Stakeholder Theory and "The Corporate Objective Revisited"

Author(s): R. Edward Freeman, Andrew C. Wicks and Bidhan Parmar

Source: Organization Science, Vol. 15, No. 3 (May - Jun., 2004), pp. 364-369
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 Science
Organization inFORMS
Vol. 15, No. 3, May-June2004,pp. 364-369 DOI10.1287/orsc.1040.0066
ISSN1047-70391EISSN1526-545510411503 0364
c 2004 INFORMS

Stakeholder Theory and

"The Corporate Objective Revisited"

R. EdwardFreeman,Andrew C. Wicks, Bidhan Parmar

TheDardenSchool,Universityof Virginia,100DardenBoulevard, Virginia22906
Charlottesville,
wicksa@darden.virginia.edu,
{freemane@darden.virginia.edu, parmarb@darden.virginia.edu}

Stakeholder theory begins with the assumptionthat values are necessarily and explicitly a part of doing business. It asks
managersto articulatethe shared sense of the value they create, and what brings its core stakeholderstogether.It also
pushes managersto be clear about how they want to do business, specifically what kinds of relationshipsthey want and
need to create with their stakeholdersto deliver on their purpose. This paper offers a response to Sundaramand Inkpen's
article "The CorporateObjective Revisited" by clarifying misconceptions about stakeholdertheory and concluding that
truth and freedom are best served by seeing business and ethics as connected.
Key words: stakeholdertheory; corporateobjectives; separationthesis; value creatitheory
stakeholderrelationships

Stakeholderd is managerialin that it reflects profitabilitythe fundamentaldriver of what they do.

and directshow managersoperateratherthanprimarily
addressingmanagementtheoristsand economists.The
focus of stakeholdertheory is articulatedin two core
questions(Freeman1994). First,it asks, whatis the pur-
pose of the firm?This encouragesmanagersto articulate
the sharedsense of the valuetheycreate,andwhatbrings
its core stakeholderstogether.This propelsthe firmfor-
wardand allows it to generateoutstandingperformance,
determinedbothin termsof its purposeandmarketplace
financialmetrics.Second, stakeholdertheoryasks, what
responsibilitydoes managementhave to stakeholders?
This pushesmanagersto articulatehow they wantto do
business-specifically, what kinds of relationshipsthey
wantandneed to createwith theirstakeholdersto deliver
on theirpurpose.Today'seconomicrealitiesunderscore
the fundamentalreality we suggest is at the core of
stakeholdertheory:Economicvalueis createdby people
who voluntarilycome togetherandcooperateto improve
everyone'scircumstance.Managersmust develop rela-
tionships,inspiretheir stakeholders,and createcommu-
nities whereeveryonestrivesto give theirbest to deliver
the value the firm promises.Certainlyshareholdersare
an importantconstituentandprofitsare a criticalfeature
of this activity,butconcernfor profitsis the resultrather
thanthe driverin the processof value creation.
Many firms have developedand run their businesses
in termshighlyconsistentwith stakeholdertheory.Firms
such as J&J,eBay, Google, LincolnElectric,AES, and
the companiesfeaturedin Built to Last and Good to
Great (Collins 2001, Collins and Porras1994) provide
compellingexamples of how managersunderstandthe
core insightsof stakeholdertheoryand use themto cre-
ate outstandingbusinesses.Whereasall these firmsvalue
their shareholdersand profitability,none of them make
364
These firms also see the importof values and relation-
ships with stakeholdersas a criticalpart of their ongo-
ing success.They have foundcompellinganswersto the
two core questionsposed by stakeholdertheory,which
underscorethe moral presuppositionsof managing-
they are aboutpurposeand humanrelationships.
Stakeholdertheory begins with the assumptionthat
values arenecessarilyandexplicitlya partof doingbusi-
ness, and rejectsthe separationthesis (Freeman1994).
The separationthesis begins by assuming that ethics
and economics can be neatly and sharplyseparated.In
this context, the challenge of doing business ethics or
improvingthe moralperformanceof businessbecomesa
Sisypheantask becausebusinessethics is, by definition,
an oxymoron.Manyproponentsof a shareholder,single-
objectiveview of the firmdistinguishthe economicfrom
the ethical consequencesand values. The resultingthe-
ory is a narrowview that cannotpossibly do justice to
the panoplyof humanactivitythatis value creationand
trade,i.e., business.
In ourview, SundaramandInkpen(2004) exhibittheir
commitmentto such a narrowinterpretation of the share-
holder ideology in their paper "The CorporateObjec-
tive Revisited."They begin, "Governingthe corporation
requirespurposefulactivity.All purposefulactivity,in
turn, requiresgoals." They conclude that the goal of
"maximizingshareholdervalue"is the only appropriate
goal for managersin the moderncorporation.
More subtly, according to McCloskey (1998), the
"maximizingshareholdervalue" view is put forward
as a "scientific"theory that is modeled and verified
appropriately by ideologistscalled "economists."Unfor-
tunately,in an attemptto be acceptedby their"scientific
brethren," several managementtheorists have adopted

