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SPRINGER BRIEFS IN ETHICS

Maria Bonnafous-Boucher
Jacob Dahl Rendtorff

Stakeholder
Theory
A Model for
Strategic
Management

123
SpringerBriefs in Ethics
More information about this series at http://www.springer.com/series/10184
Maria Bonnafous-Boucher • Jacob Dahl Rendtorff

Stakeholder Theory
A Model for Strategic Management
Maria Bonnafous-Boucher Jacob Dahl Rendtorff
Full Professor Paris Chamber of Commerce Roskilde University
and Industry Roskilde, Denmark
Paris, France

Translated by Michael Lavin

ISSN 2211-8101 ISSN 2211-811X (electronic)

SpringerBriefs in Ethics
ISBN 978-3-319-44355-3 ISBN 978-3-319-44356-0 (eBook)
DOI 10.1007/978-3-319-44356-0

Library of Congress Control Number: 2016956693

© The Author(s) 2016

This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of
the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation,
broadcasting, reproduction on microfilms or in any other physical way, and transmission or information
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protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this book
are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the
editors give a warranty, express or implied, with respect to the material contained herein or for any errors
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Printed on acid-free paper

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The registered company is Springer International Publishing AG Switzerland
Preface

It is a special pleasure and privilege to write this preface to Stakeholder Theory.

A Model for Strategic Management. While much of this book is territory that is
familiar to me, there is much new ground. They have built on the contributions of
many others, and suggested that stakeholder theory can be pushed in new directions
that are important to make societies better.
When they suggest that “Stakeholder theory examines the displacement of tradi-
tional sovereignties towards other forms of institutional legitimacy” they rightly
understand the critical philosophical attitude which comprise the origins of the
theory from Rhenman onwards. Their conclusion is equally powerful:
In the final analysis, stakeholder theory questions the traditional frontiers between the pub-
lic space and the private space; it deconstructs the categories of political philosophy, ethics,
the economy of organizations, and corporate strategy; it suggests treating these categories
in a new way. It borrows the most classical concepts from currents of liberal philosophy
from Locke to Rawls in order to them in contemporary forms of sovereignty, of govern-
ment, of civil society, of social contract, of the redefinition of the common good, of social
justice, of deliberation in the public space. In so doing, stakeholder theory creates a current
within contemporary political philosophy, that of a critical philosophy of institutions, par-
ticularly the corporation.

Seeing the development of stakeholder theory as a way to set business within

society, rather than in some fictional space of abstract economics or “free markets
disconnected with the humanness of real business” is an achievement of the first
order.
It is my sincere hope that this book catalyzes a line of research that connects
business theory with political philosophy. For too long business theory has been
separated from the rest of the human sciences, especially those who recognize the
normative as fundamental. And equally, for too long the first question of political
philosophy has been, “how is the state to be justified”. Stakeholder theory as inter-
preted in this volume has the potential to build more useful theories about the con-

v
vi Preface

nections between business and political life, between business theory and political
philosophy and ethics, and between the practical worlds of business and civil soci-
ety. Such as task may turn out to be central to building a world that is worth leaving
to our children.

University Professor R. Edward Freeman

The Darden School
University of Virginia
Charlottesville, VA, USA
December, 2012
Acknowledgments

As the main contributor, I would like to take this opportunity to thank everyone who
helped to make this book possible, especially my coauthor, Jacob Dahl Rendtorff. I
would also like to thank Thomas Donaldson, the professors at the Legal Studies and
Business Ethics Department at Wharton, as well as Albert David, Julie Battilana,
Philippe Desbrières, Jean-Pierre Bréchet, Isabelle Huault, Michael Lavin, Hervé
Mesure, Arnaud Stimec, Christian Thuderoz, William Zartman, Edward Freeman,
and the anonymous reviewers of the “Repères” collection.

