Jordan Nielsen and Brad Agle, Romney Institute of Public Management
The purpose of this research is to provide moral (normative) underpinnings for a stakeholder perspective of business management through the consideration of commonly-followed Christian religious principles. Religious principles are a rich and pervasive source of normative values, but in the corporate world moral values have long been ignored or subordinated—leading to what scholars have called the “divided life”, embracing moral imperatives outside the workplace while ignoring them within (Naughton & Alford, 2012). Ghoshal (2006) criticized this mindset, blaming it’s propagation on a view of management inspired by “amoral theories…[thus freeing individuals] from any sense of moral responsibility” (p.76). The traditional normative theory of the firm argues that managers should focus solely on shareholder value when making decisions. Stakeholder theory, on the other hand, broadens the interests of a firm, instructing management to consider all groups or people that affect or are affected by a firm (Freeman, 1984)—though primary stakeholders (i.e. those with the most risk—employees, customers, local communities) are of most relevance. Thus we set out to analyze the congruence between each perspective (i.e. shareholder, stakeholder) and ten common Christian principles.
Our research is primarily theoretical, and thus conceptual in nature. It therefore relies on a qualitative review of stakeholder literature to inform our conclusions. First, we examine the underlying assumptions of both the shareholder and stakeholder perspectives. Then, we compare the behavioral implications of those assumptions and their congruence with Christian principles.
The major underlying assumption of the shareholder perspective is that the maximization of shareholder value will generate the largest benefit to society, and thus all other considerations (aside from “playing within the rules” of law [Friedman, 1970]) are subordinate to this end. Other assumptions include a self-interested and opportunistic view of individuals (Ghoshal, 2006; Clarkson, 1995: 103), a belief that social benefits and costs are adequately expressed through corporate profits, a view that markets are efficient and adjust quickly to new circumstances (Fama, 1980; Fama and Jensen, 1983; Jensen, 1983; Barney and Ouchi, 1986; Hill and Jones, 1992) and a mathematical conclusion that an organization cannot logically maximize on two or more factors simultaneously (Jensen, 2002).
A stakeholder view of the firm focuses on maximizing real economic welfare (as opposed to just profits; Blair 1998). It sees the interests of stakeholders as intrinsically valuable in and of themselves, supporting an other-oriented attitude (Donaldson and Preston, 1995). This is followed by the belief that markets are actually inefficient in the short to medium-run, thus experiencing “sticky” prices when adjusting to new circumstances (e.g. a laid-off employee searching for a new job; Hill and Jones, 1992). Finally, it is assumed that managers view social issues through their relationships with stakeholders (Clarkson, 1995). While not exhaustive, these sets of assumptions reasonably represent the core beliefs of the two camps.
The ten core religious principles we included in our analysis are seen in Table 1 below. These principles have been referred to in previous management articles examining the role of religion (Agle and Van Buren III, 1999; Van Buren III & Agle, 1998). While we cannot provide an exhaustive analysis of each assumption and each religious principle here, we present an overview of the perceived congruence between assumptions and principles.
Discussion & Conclusion
While conceptual analyses have their limitations, an obvious pattern suggested by our research is that the shareholder perspective encourages a narrow application of Christian principles, while the stakeholder perspective encourages a broad application. For example, a shareholder-manager sees himself as a steward of only shareholders, an agent of only shareholders, accountable only to them. Stakeholder-managers, on the other hand, see their place in the “big picture”, viewing profit as a means to an end, and therefore respecting objectives such as job stability for employees, safety for customers, or clean environments for communities. It might be said that a narrow application of Christian principles is hardly an application at all. If such a statement is too strong, it is certainly not too strong to conclude that a broad application of Christian principles more fully expresses the moral absolutes of Christian teachings. Thus while both shareholder-managers and stakeholder-managers can theoretically follow Christian teachings, the stakeholder-manager makes decisions with a perspective that allows him or her to more fully behave in a manner consistent with religious principles.
An exhaustive discussion is outside the scope of this report; however, it seems rather clear that while corporations should not bear all (or perhaps even most) of the burden of “social issues”, they do in fact play a significant role, and bear a portion of responsibility for their influence in society. We conclude that Christian principles are expressed and supported more in the stakeholder perspective than in the shareholder perspective, further demonstrating that the ethical practice of business should include a decision-making process which is interested in primary stakeholders, at the least.
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