What Is the Stakeholder Theory?

Stakeholder theory was gradually developed in Western countries around the 1960s, and its influence expanded rapidly after entering the 1980s, and it began to affect the choice of corporate governance models in the United States and Britain, and promoted the transformation of corporate management methods. . The reason for the emergence of stakeholder theory is its profound theoretical and practical background. The key point of stakeholder theory is that it believes that with the development of the times, the position of material capital owners in the company is gradually weakening. The so-called weakening of the status of material owner means that the stakeholder theory strongly questions the traditional core concept of "the company is owned by individuals and institutions holding the company's common shares." ^[1]

Stakeholder theory

Corporate stakeholders include shareholders, corporate employees, creditors, suppliers, retailers, consumers, competitors, central and local governments, and social groups, the media, and more. "Simply treating all stakeholders as a whole for empirical research and application promotion can hardly lead to convincing conclusions" (Chen Honghui, 2003). So how do you classify these stakeholders? At present, the multi-cone subdivision method and the Mitchell bisect method are more commonly used internationally.

Stakeholder theory

"The survival and prosperity of an enterprise cannot be separated from the support of stakeholders, but stakeholders can be subdivided from multiple perspectives. The impact of different types of stakeholders on corporate management decisions and the extent to which they are affected by corporate activities is different. "(Chen Honghui, 2002). In the mid-1990s, many experts and scholars at home and abroad used the multi-cone subdivision method to classify stakeholders from different perspectives.

Freeman (1984) believes that stakeholders have different impacts on enterprises due to the different resources they have. He subdivided stakeholders from three aspects: (1) a group of people who hold company stock, such as members of the board of directors, managers, etc., are called ownership stakeholders; (2) those who have economic dealings with the company Relevant groups such as employees, creditors, internal service agencies, employees, consumers, suppliers, competitors, local communities, management structures, etc. are called economically dependent stakeholders; (3) Those who have a relationship with the company's social interests Stakeholders, such as government agencies, the media, and special groups, are called social stakeholders.

Frederick (1988) divides the ways in which stakeholders have an impact on the business, dividing them into direct and indirect stakeholders. Direct stakeholders are those who have a direct market transaction relationship with the company. They mainly include: shareholders, employees, creditors, suppliers, retailers, consumers, competitors, etc .; indirect stakeholders are related to the company. Stakeholders in non-market relationships, such as the central government, local governments, foreign governments, social groups, the media, the general public, etc. Charkham (1992) divides stakeholders into two types: contractual and public stakeholders according to whether the relevant group has a contractual relationship with the enterprise.

Wheeler (1998) divided the stakeholders into four categories from the perspective of whether the relevant groups are social and whether the relationship with the enterprise is directly established by real people: (1) the main social stakeholders , They have two characteristics of social and direct participation; (2) secondary social stakeholders, they form indirect relationships with enterprises through social activities, such as government, social groups, competitors, etc .; (3) major Non-social stakeholders, they have a direct impact on the company, but they do not affect specific people, such as the natural environment; (4) secondary non-social stakeholders, they do not have a direct relationship with the company, It does not affect specific people, such as environmental stress groups, animal interest groups, and so on.

Stakeholder Theory Mitchell Score

The Mitchell scoring method was proposed by American scholars Mitchell and Wood in 1997. It combines the definition and classification of stakeholders. First of all, it is believed that all stakeholders of an enterprise must have at least one of the following three attributes: legality, rights and urgency. Stakeholders are scored based on these three aspects, and the company's stakeholders are divided into three types according to the score: (1) deterministic stakeholders, which have legality, power and urgency. He is the company's primary concern and close contact, including: shareholders, employees and customers. (2) Expected stakeholders, due to any two of the three attributes. Have both legitimacy and rights, such as investors, employees, and government departments; groups with legitimacy and urgency, such as media and social organizations; groups with both urgency and power, but no legitimacy, For example, some political and religious extremists and radical social elements often use more violent means to achieve their goals. (3) Potential stakeholders, who have only one of three attributes.

Mitchell's bisect method can be used to judge and define the stakeholders of an enterprise. It is relatively simple to operate and is a big step forward in stakeholder theory. Some domestic scholars have also defined and divided stakeholders from other attributes.

Wan Jianhua (1998) and Li Xinhe (2001) started from two aspects of cooperation and threat of stakeholders, and divided the stakeholders into supporting stakeholders, mixed stakeholders, unsupporting stakeholders, and Marginal stakeholders. Chen Honghui (2003) divided the use of stakeholders into three types: core stakeholders, dormant stakeholders, and marginal stakeholders from three aspects: initiative, importance, and urgency.

Defects and Defects in Stakeholder Theory

(1) Traditional business theory holds that the only goal of an enterprise is to "maximize economic profits." The emergence of the stakeholder theory has dispersed the business goals of the enterprise. In addition to the economic goals, the enterprise must also assume social and political responsibilities. This is likely to lead to a deadlock in the "corporate-run society." Once the stakeholder theory is accepted by the public, the company's behavior is bound to be limited by the framework, and the company is virtually covered by public welfare. As a result, it is likely to lead to the loss of corporate economic profits. It is more likely that the company will fall into a situation where it loses sight of one another. For example, the company has realized the maximum economic profit, but it cannot take care of social responsibility. Lost economic advantage.

(2) The definition of stakeholders is too broad. Where are the boundaries of stakeholders? Although many experts and scholars at home and abroad have elaborated their views on the definition and division of stakeholders, most of them just stay at the stage of discussion and hypothesis. From the perspective of more than a dozen types of stakeholders involved, it is not clear whether they are important. So far, there is no theory or method that can quantitatively measure the weight of many stakeholders.

(3) How to apply stakeholder theory to practice? Many domestic scholars have analyzed and discussed the feasibility of stakeholders from various aspects, and theoretically prove that the theory of stakeholder feasibility is feasible. However, due to the imperfections of the stakeholder theory itself, it is really difficult to practice. For example, there are too many and too many stakeholders involved in the theory. It is impossible for customers to focus on them and take action. Many scholars have proposed that stakeholder participation in corporate governance is not feasible so far. Although Freeman proposed the "stakeholder authorization rule" to support how stakeholders participate in corporate governance, the implementation of the theory requires operators to have a deeper understanding of the theory of stakeholders and the basis for participation. Furthermore, the realization of these participation mechanisms may be flawed.