Maria Bonnafous-Boucher

vii
Contents

1 From “The Stakeholder” to Stakeholder Theory .................................. 1

Definitions ................................................................................................... 1
Conceptual Framework: R. E. Freeman (1984–2010)
and His Followers ....................................................................................... 4
Parameters of the Theory ............................................................................ 8
Epistemological Debates and Theoretical Pluralism .................................. 10
Is Stakeholder Theory a Theory? ........................................................... 11
A Concrete Theory: Categorizing the Actors Who Count
in Corporate Strategy ............................................................................. 11
A Theoretical Pluralism Revealed by Donaldson
and Preston (1995) ................................................................................. 15
Critiques of the Theory ............................................................................... 17
The Scope of the Theory and Its Potential for Expansion .......................... 18
2 Stakeholder Theory in Strategic Management ...................................... 21
Representations of the Corporation in Strategic
Management and the Emergence of Stakeholder Theory (1980–1990)...... 22
Between 1950 and 1968, an Economistic Approach
to the Corporation .................................................................................. 23
1968 and 1985: Strategic Representations of the Corporation............... 23
1985 and 1995: A Financial Vision Combined with
Multi-Criteria Performance and a Conception Offering
an Alternative to Financial Orthodoxy ................................................... 23
Since 1995: A Multitude of Different Perspectives................................ 23
The Role of Stakeholder Theory in Corporate Strategy.............................. 25
The Corporation Between Dependence on the Environment
and Policy Self-Determination ............................................................... 25
Stakeholder Theory: Promoting Strategic Management,
1970–1980 .............................................................................................. 26

ix
x Contents

A Pluralist Representation of the Corporation

and of the Organization: Toward Partnership-Based
Corporate Governance............................................................................ 28
Strategic Models Which Are Not Congruent with
Stakeholder Theory: Michael Porter ........................................................... 31
Michael Porter’s Competitive Advantage............................................... 31
Richard D’Aveni’s Hyper-Competition Model (1994–2010) ................ 33
Strategic Models Compatible with Stakeholder Theory ........................ 34
The Corporation as a Political System: The Francophone
School of 1980–2009 ............................................................................. 34
Resource and Skills-Based Strategy....................................................... 36
The Relational View ............................................................................... 37
Impact of Stakeholder Theory on Strategic Marketing
and Research in Negotiation ....................................................................... 37
Conclusion .................................................................................................. 38
3 Stakeholder Theory as a Theory of Organizations ................................ 41
Stakeholder Theory, a Factor of Change in Organization Theory .............. 42
From Structure to Its Fragmentation: The Internationalization
of Organizations and of Inter-organizational Relations .............................. 44
The Increasing Internationalized of Firms: From Very
Large Companies to Companies That Are Born Global ........................ 44
International Regulatory Organizations with a Global Vocation............ 45
Public Organizations Undergoing Profound Changes ........................... 46
Organization Theory and Stakeholder Theory ............................................ 47
The Organization as Relation and as Organized But
Unexpected Action ................................................................................. 48
Organized Action as Sensemaking ......................................................... 49
Other Currents Relevant to Stakeholder Theory ......................................... 49
The Neo-Institutionalist Current ............................................................ 49
Political Approaches............................................................................... 50
Conclusion .................................................................................................. 51
4 Political Philosophy Interpellated by Stakeholder Theory ................... 53
Conflict Between Institutions and Organizations........................................ 54
From Civil Society to Stakeholder Society? ............................................... 54
The Hegelian Theory of Civil Society ................................................... 55
Three Factors of Correspondence Between Civil Society
and Stakeholder Society ......................................................................... 56
Stakeholder Theory and the Social Contract............................................... 59
A Non-social Contract: The Firm as a Network of Contracts ................ 60
Stakeholder Theory’s Social Contract: An Alternative
to the Theory of the Firm ....................................................................... 61
The Social Contract: From Rhetoric to Reality...................................... 63
The Relevance of the Social Contract to Stakeholder Theory ............... 64
Conclusion .................................................................................................. 65
Contents xi

5 Stakeholder Theory and Ethics ............................................................... 67

Ethics: Justice, Equality and Fairness ......................................................... 67
From the Ethics of Discussion to Deliberative Rationality......................... 69
The Paradox of Stakeholders in Business Ethics ........................................ 69
Stakeholder Theory and the Common Good: Contrasting Conceptions ..... 71
Equity and Justice as Management Principles: Robert Phillips
and John Rawls ........................................................................................... 72
Deconstruction of the Paradigm of Justice and Ethics................................ 77
Conclusion .................................................................................................. 78

General Conclusion......................................................................................... 79

Bibliography .................................................................................................... 83
Introduction

