Showing posts with the label stockholders theory

The Bounded Rationality of Stakeholder Theory

Stakeholder Theory is an organizational management perspective that attempts to defined the nature and purpose of firms/corporations within society. According to its founder Milton Friedman, the purpose of a firm is embedded almost exclusively in the production of wealth for shareholders (Friedman, 1970). Since this time, the concept of stakeholder has been expanded to include the idea that other entities have a particular stake, or interest, in the organization and can influence its success or failure. The theory defines who are the stakeholders in an organization and their rights and obligations to the shareholders as well as society in general. The root of the theory is based off of the premise that its purpose is the, " identification of moral or philosophical guidelines for the operation and management of the corporation " (Donaldson & Preston, 1995). The theory helps to foster the understanding that the needs of the owners should be realized first before other con