Question

Consider Joseph Heath and Wayne Norman’s concerns for stakeholder theory. What sorts of problems or concerns does a normative account of managing for stakeholders raise? How might a proponent of stakeholder theory respond to these concerns?

Answer 1

• As per stakeholders theory, business has to create value for not only its shareholders but also for its stakeholders.
• Several stakeholder of business are employees, suppliers,financiers, community, trade unions, political groups, trade associations, competitors, consumers and others.
• Joseph Heath and Wayne Norman in their paper highlights that by realizing the severity of problems that are identified between shareholders and managers it can be determined that to manage corporate social responsibility and good corporate governance is a difficult task.
• If only narrow concept is followed that addresses, business organizations have only one obligation that is to maximize shareholder value, still it will not be easy to fulfill this obligation.
• However, if broader concept is followed that addresses, that business organizations have responsibilities towards various other stakeholder groups, this will only add to difficulties of managers.
• The major concern is the arising conflicts between stakeholders interests and managements difficulties to fulfil these interests.

Three major problems are identified that arise by normative account of managing for stakeholders:

• Problem in understanding how to create and trade value,
• Connecting capitalism with ethics is another major problem,
• Helping managers in addressing above mentioned problems.

A proponent of stakeholder theory might respond to these concerns by simply addressing that by fulfilling stakeholders interests is the major concern of business and by being able to do sorest of the issues will disappear.