Governance & Policy
Stakeholder Theory
Freeman's theory that a firm should create value for all stakeholders — employees, customers, suppliers, communities — not only shareholders.
Definition
Stakeholder theory, developed by R. Edward Freeman in Strategic Management: A Stakeholder Approach (1984), holds that a firm is a nexus of relationships with all groups who can affect or are affected by it — employees, customers, suppliers, financiers, communities, regulators and, by extension, the environment — and that managing for their joint interests, rather than maximising shareholder returns alone, is both ethically required and strategically superior. It provides the theoretical foundation for stakeholder capitalism, CSR and ESG.
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