principally against doing harm) on the pursuit of profit maximization. Tom Carson is perhaps alone in the business ethics literature in recognizing explicitly the compatibility of Goodpaster’s view with Friedman’s shareholder theory (cf. Carson 1993).
- 6.
- 7.
Although Donaldson and Preston advance no account of why mutual support among the three theses is an important insight, it is not difficult to determine why it matters to one of the authors. Donaldson elsewhere seeks to “bridge the is-ought gap” (cf. Donaldson and Dunfee 1999). That is just another way of saying that he seeks to lay the groundwork for arguments in which evidence for one kind of thesis (an “is” thesis) is also evidence for another (an “ought” thesis). The attempt to show that the three theses composing Donaldson and Preston’s omnibus stakeholder theory are mutually supporting is but another manifestation of that same project.
- 8.
Although not advanced on behalf of stakeholder theory in particular, this is the upshot of Norman Bowie’s paradox-of-hedonism-based arguments (cf. Bowie 1999).
- 9.
Strictly speaking, this is false. Normative statements include statements of reasons for action, for belief, and for attitudes (cf. Korsgaard 1996, p. 8). However, within the domain of practical reasoning (within which ethics certainly falls), the only forms of normativity that need concern one are those that entail reasons for action.
- 10.
This, perhaps, is what Donaldson and Preston (1995) advert to when they note that both normative and instrumental stakeholder theory are “prescriptive” (p. 72). But whether prescriptivity captures what is common to their normative and instrumental theses is at least open to doubt. In ethical theory, prescriptivism refers to a particular account of what normativity entails, rather than to normativity generally. It is a view associated with Hare (1952).
- 11.
The lack of a substantive, stakeholder-theoretic account of legitimacy in interests, or of the kind of consideration legitimate interests warrant, is not the unique failing of Donaldson and Preston. Freeman and Phillips advance an account of stakeholder theory’s normative thesis that rivals Donaldson and Preston’s for sparsity of content. In the context of what they aver is a “libertarian defense” of stakeholder theory, they advance as its normative content the view that “managers ought to pay attention to key stakeholder relationships” (Freeman and Phillips 2002, p. 338).
- 12.
Jones and Wicks (1999) aver both that stakeholder theory is intellectually vibrant and that its normative aspect is its best-developed part.
- 13.
The correctness of this interpretation is made explicit later by Donaldson when he writes that instrumental stakeholder theory “refers to any theory asserting some form of the claim that, all other things being equal, if managers view the interests of stakeholders as having intrinsic worth and pursue the interests of multiple stakeholders, then the corporations they manage will achieve higher traditional performance measures” (Donaldson 1999, p. 238).
- 14.
Indeed, as Jones and Wicks (1999) observe, instrumental stakeholder theory “posits that certain outcomes will obtain if certain behaviors are adopted. Instrumental theory is contingent theory: the predicted outcomes are contingent on behavior of a certain type” (p. 208). Instrumental theory, they continue, “involves if/then statements” (ibid., p. 213). There can be little doubt that Donaldson and Preston’s instrumental thesis entails claims about the outcomes that follow from the adoption of certain actions and that these claims are formulable as if/then statements.
- 15.
Jones and Wicks sidestep descriptive stakeholder theory on the grounds that it seems less promising a mode of inquiry than instrumental stakeholder theory (cf. Jones and Wicks 1999, pp. 207f.). Others may legitimately question the very possibility of descriptive theory (whether stakeholder-oriented or not). What, after all, is a descriptive theory over and above a description? I will not pursue these issues here.
- 16.
An anonymous referee commenting on an earlier version of this paper asks whether Donaldson and Preston may defuse this argument by denying a rigid fact/value distinction. They cannot, for Donaldson and Preston’s triadic interpretation itself depends upon a rigid fact/value distinction. How, except by recognizing significant conceptual cleavage between the descriptive and the normative, may one conclude in a reasoned way that this claim is descriptive and that is normative? Denying that conceptual cleavage, they would be denying the ground upon which the triadic structure of their theory is built. This is what Freeman adverts to when he criticizes Donaldson and Preston’s view for relying on “a centuries-old philosophy of science” (see note 2, above). Freeman believes it best to abandon that philosophy of science and recognizes that the triadic interpretation must be abandoned along with it. I strike from the other side, arguing that even if one accepts that underlying philosophy of science one cannot get where Donaldson and Preston wish to go.
- 17.
They write only that “careful analysis reveals that it is normatively unacceptable” (Donaldson and Preston 1995, p. 82). The careful analysis revealing this is neither conducted nor cited in their article.
- 18.
By implication, I mean the conditional expressed in the form “a implies b” or “if a, then b”. “a implies b” (“if a, then b”) is true in all circumstances except that where a is true and b is false. Thus, if “a implies b” (“if a, then b”) is true and a is true, it follows that b is true also. For a good, transparent discussion of the conditional, see Guttenplan (1986, pp. 57ff.).
- 19.
Let a, b, and c be propositions. Adopt as conventional logical operators “→” for “implies” (or “if [left side of arrow], then [right side of arrow]”) and “&” for “and”. If a → (b & c), it follows that (a & b) → c and that (a & c) → b. Consequently, if no two theses imply the third, it cannot be the case any thesis implies the other two.
- 20.
Donaldson seeks to run the argument the other way, as well. That is, he argues that holding B-Instrumental entails believing that one ought to act as if B-Normative were true. But so what? Whenever one acts on the belief that one ought to perform action A, one believes that one ought to act as if every ought-proposition that entails performing A were true – but that does not demonstrate or even provide some reason to believe that any of the ought-propositions that entail performing A are true. For example, suppose that I am walking on the south side of the street. I am hungry and I see that my favorite restaurant is on the north side of the street. I form the belief that in order to sate my hunger, I ought to cross to the north side of the street. In so doing, I believe that I ought to act as if all of the following (and many more) beliefs are true:
-
(1)
I ought to cross to the north side of the street because north-siders make better lovers.
-
(2)
I ought to cross to the north side of the street because that brings me closer to God.
-
(3)
I ought to cross to the north side of the street because that is the shady side.
The truth of the proposition that in order to sate my hunger, I ought to cross to the north side of the street demonstrates exactly nothing about the truth of these other propositions (impotence, Satan, and an unrelenting August sun may await me on the north side of the street), even though in crossing the street I will act as if they were all true and will believe that I ought to act as if they were all true.
-
(1)
- 21.
Let Bn = B-Normative, Bi = B-Instrumental, and Bf = B-Fiduciary. Adopt as conventional logical operators “~” for “not”, “&” for “and”, and “v” for “or”. Take as a premise:
(1) ~(Bn & ~Bi & Bf)
which says that Bn, ~Bi, and Bf form an incompatible set. Take also as a premise:
(2) Bn
From (1) and (2) one derives:
(3) ~(~Bi & Bf)
which says that ~Bi and Bf form an incompatible set. Applying DeMorgan’s rule, an algorithm for transforming “and” expressions into “or” expressions and vice versa, (3) is logically equivalent to:
(4) (Bi v ~Bf)
which says that at least one of Bi and ~Bf must be the case – but as there are no further logical deductions that can be made, the truth of Bn carries one no further. Mere commitment to Bn inclines no more in favor of Bi than ~Bi.
- 22.
And then, only insofar as it is supplied with content that has that upshot.
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Marcoux, A.M. (2011). Triadic Stakeholder Theory Revisited. In: Brink, A. (eds) Corporate Governance and Business Ethics. Studies in Economic Ethics and Philosophy, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-1588-2_12
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