Shareholder and Stakeholder Theory
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Shareholder and stakeholder theory: after the financial crisis
Terence Tse
ESCP Europe, London, UK
Abstract
Purpose – The recent financial crisis has restarted the debate of the value of both shareholder and stakeholder theories. This paper aims to continue this discussion. Design/methodology/approach – The paper reviews existing literature and examines the benefits and problems associated with these frameworks through the lens of the recent events which have taken place during the financial crisis. Findings – The main assertion of this paper is that shareholder theory is in itself a sound theory. Yet, some executives following this theory could have brought disrepute to it. In contrast, the stakeholder theoretical framework has yet to assert its influence because the concept is not yet unambiguously defined, which makes it difficult for the framework to become operational in practical business settings. Research limitations/implications – Future research should seek consensus on the scope and definition of the stakeholder model, as well as who the stakeholders should include. It should also focus on developing the tools and techniques necessary for the incorporation of stakeholder theory into business operations. Social implications – Policy makers could work with industry bodies and business leaders to encourage them to place greater emphasis on the interests of non-shareholders and encourage collaboration between various groups of stakeholders to achieve corporate goals. Originality/value – The paper continues the shareholder and stakeholder theory debate in light of the recent economic crisis. Keywords Shareholder value analysis, Stakeholder analysis, Financial services, Economic theory Paper type Research paper
Shareholder and stakeholder theory 51
1. Introduction In June 2009, more than 1,000 MBA students from several top business schools signed
Shareholder and stakeholder theory: after the financial crisis
Terence Tse
ESCP Europe, London, UK
Abstract
Purpose – The recent financial crisis has restarted the debate of the value of both shareholder and stakeholder theories. This paper aims to continue this discussion. Design/methodology/approach – The paper reviews existing literature and examines the benefits and problems associated with these frameworks through the lens of the recent events which have taken place during the financial crisis. Findings – The main assertion of this paper is that shareholder theory is in itself a sound theory. Yet, some executives following this theory could have brought disrepute to it. In contrast, the stakeholder theoretical framework has yet to assert its influence because the concept is not yet unambiguously defined, which makes it difficult for the framework to become operational in practical business settings. Research limitations/implications – Future research should seek consensus on the scope and definition of the stakeholder model, as well as who the stakeholders should include. It should also focus on developing the tools and techniques necessary for the incorporation of stakeholder theory into business operations. Social implications – Policy makers could work with industry bodies and business leaders to encourage them to place greater emphasis on the interests of non-shareholders and encourage collaboration between various groups of stakeholders to achieve corporate goals. Originality/value – The paper continues the shareholder and stakeholder theory debate in light of the recent economic crisis. Keywords Shareholder value analysis, Stakeholder analysis, Financial services, Economic theory Paper type Research paper
Shareholder and stakeholder theory 51
1. Introduction In June 2009, more than 1,000 MBA students from several top business schools signed