Between 1984 and 2012, much has been written and said about stakeholder theory.
Published in 2010, R. E. Freeman’s Stakeholder Theory: The State of the Art pro-
vides an overview of the major contributions in the field. The uninterrupted and
increasingly rapid flow of publications up until that time attests to the importance of
the theory.
This book puts the importance of stakeholder theory into perspective, first as a
negotiated model of governance; second, as a descriptive, explicative, and interpre-
tative framework for modalities of decision-making and action in management; and
third, as a local theory, developed in the field of strategic management, extending
beyond the confines of the discipline in which it originated. The principal objective
of this book is to highlight the philosophical (political and moral) issues inherent in
a management model.
Stakeholder theory is without doubt a local theory in that the sources of the
notion of the stakeholder are to be found in a specific form of organization – the
multinational company – in a particular context, the globalized economy of the
1980s and 1990s. Stakeholder theory is concerned with the representation of
decision-making mechanisms and power relations within such organizations; it
offers a way of reappraising the models of governance of the multinational and,
consequently, the possibility of redistributing the wealth it creates taking into
account the parties which interact with it directly or exert an influence over it indi-
rectly. Moreover, stakeholder theory reappraises the corporate environment by
introducing a series of sometimes converging, but often conflicting, interests; it
deepens the notion of the strategic environment by extending the postulate accord-
ing to which doing business is more than just making money. Consequently, it
attempts to better situate the place and role of the corporation in society and to
analyze the impacts of its activity on the economic, political, social, legal, cultural,
and ecological environment. In short, stakeholder theory reconciles business ethics
and strategy.
However, there is no denying that, although anchored in research focusing on
corporate life, the notion of the stakeholder is enjoying growing influence beyond
the frontiers of management. What, then, is the real scope of the notion and the

xiii
xiv Introduction

theory that has emerged from it? Deriving from management, can it impact on other
fields of knowledge and other practices? Such a hypothesis may corroborate the
idea according to which our systems of thought are fed by a managerial tropism
(Gary S. Becker’s Foucauldian reading). Is the corporation, now a fundamental eco-
nomic unit of society, destined to become a fundamental social unit too? Indeed,
according to some commentators, the underlying intention of stakeholder theory is
to affect this transformation. That is why it is legitimate to ask questions about the
extension of the theory beyond the field of management science. However, for good
or ill, stakeholder theory rethinks and attempts to resolve, in the sphere of business
life, questions as decisive as those concerning the interests of one or more social
categories, or even one or more social classes. It appraises the rise – through delib-
erative and participative practices – of democratic processes in all organizations up
to corporate government. It reflects on the concrete consequences that this phenom-
enon represents for the distribution of powers. It highlights, through the necessary
distribution of wealth, the possibility of a form of social justice within the corpora-
tion. Lastly, it asks questions about the contribution of commercial firms to the
common good of society.
The reader will perhaps find it surprising that a theory and a concept, the sources
of which are to be found in management science, can be used to explain situations
not limited to either economic or corporate life. This explanatory power, or what we
refer to as the heuristic function of the theory, is all the more penetrating in that it is
based on a comparison of current perspectives in management studies. Indeed, the
fecundity of the theory derives from its local precision, which encourages both criti-
cal and constructive studies on democratic mechanisms and corporate governance
structures, as well as on organizational systems at the crossroads between private
and public life.
Thanks to its heuristic function (Bonnafous-Boucher 2011),1 the value of stake-
holder theory is largely based on its capacity to develop notions which transform
our ways of thinking about the organization of power, decision-making, and action.
Whence its practical usefulness, which, however, is often called into question. In
this book, we propose a normative heuristic approach.
Chapter 1 consists in an examination of the process whereby the notion of the
stakeholder became a theory. A number of definitions are addressed, including the
now well-established conceptual framework first mooted in the 1960s and devel-
oped in the 1980s. This brief panorama provides an outline of the parameters of the
theory and contextualizes the epistemological debates that have arisen around it,
debates that have led to the development of a kind of theoretical pluralism and to the
emergence of a number of critiques. The scope and potential for extending the the-
ory to other fields are also discussed.
Chapter 2 provides a description of the theory’s roots in strategic management
and outlines how it reflects a historically constructed conception of the corporation
that differs from a financial or merely competitive representation of the economic
actor in an economic, social, and cultural environment. Stakeholder theory situates

1
The references between brackets refer to the bibliography at the end of the book.
Introduction xv

the corporation between a dependence on the environment and the possibility of

determining its own policy. Congruent approaches are examined, including the
French approach, which identifies the corporation as a political system; the resource-
and skills-based approach; and the approach representing the corporation as a net-
work of complex relations.
Chapter 3 deals with stakeholder theory’s contribution to organization studies, an
aspect ignored by the authors of the theory themselves.
Chapter 4 presents an overview of conflicts over legitimacy between traditional
public institutions and international organizations. The possibility or impossibility
of constructing a social contract on contemporary foundations is examined, and the
links between stakeholder theory and theories of justice and the redistribution of
wealth are discussed. As an immediate consequence of these politico-philosophical
and moral considerations, stakeholder theory is, in this book, considered not as a
marginal approach to social questions affecting the corporation, nor as a kind of
borderless actor theory, but as a theory capable of regenerating problematics as
fundamental as those of the nature of the corporation and the emergence of a trans-
national civil society.
Chapter 5 deals with the relationship between stakeholder theory and ethics.
Chapter 1
From “The Stakeholder” to Stakeholder
Theory