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Freeman, Wicks, and Parmar: StakeholderTheoryand "The CorporateObjectiveRevisited"
Science15(3),pp. 364-369,0 2004 INFORMS
Organization
the fashionof acceptingthe economicview of business
activityas the most useful one availableand have fallen
into the trapof the separationthesis. "Maximizingshare-
holder value" is not a value-neutraltheory and con-
tains vast ideological content.At its worst, it involves
using the prima facie rights claims of one group-
shareholders-to excuse violating the rights of others.
Shareholderrights are far from absolute,regardlessof
how much economists talk about the corporationas
being the privatepropertyof the shareholders. Therights
of shareholdersare primafacie at best, and cannotbe
used to justify limiting the freedom of others without
theirconsent.
We wish to offer threemain critiquesof "TheCorpo-
rate ObjectiveRevisited"(Sundaramand Inkpen2004).
First, Sundaramand Inkpenhave grossly mischaracter-
ized stakeholdertheory.Second,there are good reasons
for rejectingtheir argumentsfor the primacyof share-
holdervaluemaximization.Indeed,if stakeholdertheory
is understoodin a fairly commonsenseway, then many
of the oppositeconclusionscould be drawn.Finally,we
suggest that if the underlyingideological issue is one
of eithereconomicor politicalfreedom,then Sundaram
and Inkpenwould do betterto become pragmatistsand
join the big tent of stakeholdertheorists.We take each
point in turn.
The Mischaracterizationof Stakeholder Theory
One of the most glaring errorsof their paper is that
Sundaramand Inkpen decide to lump all views that
are not the shareholdermaximizationthesis as stake-
holder views. They claim that stakeholderviews have
dominated significant periods of time over the past
150 years (Sundaramand Inkpen2004). They lump all
the following diverse activities together as part of a
stakeholderapproachto corporategovernance:corpo-
rate chartering,unions, acting in the interestsof con-
sumers,payingattentionto the naturalenvironmentand,
we would suppose, Nader's proposalfor federal char-
tering, stakeholderstatutes(some of which are obvious
excuses for managerialself-dealing),proposalsfor inde-
pendentdirectorswith a sense of public good, and crit-
icisms of globalization.
Although stakeholdertheory can be many things to
manypeople,it does not follow thatwe shouldcast it as
"everythingnonshareholder oriented."First,it is impor-
tant to remember(as Sundaramand Inkpenhave for-
gotten) that shareholdersare stakeholders.Dividing the
worldinto "shareholder concerns"and"stakeholder con-
cerns"is roughly the logical equivalentof contrasting
"apples"with "fruit."Shareholdersare stakeholders,and
it does not get us anywhereto try to contrastthe two,
unless we have an ideological agendathat is servedby
doing so.
Second,SundaramandInkpenwritea greatdeal about
the difficultyof resolvingconflicts among stakeholders
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365
andfiguringout how to treatdifferentgroups(Sundaram
andInkpen2004). Not only is this concernoverblown,it
is not uniqueto the stakeholderview. Advocatesof the
shareholderview also have to deal with this criticism,
even if they have a differentand more simplistictheory
to use. On what termsare we going to get stakeholders
to sign on and give their best for the firm?Ironically,
we would arguethat stakeholdertheorygives managers
more resources and a greatercapability to deal with
this challenge,becausethey can offer not only financial
reward,but languageand actionto show thatthey value
relationshipswith other groups and work to advance
their interestsover time. In an era when firmsare rely-
ing on committedvalue-chainpartners(e.g., employees
and a whole range of suppliersin the supply chain) to
create outstandingperformanceand customerservice,
stakeholdertheoryseems to providemanagerswith more
resourcesto find success.
Third,SundaramandInkpen(2004) blow the problem
of "whosevalues count"out of proportionand make it
seem an impossibletask. Again, there are many com-
panies that have addressedthis challenge,and that use
their answers to the values questionsposed by stake-
holder theoryto run successful businessesover a long
time (e.g., Merck,J&J,3M, andMotorola).If we see this
as a pragmaticexercise of firmswith their stakeholders
to findways to cooperatewitheach otherthe taskis a lot
easier and admitsa varietyof answers-something that
fits a pluralisticculturethat values freedomand volun-
tarycooperation.If we see it as a philosophicalproblem
that has only one answer,an answerwhich has to con-
form to the rigorsof Kant'scategoricalimperative,then
life gets much harder.Stakeholdertheorypushes man-
agersto embracethe pragmaticand pluralisticapproach
andrecommendswe avoidthe philosophicaland single-
theoryapproach.
Fourth,and finally, stakeholdertheory does a better
job of explainingand directingmanagerialbehaviorin
markets. Stakeholdertheory claims that whateverthe
ultimateaim of the corporationor other form of busi-
ness activity,managersandentrepreneurs musttake into
accountthe legitimateinterestsof those groupsandindi-
vidualswho can affect(or be affectedby) theiractivities
(Donaldson and Preston 1995, Freeman 1994). It is quite
natural to suggest that the very idea of value creation
and trade is intimately connected to the idea of creating
value for stakeholders. Business is about putting together
a deal so that suppliers, customers, employees, commu-
nities, managers, and shareholders all win continuously
over time. In short, at some level, stakeholder interests
have to be joint-they must be traveling in the same
direction-or else there will be exit, and a new collabo-
ration formed (Venkataraman2002). The best deal for all
is if managers try to create as much value for stakehold-
ers as possible. There are, of course, conflicts among
stakeholder interests but these conflicts must be resolved
 Freeman, Wicks, and Parmar: StakeholderTheoryand "The CorporateObjectiveRevisited"
366 Science15(3),pp. 364-369,c 2004 INFORMS
Organization

