Stakeholder Management
The relationship between management and stockholders is ethically different in kind from the relationship between management and other parties (like employees, suppliers, customers, etc.), a fact that seems to go unnoticed by the multi-fiduciary approach. If it were not, the corporation would cease to be a private sector institution—and what is now called business ethics would become a more radical critique of our economic system than is typically thought. On this point, Milton Friedman must be given a fair and serious hearing.
This does not mean, however, that "stakeholders" lack a morally significant relationship to management, as the strategic approach implies.
It means only that the relationship in question is different from a fiduciary one. Management may never have promised customers, employees, suppliers, etc. a "return on investment," but management is nevertheless obliged to take seriously its extra-legal obligations not to injure, lie to or
70 BUSINESS ETHICS QUARTERLY
As we think through the proper relationship of management to stakeholders, fundamental features of business life must undoubtedly be recognized: that corporations have a principally economic mission and competence; that fiduciary obligations to investors and general obligations to comply with the law cannot be set aside; and that abuses of economic power and disregard of corporate stewardship in the name of business ethics are possible.
But these things must be recognized as well: that corporations are not solely financial institutions; that fiduciary obligations go beyond shortterm profit and are in any case subject to moral criteria in their execution; and that mere compliance with the law can be unduly limited and even unjust.
The Stakeholder Paradox can be avoided by a more thoughtful understanding of the nature of moral obligation and the limits it imposes on the principal-agent relationship. Once we understand that there is a practical
"space"
This does not mean, however, that "stakeholders" lack a morally significant relationship to management, as the strategic approach implies.
It means only that the relationship in question is different from a fiduciary one. Management may never have promised customers, employees, suppliers, etc. a "return on investment," but management is nevertheless obliged to take seriously its extra-legal obligations not to injure, lie to or
70 BUSINESS ETHICS QUARTERLY
As we think through the proper relationship of management to stakeholders, fundamental features of business life must undoubtedly be recognized: that corporations have a principally economic mission and competence; that fiduciary obligations to investors and general obligations to comply with the law cannot be set aside; and that abuses of economic power and disregard of corporate stewardship in the name of business ethics are possible.
But these things must be recognized as well: that corporations are not solely financial institutions; that fiduciary obligations go beyond shortterm profit and are in any case subject to moral criteria in their execution; and that mere compliance with the law can be unduly limited and even unjust.
The Stakeholder Paradox can be avoided by a more thoughtful understanding of the nature of moral obligation and the limits it imposes on the principal-agent relationship. Once we understand that there is a practical
"space"