The alternative view admits that stockholders are an important constituency of the firm, but that other groups such as employees, customers, suppliers, and the community also have a stake in the activities and the success of the firm. Edward Freeman(1984) argued that the firm should be managed in the interest of the interest of the broader spectrum of constituents. The manager would necessarily be obligated to account for the interest and concerns of the various constituent groups in arriving at business decisions. The aim would be to satisfy them all, or at least the most concerned stakeholders, on each issue. The complexity of that kind of decision-making can be daunting and slows the process. In addition, it is not always clear which stakeholder interests are relevant in making specific decisions. Such a definition seems to depend largely on the specific context, which would seem to challenge the ability to achieve equitable treatment of different stakeholder groups across time. But the important contribution of this view is to suggest a relational view of the firm and to simulate the manager to consider the diversity of those relationships.
Adding complexity to the question of whose interests one serves is the fact that one often has many allegiances- not only to the firm or the client, but also to one's community, family, etc. one's obligations asan employee or as a professional are only a subset of one's total obligations.
The alternative view admits that stockholders are an important constituency of the firm, but that other groups such as employees, customers, suppliers, and the community also have a stake in the activities and the success of the firm. Edward Freeman(1984) argued that the firm should be managed in the interest of the interest of the broader spectrum of constituents. The manager would necessarily be obligated to account for the interest and concerns of the various constituent groups in arriving at business decisions. The aim would be to satisfy them all, or at least the most concerned stakeholders, on each issue. The complexity of that kind of decision-making can be daunting and slows the process. In addition, it is not always clear which stakeholder interests are relevant in making specific decisions. Such a definition seems to depend largely on the specific context, which would seem to challenge the ability to achieve equitable treatment of different stakeholder groups across time. But the important contribution of this view is to suggest a relational view of the firm and to simulate the manager to consider the diversity of those relationships.
Adding complexity to the question of whose interests one serves is the fact that one often has many allegiances- not only to the firm or the client, but also to one's community, family, etc. one's obligations asan employee or as a professional are only a subset of one's total obligations.
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