Chapter 6: The Inescapability of a Minimal Version of Normative Stakeholder Theory
Thomas Donaldson I want to critique concepts prominent in the debate between so-called stakeholder and non-stakeholder interpretations of the corporation. I hope to demonstrate the inconsistency of any view that stops fully short of normative stakeholder theory. My critique implies that any purely ‘instrumental’ or purely ‘descriptive’ stakeholder interpretation (Donaldson and Preston, 1995) of the corporation is conceptually impossible. Normative stakeholder theory – at least in a minimal form – is ineliminable when interpreting the modern corporation. As I shall show, the logic of the language used to inform the major, ‘descriptive’ views of the corporation, that is, agency theory (Jensen and Meckling, 1976; Fama and Jensen, 1983), new institutional economics (Williamson 1985, 1996a, 1996b) and even instrumental stakeholder theory (Jensen 2002), require on pain of inconsistency the attribution of moral rights to some non-owning stakeholders. Both descriptive and instrumental views of the corporation must posit moral property rights for shareowners; and this, in turn, commits them to normative conclusions about the attribution of moral rights to other stakeholders. Moreover, this attribution of moral rights to a variety of stakeholders entails moral responsibilities on the part of the corporation.1 In his famous article, ‘The problem of social cost’, Ronald Coase acknowledges limitations to non-normative approaches. He explains at the close of the article how even the economic concepts he has utilized are not fully sufficient for designing models of organizational governance. He asserts that ‘problems of welfare economics must ultimately dissolve into a study of aesthetics and morals’ (Coase, 1960). Few have...
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