so thatstakeholdersdo not exit the deal-or worse-use value for shareholders.How else could managerscreate
the politicalprocessto appropriate value for themselves shareholdervalue other than by creatingproductsand
or regulatethe value createdfor others. servicesthatcustomersare willing to buy, offeringjobs
All of this seems to us to be managerialcommon that employeesare willing to fill, buildingrelationships
sense, dressed up in its Sunday finery for publica- with suppliersthat companies are eager to have, and
tion. Stakeholdertheory is inherentlymanagerial,as being good citizens in the community?Creatingvalue
Donaldsonand Preston(1995) argue and as countless for stakeholdersis important,if for no otherreasonthan
executives have testified (for a recent example, see to avoid the folly of regulationand governmentexpro-
George 2003). As we argue elsewherein this journal, priation.Of course,understoodthis way, Sundaramand
stakeholdertheoryfinds its justificationin a pragmatist Inkpen'sclaimthatshareholdertheoryis pro-stakeholder
approachto managementtheory (Wicks and Freeman is also correct.Hereis the mainpoint:Thereis no need
1998). to posit these theoriesas oppositional.Joneset al. (2002)
and many othershave made this point for years.
The Primacy of Creating Value for Stakeholders (2) StakeholderTheory Gives Us the Correct Way
The main rhetoricalthrust of Sundaramand Inkpen to Think About EntrepreneurialRisks. Venkataraman
comes in a five-pointargumentfor the primacyof share- (2002) suggests that taking a stakeholderapproach
holdervalue maximization.They suggest: enablesus to developa more robusttheoryof entrepre-
(1) The goal of maximizingshareholder valueis pro- neurship,one in which the role of entrepreneurial risk
stakeholder. valuecreates is better understood. Sundaram and Inkpen's view is
(2) Maximizingshareholder
the appropriate incentivesfor managersto assume that taking such an approach would lead to risk avoid-
entrepreneurial risks.(3) Havingmorethanoneobjective ance behaviorby managers,because,accordingto them,
functionwill makegoverning if
difficult, not impossible. "constituenciesexcept the residualcash flow claimants
(4) It is easierto make shareholdersout of stakeholders have incentivesto dissuademanagersfromtakingexces-
thanvice versa.(5) In the eventof a breachof contract sive entrepreneurial risks."Leaving aside the question
or trust,stakeholders, compared withshareholders,have of excessive risks and whetheravoidingexcessive risks
protection (or can seekremedies)throughcontracts and is a good or bad thing, this argumentagain shows that
thelegalsystem. Sundaramand Inkpen'sview of stakeholdertheory is
Giventhat Sundaramand Inkpenhave lumpedso many one of allocatingbenefits to other stakeholdersat the
differentviews into stakeholdertheory,it does not make expense of shareholders.Of course, it is in each stake-
to take risks that can
sense to take the time and space to addressevery argu- holder'sinterestfor management
ment they put forthagainstit. Thereis, in fact, a large
lead to increasing the size of the pie for everyone.
literatureon stakeholdertheorythatclarifieswhat stake- Indeed,in
the real world, opposed the worldof eco-
as to
nomicsjournals,managersoften work with stakeholder
holdertheoryis and why it does not fall victim to the
groups,such as customersand suppliers,to jointly test
argumentsthatSundaramand Inkpenuse (Phillipset al. new productsand services.Often,customersand suppli-
2003). Instead,we wish to suggestthe followingas alter- ers will
nativeargumentsfor the view thatwe shouldunderstand accept some of the risk inherentin developing
new ideas, products,and programs.The recentwave of
capitalismas creatingvalue for stakeholders: corporatealliancesand the emergenceof issues such as
(1) The goal of creating value for stakeholdersis supply-chainmanagementareevidencethatstakeholders
decidedlypro-shareholder. can see their interestsas joint, not just opposed. (For
(2) Creatingvalue for stakeholderscreatesthe appro- a nice review of this literature,see Inkpen 2001.) By
priateincentivesfor managersto assumeentrepreneurial focusing on the allocation aspect of stakeholderthe-
risks.
ory, Sundaramand Inkpen miss the idea of seeing
(3) Having one objectivefunctionwill make gover- entrepreneurial risk in its richer context of joint stake-
nance and managementdifficult,if not impossible. holder relationships.
(4) It is easierto makestakeholdersout of sharehold-
ers thanvice versa. (3) Having One Objective Function Makes Gover-
nance and Management Difficult. It is hard to imagine
(5) In the eventof a breachof contractor trust,share-
holders, comparedwith stakeholders,have protection how anyone can look at the recent wave of business
scandals, all of which are oriented toward ever-
(or can seek remedies)throughmechanismssuch as the
marketfor shares. increasing shareholder value at the expense of other
We shall brieflytake each argumentin turn. stakeholders, and argue that this philosophy is a good
idea. The problem with focusing on a single objec-
(1) StakeholderTheoryIs DecidedlyPro-Shareholder. tive is that the world is complex, and managers and
Shareholdersarestakeholders,at least accordingto every directors are boundedly rational (at least we can meet
piece of literaturewith which we are familiar,or that economists on their own assumptions). By employ-
we have written.Creatingvalue for stakeholderscreates ing pseudoscientific measurements and quantifying away

