Opinion on Stakeholder Theory
In our readings last week, Freeman and Friedman have two very contrasting opinions on the goals and responsibilities of a business. Freeman supports the Stakeholder Theory in saying that anyone who has a stake/claim in the firm has the right to be treated as a participating determining factor in the direction of a firm. They are not just a means to the end. Friedman pretty much says the opposite. He believes that businesses have no responsibility outside of those who have ownership in the company. In devising my own opinion, I lean more towards Freeman’s argument although I think the two are more overlapping than is initially apparent.
According to Freeman, stakeholders can be anyone; employees, stockholders, competitors, customers, the local community, etc. The firm is constantly asking the question “For whose benefit and at whose expense should the firm be managed?” What Friedman failed to realize is asking these types of questions may further his ultimate goal of making more profits. In my opinion, people like organizations which are prevalent in the community and organizations that help the underdogs of society. These types of participation give the company a face to go along with their big business name. We are creatures of habit and we like things we are familiar with. Considering the stake of a group such as the local community can ultimately be a financial issue. Although the local community is not a stockholder by definition, there are people within it that have the potential to become stockholders. Even if Friedman is black hearted enough to find no value in considering the needs of those outside ownership, he certainly should be able to take liking to the idea of this long run boast in PR and therefore profits.
Another stakeholder group Friedman may have overlooked is the employee segment. Happy workers are good workers. Good workers are more effective and efficient. Better efficiency and effectiveness mean more profits. If Friedman utilizes this logic to his advantage (this logic supported by the Stakeholder’s Theory) he may be able to yield better results to the owners he is so indebted to. The groups are all interrelated.
I like the idea presented in the Stakeholder Theory that there are multiple groups to consider, however, I’m not sure I completely agree with the no primacy part of it. I truly believe the groups are interrelated and affect one another, but I do believe sometimes you need to pick one group’s values over another since they often do not sync. In this case you would have to choose one group over another and it is only natural to have primacy.