Stakeholder Theory

Stakeholder Theory

Impact and Prospects

Edited by Robert A. Phillips

Honoring the twenty-fifth anniversary of R. Edward Freeman’s Strategic Management: A Stakeholder Approach, one of the most influential books in the history of business strategy and ethics, this work assembles a collection of contributions from some of the most renowned and widely-cited scholars working in the area of stakeholder scholarship today.

Chapter 10: Some Thoughts on the Development of Stakeholder Theory

R. Edward Freeman

Subjects: business and management, strategic management


R. Edward Freeman The ideas behind the stakeholder concept are as old as commerce itself. No one can possibly deny that from its earliest beginnings in barter, business has been a matter of trade between buyers and sellers so that both were at least perceptually better off because of the exchange. Exchange created value between the partners and led to specialization of labor, more knowledge and innovation, and hence more exchange. Eventually, employees were added, though during ancient times they had relatively little freedom. While the separation of ownership and control may well be rooted in feudal society,1 the emergence of wealthy merchants who often earned their profits on the backs of others has a long history. Where value is created, value can be destroyed. Commerce affected customers, suppliers, and employees and the owners of the business, even if value was sometimes destroyed for some.2 Even communities and governments have long been involved in value creation and trade. Fernand Braudel’s magisterial history of capitalism shows us the fiction that is free-floating markets disconnected from the rest of society.3 Markets emerged as town fairs, then moved outside the gates of towns to avoid governmental taxes, much in the way that some multinational companies incorporate off shore to minimize tax exposure. ‘Managing the government or community relationship’ has been a part of value creation and trade from the very beginning. According to Braudel, door-to-door peddlers were outlawed in England during the seventeenth century because they prevented the government from collecting their...

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