Stakeholder Theory

Stakeholder theory is a theory of organizational management and business ethics, most closely associated with R. Edward Freeman's 1984 book Strategic Management: A Stakeholder Approach, that holds a company should be managed for the benefit of all its stakeholders, including employees, customers, suppliers, communities, and shareholders, rather than for shareholders alone. Freeman argued that attending to the interests of this broader set of groups affected by or able to affect a firm's objectives is both an ethical obligation and, over the long run, good for the firm's own performance and survival. The theory has been influential in debates over corporate governance and corporate social responsibility, often presented as a direct alternative to shareholder primacy models of the firm.