Normative approaches towards
stakeholder theory hold that:
Managers ought to pay attention to key stakeholder
relationships.
According to this perspective, managerial relationships with
stakeholders are based on normative, moral commitments. Rather than on a
desire to use those stakeholders solely to maximize profits. In short, a
firm establishes certain fundamental moral principles. These guide how
the company does business, in particular with respect to how it treats
stakeholders. And the corporation uses those principles as a basis for
decision-making.
One genesis of this normative model is the fact that company decisions
affect stakeholder outcomes. Ethics, generally speaking, deals with
obligations that arise when an individual or corporate agent’s decisions
affect others; regardless of precisely what constitutes an ethical
decision, decisions made without any consideration of their impact on
others are usually thought to be unethical. Donaldson and Preston (1995)
captured the implications of this view for stakeholder management well
by stating that the stakeholder interests have intrinsic worth. That is,
certain claims of stakeholders are based on fundamental moral
principles. They are unrelated to the instrumental value of the
stakeholders for a corporation. A firm cannot ignore or cannot abridge
these claims, simply because honoring them does not serve its strategic
interests, or is strategically inconvenient. In a sense, these claims
are independent of, and should be addressed prior to, corporate
strategic considerations. Stakeholder interests are thought to form the
foundation of Corporate Strategy itself. They represent what we are as a
company, and what we think is important.
Given such a stakeholder orientation, a firm shapes its strategy
around certain moral obligations to its stakeholders. In this vein,
a Kantian posture (Bowie, 1994; Evan & Freeman, 1983), a feminist
perspective (Wicks, Gilbert, & Freeman, 1994), and a fair contracts
approach (Freeman, 1994; Phillips, 1997) are examples of moral
principles that can form the normative foundation for
stakeholder-oriented management. Freeman and Gilbert explicated this
perspective:
We cannot connect ethics and strategy. Unless there is a point of
intersection between the values and ethics we hold, and the business
practices that exemplify these values and ethics. To build strategy on
ethics and to avoid a process that looks much like post hoc
rationalization of what we actually did, we need to ask :”what do we
stand for?” in conjunction with our strategic decisions. (1988)
The second genesis of a normative stakeholder orientation based on moral
principles is the argument that making a strategic commitment to
morality is not only conceptually flawed but is also ineffective. To
strategically apply ethical principles means that a firm only acts
according to moral principles when this is to its advantage. However
this is by definition not following ethical principles at all. In
addition, Quinn and Jones (1995) argued that if the purpose of acting
ethically is to acquire a good reputation that, in turn, will provide a
firm with economic benefits, why not pursue the good reputation directly
without the intellectual excursion into moral philosophy? In some cases,
of course, the behavior called for will coincide with that dictated by
ethics, but in others it may not. What difference does ethics make if
one can act instrumentally without reference to ethics?
From a practical perspective, Jones (1995) argued that the instrumental
benefits of stakeholder management paradoxically result only from a
genuine commitment to ethical principles. He argued that firms which
create, and sustain, stakeholder relationships based on mutual trust and
cooperation will have a competitive advantage over other firms that do
not act in this way (cf. Barney & Hansen, 1994). If a firm’s commitment
to trust and cooperation is strategic rather than intrinsic, it will be
difficult for the firm to maintain the sincere manner and reputation
(Frank, 1988) required for its differential desirability as an economic
partner. In other words, trustworthiness, honesty, and integrity are
difficult to fake. Thus, to reap the instrumental benefits of
stakeholder management, a firm must be committed to ethical
relationships with stakeholders. Regardless of the expected benefits.
Strategically applied moral commitments are not really moral. And,
paradoxically, they cannot cause the desired strategic outcomes.
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