In today’s fast-paced and cutthroat business environment, where decisions are often driven by power plays and profit margins, the stakeholder approach to business may seem like a relic of the past. However, proponents of stakeholder theory, such as Darden School of Business Professor Ed Freeman, argue that it is more relevant than ever in a world where corporate executives are scaling back commitments to workers and political leaders are enacting sweeping changes that impact employees and other stakeholders.
Freeman, who articulated the original stakeholder principles in his 1984 book “Strategic Management: A Stakeholder Approach,” believes that businesses have a huge opportunity to step up and prioritize the well-being of all stakeholders. This sentiment is echoed in recent research that suggests people are increasingly looking to corporations to demonstrate ethical leadership and transparent communication.
According to a survey conducted by JUST Capital, ethical leadership is now the second most important expectation people have for businesses, up from seventh place in previous years. Similarly, the expectation for transparent communication has risen to the fourth spot, indicating a growing demand for companies to be more accountable and socially responsible.
The survey also revealed that the top priority for people is fair, living wages, highlighting the importance of treating employees and other stakeholders fairly. Stakeholder capitalism, which considers the impact of business decisions on all stakeholder groups, not just shareholders, is gaining traction as a more holistic approach to business.
At the University of Virginia Darden School of Business, stakeholder theory has long been a core part of the curriculum and school values. Freeman, who has been teaching stakeholder theory and ethics at Darden since 1987, emphasizes the importance of responsible leadership and ethical decision-making in business.
The survey results align with the sentiments expressed by voters in the 2024 election cycle, indicating a growing concern for economic well-being, consumer rights, and corporate accountability. Freeman believes that these findings reinforce the need for corporate and government leaders to consider the broader impact of their actions on society.
As businesses navigate an increasingly complex and interconnected world, the stakeholder approach offers a framework for making decisions that benefit not only shareholders but also employees, customers, suppliers, communities, and the environment. By prioritizing the well-being of all stakeholders, companies can build trust, foster long-term relationships, and create sustainable value for society as a whole.
In conclusion, the stakeholder approach to business is more important than ever in a climate where ethical leadership, transparency, and fair treatment of stakeholders are top priorities for the public. By embracing stakeholder capitalism and aligning business practices with the expectations of society, companies can not only drive financial success but also contribute to a more just and sustainable future for all.
