Author(s)

Frederic Narbel, Katrin Muff

Business School Lausanne, Lausanne, Switzerland.

Evolving views of stakeholder theory propose ways to transform societal problems into win-win solutions for the firm and society alike. Yet, and despite its success in expanding the understanding of the role of the firm in society, stakeholder theory has two main limitations. First, it is anchored in the traditional view of the firm defining it as an entity whose legitimate purpose is the generation of economic value for itself and its owners. Second, it relies on regulation as a compensatory mechanism for the externalities it generates. It is therefore fair to argue that at its current stage of development, stakeholder theory never leaves the confines of economic value maximization. As a result, stakeholder theory generates discussion on how to make its different interpretations comply with and serve the economic purpose instead of proposing a solution creating societal value. We therefore propose to interrupt the evolution of stakeholder theory and suggest a conceptual model derived from the study of best practices of successful firms using an outside-in approach to governance as an alternative. The intent is to redefine the purpose of the firm as one guided by societal goals instead of one driven by the pursuit of profit maximization.

Corporate Social Responsibility, Creating Shared Value, Corporate Finance, Stakeholder Theory, Short-Termism

Narbel, F. and Muff, K. (2017) Should the Evolution of Stakeholder Theory Be Discontinued Given Its Limitations?. Theoretical Economics Letters, 7, 1357-1381. doi: 10.4236/tel.2017.75092.