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Institute for Public Relations: Deconstructing: Stakeholder Capitalism

09 Jun 2022
In the past 15 years, stakeholder capitalism has grown significantly as a business philosophy, influencing the communication and public relations industry. But what exactly does “stakeholder capitalism” mean?

Originally found at Institute for Public Relations

The History of Stakeholder Capitalism

While the term “stakeholder” has existed for a few hundred years, one of the first appearances of the term in business literature was in 1963 in an internal memo at the Stanford Research Institute. [i] The stakeholder-centric approach took off in 1984 when Dr. R. Edward Freeman, a professor at the University of Virginia Darden School of Business, published a seminal book focused on stakeholder theory, “Strategic Management: A Stakeholder Approach.” Founded on pragmatic and libertarian theoretical lines, stakeholder theory[ii] was created after current business theories did not respond well to rapid changes and other evolutions occurring in the business environment. Since then, Dr. Freeman has authored or edited more than 100 volumes and 200 articles in stakeholder management, strategy, and ethics. Nearly all scholarly articles about stakeholder theory or stakeholder capitalism track back to Freeman.

What is a Stakeholder-centric Approach?

A stakeholder-centric approach is a management process that considers all those who have a stake in the company, who can be affected by the company, or who can effect how an organization achieves its objectives.[iii] This is different than the traditional shareholder primacy approach that focuses on maximizing company earnings to increase financial value and gains for the shareholder.Being stakeholder-centric is not an easy task. Dealing with stakeholders may be more challenging than ignoring them.[iv] Freeman and McVea (2001) said that stakeholder management is “a never-ending task of balancing and integrating multiple relationships and multiple objectives”[v] and promoting shared interests in an ever-changing business environment.


Continue reading the original article at Institute for Public Relations

Read the original research in Academy of Management Annals.

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