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Freeman, Wicks, and Parmar: StakeholderTheoryand "The CorporateObjectiveRevisited"
Science15(3),pp. 364-369,@2004INFORMS
Organization
uncertaintyin a naively Bayesian fashion, proponents
of techniquessuch as economic value added and other
consultingploys have convincedmany companiesand
managersthat the effects of a particularprojectcan be
seen in the short-termmovementof a company'scom-
mon stock. There is too much complexity and uncer-
tainty.Managersneed to use judgmentmore than ever.
It is not always clear how the new plant in Indonesia
is going to affect our operationsin Paris, and how hir-
ing a new humanresourcesdirectorin Omahacan affect
Friday'sstock price. If we see stakeholderinterestsas
fundamentally joint, it will be the managers'job to guide
these relationshipsin the right direction.If these rela-
tionshipsare managedwell, shareholderswill reap the
profits.It has long been known in philosophy,at least
since JohnStuartMill andprobablysince Aristotle,that
if you wantto maximizea particularthing, such as util-
ity, you shouldperhapsnot try to do it consciously.As
Hayek and othershave suggested,in a complex world
orderemerges.
In reducing this complexity, the shareholderview
is more susceptible to moral myopia. According to
Sundaramand Inkpen(2004), having a single function
for the firm makes life easier for managersprecisely
becauseit cuts throughthe morassof claims andpoten-
tial responsibilitiesplacedat the feet of managers.They
claim managementhas only one responsibility:Make
money for the shareholders.Although this is conve-
nient for managersit distortsreality (i.e., both legally
and morally)and fosters a worldviewwhere managers
do not see themselvesas moral agents responsibleto a
wide arrayof groupsfor theiractions.If makingmoney
for shareholdersis my primaryduty and I do not have
responsibilitiesto other groups, it might be consider-
ably easier for me to rationalizequestionablepractices
thatplace harmat the feet of nonshareholder stakehold-
ers (such as workersor suppliers,to whom I allegedly
have no moralresponsibilities)in the nameof increased
profitability.
This view also downplaysthe languageof morality
and moralcomplexity.Businessis aboutmakingmoney
for shareholders.Thereis no clear moralgroundingfor
such a claim, nor is there a discussionabouthow man-
agers deal with the other moral and legal challenges
they face in the day-to-dayactivitiesof the firm.There
is alreadyconsiderableevidence that managershave a
difficulttime seeing the moraldimensionsof business-
preferringinsteadthe financialand amoralview of busi-
ness (Bird and Waters 1984, Freeman1994, Werhane
1998). Offeringmanagersmore proof that business is
only aboutprofitsfor shareholders(and that moralityis
either irrelevantor places only a few broadconstraints
on managerialaction) will more likely foster the kind
of tunnelvision, rationalizations(e.g., "everyoneelse is
doing it"), and self-dealing we see in ethics disasters
such as those that took place at Enron,WorldCom,and
HealthSouth.
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367
We recognizethatthe shareholderview does not con-
done the activities of managersat these firms. Indeed,
the shareholderview finds these actions deplorable.
However,the issue is which worldviewenables man-
agers to rationalize risky, unethical, and ultimately
illegal behavior.Our claim is that a view that places
moralitylargelyout of the conversation,andthatreduces
managerialresponsibilityto making money, is more
likely to foster unethical behavior.At the very least,
Sundaramand Inkpen'sview does not seem to offer us
much help in seeing ethics as connectedto the day-to-
day activitiesof managers,and as providingthem with
resourcesto bettermanagethe challengesof the day.
