Question

Edward Freeman (1984) was one of the key business researchers in the development of the stakeholder theory of the firm. a. What is stakeholder theory and how does this approach differ to other approaches to the social responsibility of business? b. Apply stakeholder theory to a large a large mining company and describe how they would demonstrate their specific commitments to responsible business.

Answer 1

Answers:

Note: Below are guide answers only. Explain and expound in your own words. Always validate accuracy.

"What is stakeholder theory and how does this approach differ to other approaches to the social responsibility of business?"

Stakeholder theory is about giving value to all people or group who has interest in the business and organization, and not focusing merely to stockholders. They include investors, customers, clients, suppliers, affected communities, etc. This approach differs to other approaches to the social responsibility of business by considering and involving all those with stake and interest in the organization. For example, under corporate social responsibility approach, the business has the responsibility to make proper and right disposal of spoiled products and materials for a clean environment. Under stakeholder theory, people living in areas affected are considered "stakeholders" by the company. Even though these people may not be stockholders, they are involved by the business as they are stakeholders in relation to the company.

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"Apply stakeholder theory to a large a large mining company and describe how they would demonstrate their specific commitments to responsible business."

Using stakeholder theory, a large mining company should involve communities that will be affected in their mining operations. They should ensure that they would not affect these communities negatively. They need to ensure safety of people's lives, consider them, and listen to them so the business will operate smoothly and carefully. The mining company involves all stakeholders and not just doing business-as-usual operations for the sake of earning profit for its own stockholders.