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Academy of Management 1995, Vol. 20, No. 1, 65-91.
THEORY THE THE STAKEHOLDER OF CONCEPTS, EVIDENCE, CORPORATION: AND IMPLICATIONS THOMAS DONALDSON Georgetown University LEE E. PRESTON University of Maryland The stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. These three aspects of the theory, although interrelated, are quite distinct; they involve different types of evidence and argument and have different implications. In this article, we examine these three aspects of the theory and critique and integrate important contributions to the literature related to each. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental. If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the managers of the unit are fiduciaries for it and not merely for its individual members, that they are . . . trustees for an institution [with multiple constituents] rather than attorneys for the stockholders. E. Merrick Dodd, Jr.
Harvard Law Review, 1932 The idea that corporations have stakeholders has now become commonplace in the management literature, both academic and professional. Since the publication of Freeman's landmark book, Strategic Management: A Stakeholder Approach (1984), about a dozen books and more than 100 articles with primary emphasis on the stakeholder concept have appeared. (Significant recent examples include books by Alkhafaji, 1989; Anderson, 1989; and Brummer, 1991; and articles by Brenner & Cochran, 1991; Clarkson, 1991; Goodpaster, 1991; Hill & Jones, 1992; and Wood, 1991a,b; plus numerous papers by Freeman and various collaborators,
The development of this article benefited greatly from discussions held at the Conference on Stakeholder Theory at the University of Toronto, May 1993, and from the specific comments of many people, including Professors Aupperle, Carroll, Clarkson, Halal, Freeman, Jones, and Sethi. 65
Academy of Management Review
individually cited.) Stakeholder management is the central theme of at least one important recent business and society text (Carroll, 1989), and a diagram purporting to...