(4) It Is Easier to Make StakeholdersOut of Share-
holders. This one is easy. Shareholdersare already
stakeholders. Q.E.D.
(5) StakeholdersHave Remedies that Shareholders
Do Not Have. This issue is tricky. Oliver Williamson
has tried to make the point that nonshareholderstake-
holdershave contractualremediesthat shareholdersdo
not have, so that shareholdersbear greaterasset speci-
ficity (thecost of redeployingassets).This argumenthas
been rebuttedby the idea thatthe marketfor sharesacts
as an instantlycostless redeploymentprocess (Freeman
and Evan 1990). Shareholderswho sell enough stock
to move the price of the stock cannot instantlyrede-
ploy costlessly, of course, but this is a functionof the
size of the holdings.It is possible that large suppliers,
large customers,and large shareholdershave more in
commonthanwould appearat firstglance.Freemanand
Evan distinguishbetween safeguards-where the par-
ties to the contractpay the costs of the safeguards-and
contracts-where the costs of safeguardscan be imposed
on others.They suggest that the claim that stakehold-
ers can morecostlessly redeployis really the claim that
there are mechanismsin society so that partiesexter-
nal to the contractpay the costs. Witnessthe so called
protectionsof labor:the Fair LaborPracticesAct, the
NationalLaborRelationsBoard,andso on. If this is cor-
rect, shareholdersappearto be in the sameboat as other
stakeholders.The whole point of the recent Sarbanes-
Oxley Act, the furorover the Securitiesand Exchange
Commission,and the issue of transparencyand valid-
ity of financialreportingwas to protect shareholders.
Sundaramand Inkpenmiss the pointby focusingon the
derivativesuits by shareholdersas the only means of
shareholderprotection.Surely,we want value creation
and trade to be self-sustainingwherebyparties to the
contractspay the costs of safeguardingthose contracts
ratherthan imposing those costs externallyon others.
The only way this can be conceptualizedis by takinga
stakeholderapproach.
In strugglingto make sense of all this, we want to
make sure that the readerdoes not searchfor ways to
frameor resolve this debatethat miss the core question
at the heart of our differences with Sundaramand
 Freeman, Wicks, and Parmar: StakeholderTheoryand "The CorporateObjectiveRevisited"
368
Inkpen.There are severalways one might try to make
sense of the differencebetween these two approaches.
For instance,one mightbe inclinedto see the disagree-
ment as being aboutlevels of analysis-that stakeholder
theory gives performancemetrics that work for man-
agers at the operatinglevel, whereasshareholdertheory
gives performancemetricsthat work for financialmar-
kets (Meyers and Gupta 1994). Both have their place
and use, but they only work well within their domain.
Second, one could arguethatit is a conflictbetweenan
ideal (shareholder)and a real-world(stakeholder)the-
ory. The formermight do a greatjob of capturingthe
ideal workingsof the marketfrom the macroview, well
above the rumblingsof the trading-roomfloor, whereas
the latter speaks to managersfrom the vantage point
of their day-to-dayactivities.Finally, there might also
be groundsfor seeing an issue of scale involved-that
stakeholdertheorymakesmore sense in entrepreneurial
firmsand that shareholdertheoryis a betterfit in larger
and more establishedcompanies.All of these readings
providea way to give each side its due.
In our view, althougheach of these issues is interest-
ing and mightprovideuseful insights,each also deflects
attentionfrom the fundamentalissue-how we under-
standbusinessand value creationwrit large.If we want
to rejectthe separationthesis and see a moraldimension
to businessactivity,then stakeholdertheoryprovidesthe
requisiteframework.The shareholdertheory,particularly
as propagatedby economists,continuesto perpetuatethe
