In a room of twenty something students, Professor Hendry had just opened up the floor for questions for Ed Freeman. I sort of expected the awkward silence, but I didn’t really want to see how far it could go.
“Um, I’m taking a class called stakeholder management and-“
“Wait hold on, you have a class called what?”
“Er, The Stakeholder Organization?”
Ed started to tell us about how he submitted a paper to a publication, in the late 70’s – just a working paper, nothing complete- and the editors thought that the paper title “Stakeholder Theory” was a typo. Surely, the editors thought, Ed must have meant stockholder. He seemed pretty pleased that there was an entire class based on this concept.
“We’ve been talking about the distinction between stakeholder and shareholder theory in class, and how stakeholder is sometimes a catch-all for non shareholder companies. Is there anything you would define specifically as attributes of stakeholderism?
Freeman explained how stakeholderism and shareholderism are not mutually exclusive; shareholder value is definitely a part of stakeholder values. He asked, as a start-up business, “How are you going to make money?” There is no such thing as an entrepreneur that only cares about making money. You have to think about the various groups that have a stake in creating or receiving value from your business proposition. Specifically, he mentioned customers, community, employees, suppliers, and financiers as important groups to make relationships with when starting a business. Freeman alluded to the “soft, squishy stuff” that seems superfluous to traditional, capitalist business models, which really should be at the core of the company (stakeholders). The best companies, he went on to say, are high purpose companies led by fanatical, passionate individuals.
Later, I went to the microphone and asked a question after his lecture in Trout. I was perfectly fine until I started to speak into the microphone, so I think I phrased my question something like this, “Companies are doing additional things like CSR reports, but not as part of the original business model. How can we change the org structure to adopt a more stakeholder point of view?”
I was hoping that Freeman would talk about some of the ways in which companies have integrated CSR into their core business practices, and how organizational structures have changed to reflect these new practices. That is not how Freeman interpreted my question- which is fine- but it left me feeling less that satisfied. He talked about how changing a business takes time, and that our generation would be a part of creating that change. He noted that CSR stood for Corporate Stakeholder Responsibility, which confused me because I thought CSR stood for corporate social responsibility. Which are similar, but at least for me, not the same. I get his message, though; stakeholder theory in practice takes time. He mentioned that there is a disconnect between what we know to be a great business and how to run a business. I think Freeman was answering the question of how to transition from our current business models to an excellent business, and that really the only solution is that it takes time to change cultural norms.
I really do think my management education has made me more cynical, in that I thought Freeman’s lecture has a rosy glow about it. He spoke about opportunity, and well-intentioned people, but in the face of all that we’ve read for this class alone, I can’t help but think that not everyone is as well intentioned as the few companies he highlighted. I think actual implementation of stakeholder theory is complex, for any number of reasons, and Freeman skipped over a lot of those problems. Maybe he was intending his lecture as an introduction to the topic, but I would have liked to hear more about the actual barriers and successes of changing from shareholder to stakeholder that companies have and will face, and how I as a manager can anticipate and react to those changes. All in all, I am grateful I had the opportunity to hear about this concept from the man who literally invented it.
Cheers!
The Good, the Bad, and the Ugly 