48 Is stakeholder theory controversial?

Stakeholder theory can be controversial. Consider the following example perspectives. Columnist George F. Will wrote an article titled “Business beware, ‘stakeholder’ capitalism is parasitic progressivism”. He calls the word “stakeholder” a “toxic noun” of “dubious legality” because “the wealth of workers, and of current and future retirees, is diminished when ‘stakeholders’ get corporations to sacrifice the goal of maximizing economic value to noneconomic, generally political goals.” He sums up this view with “Self-proclaimed stakeholders, parasitic off others’ labor and accumulation, assert that everything is their business.”

Or, consider David L. Bahnsen’s piece “The Well-Deserved Death of ‘Stakeholder Capitalism’” which states that “Stakeholder capitalism is a fraud” because “when the primary function of the business is lost — that is, the profitable delivery of goods and services toward the aim of a better enterprise — not only do equity shareholders suffer, but so also do bondholders, employees, vendors, et al.”

What these critiques have in common is attacking a certain view of stakeholder theory. Certainly, if a business becomes so concerned with satisfying external social responsibilities that it ignores the need to make a profit, it may fail and those responsible have likely violated fiduciary duties they owe to others. This is very similar to the counterexample of a business so concerned with short-term profits that it alienates its customers, loses its employees, and suffers the same type of economic failure contemplated in these articles. As we saw in the CSR Pyramid in the prior Question, economic concerns form the foundation of this text’s conception of business responsibility. Our view of stakeholder theory–which calls for long-term, strategic, consideration of the needs of suppliers, employees, shareholders, customers, vendors, and others who affect and are affected by the business–is not this sort of caricature.