idea of businessas an amoraleconomicactivitythatrad-
ically constrictswhat is possible for humanbeings. The
core questionis whetherwe embracethe separationthe-
sis and whetherwe want to be a part of organizations
thattakeit as a given. It is criticalthatwe see firmsand
marketsas integralvehicles for workingwith othersto
improveeveryone'sstake. To do this, we must see the
separationthesis as optional.
Of course,we could articulatethe shareholdertheory
in a way that does not commitit to the separationthe-
sis. Briefly,it would go somethinglike this: Corporate
propertyis the privatepropertyof shareholders.Moral
rules that apply to privatepropertyapply to corporate
property.No one, or their agent, may use his or her
propertyto harmothers (at least withouttheir permis-
sion). Freedomto make agreementsabouthow we and
our agents use our propertyis an importantprinciple.
So it follows that businessworks because shareholders
or their agents use their propertyto create value for
which others freely trade.It is important,if this is to
be done effectively,thatmanagers(agentsof sharehold-
ers) understandthe needs of other affectedpartiesand
how thosepartiesareindeedaffectedby tradingwith the
agentsof shareholders.In practice,these partiesareusu-
ally customers,suppliers,employees,and communities.
Ergo, somethinglike a stakeholderview would emerge
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Science15(3),pp. 364-369,@2004INFORMS
Organization
from a more-carefullyworkedout, fully moral version
of shareholdertheory.
Once we have rejectedthe separationthesis, the issue
is not whethera theory has moral content, but rather
what kind of moral contentit has (Freeman1994). As
we have arguedin this paper,stakeholdertheorybetter
equips managersto articulateand foster the sharedpur-
pose of their firm. Unlike the narrowview of share-
holdertheorythat ascribesone objectivefunctionto all
corporations,stakeholdertheoryadmitsa wide rangeof
answers.In this view, there is not just one stakeholder
theory,but manypossible normativecores (i.e., particu-
lar answersto the two questions)thatmakeup the genre
of stakeholdertheory (Freeman1994, Jones and Wicks
1999). A carefullook at firms such as 3M, Merck,and
Johnson & Johnsonshows that there is a wide range
of answersthat firmshave given to the questionsposed
by stakeholdertheory.On this account,even shareholder
theory is, in fact, a version of stakeholdertheory-
one whose moral presuppositionsinclude a respect for
propertyrights, voluntarycooperation,and individual
initiative to improve everyone's circumstances.These
presuppositionsprovidea good startingpoint, but not a
completevision of value creation.
The Real Issue: Economic and Political Freedom
There is much at stake in this debate.The shareholder
ideologists want us to believe that economic freedom,
and thereforepoliticalfreedom,are threatenedby stake-
holdertheory.Nothing could be furtherfrom the truth.
The whole idea of seeing business as the creation of
value for stakeholdersand the tradingof thatvalue with
free consentingadultsis to think abouta society where
each has freedom compatible with a like liberty for
all (Rawls 1971). Value creationand trade have to go
together.One is no good withoutthe other.Hence, the
very idea of economicand politicalfreedombeing sep-
arableis questionable(Freemanand Phillips 2002).
Management theory needs to get back to
management-to the understandingof how value gets
created and traded-in all of its gory particularistic
detail. Talkingabouthow all value must get created,or
the one and only best way to organizevalue creation,or
the one and only stakeholdergroup whose primafacie
rights must always win, are all intellectualmoves that
serve neithertruthnor freedom.
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