Definitions

The term stakeholder (“partie prenante” in French) is used in different ways by

specialists and members of the public. For the wider public, it is a generic term,
equivalent to “citizen,” to anyone taking part in public life. For specialists, it refers
to people who are not shareholders. In fact, “partie prenante” is an imperfect trans-
lation of the English stakeholder, literally the “holder” of a “stake.” Less literally,
stakeholder means he, or she, who has a stake in something. More broadly, it means
someone who participates or “takes part” in something (“prendre partie,” hence
“partie prenante”). In English, the term stakeholder is a neologism which plays on
the term stockholder (designating those who share the profits, including the share-
holders). The term indicates that parties other than stockholders can have a say and
that their stakes and interests in the activities of the firm should be recognized
(Freeman and Reed 1983). It defines individuals and groups of individuals indispen-
sible to the survival of the firm and who are either consulted or participate directly
in decision-making processes or arbitrage. But from which point of view is the
question of survival to be considered: from that of the firm or that of the stake-
holder? It is for this reason that some Francophone authors prefer the term “partie
intéressée” (“interested party”) (Benseddik 2006) or “ayant droit” (“rights holder”)
(Mercier 2006). Perhaps not surprisingly, for the Swedish administrative research
school of the 1960s, represented by Rhenman and Stymne (1965), the notion of the
stakeholder is seen as reciprocal relationship in which a stakeholder is a group
which depends on the firm in order to achieve its own objectives and on which the
firm depends for its survival.
Officially, the term “stakeholder” was first used in public at a conference held at
the Stanford Research Institute in 1963 to refer to “all groups on which an organiza-
tion is dependent for its survival.” But it was only 20 years later that the term “stake-
holder” was popularized by Freeman (1984) who, at that time, used it to mean: “an
individual or group of individuals which can affect or be affected by the achievement

© The Author(s) 2016 1

M. Bonnafous-Boucher, J.D. Rendtorff, Stakeholder Theory, SpringerBriefs in
Ethics, DOI 10.1007/978-3-319-44356-0_1
2 1 From “The Stakeholder” to Stakeholder Theory

of organizational objectives.” Only those who cannot affect (due to an incapacity to

do so) and those who are not affected by the actions of an organization (due to the
absence of any form of relationship) are excluded from this definition. It should also
be noted that a stakeholder can be affected by the corporation without being able to
affect it in turn (and vice-versa). Potentially, and alternatively, it can contribute to or
threaten the organization.
In the final analysis, while the term “stakeholder” is closely associated with the
private sector and the corporate world, it is also revealing in terms of the relation-
ship between the business world and public life: it illustrates the difficulty of dis-
sociating various interests, since the environment within which corporations act is
not only economic and legal, but also social, political, cultural and ecological. In
fact, the term “stakeholder” has crossed the borders of corporate governance and is
now frequently used by political analysts, as evidenced by the White Book on
European governance (Candela 2006), and by numerous political scientists
(Ackerman and Fischkin 2004). Nevertheless, the decision-making processes of
national public organizations (states, public authorities), regional public organiza-
tions (the European Union), and para-public organizations (associations, interna-
tional NGOs) has little to do with the corporate governance model.
Consequently, it is difficult to determine a priori who is a stakeholder and who
or what is not. It depends on a concrete analysis of the precise situation in which an
organization or, more specifically, a corporation, finds itself. Whether in public
debates or in debates on corporate management, the notion of the stakeholder is
generally associated with that of the actor concerned with a decision or a project. It
seems to complement the notions of the historical social actor (Bourdieu), the stra-
tegic actor (Crozier), the identity-creating actor (Sainsaulieu), the group actor
(Kaes, Anzieu), and the impulse actor (Enriquez), a family of concepts traversing
many of the social sciences. Stakeholders are constantly implicated in collective,
public action in terms of both analysis and practice. It is as if, in order to govern, or
quite simply to win agreement to a reform, it is sufficient to be aware of the interests
and influence of various groups. Thus, in a neo-liberal context, integrating stake-
holders into an action framework takes the form of a pertinent, actionable theory
(Audier 2012) in which everything is negotiable in a context in which decisions are
made in function of events and their impacts (Bonnafous-Boucher 2004). But who
or what is a stakeholder and who isn’t? If everything, either in an absolute or relative
manner, is a stakeholder, is the fact of acting tantamount merely to establishing
degrees of engagement or disengagement? In many regards, stakeholder theory
bears witness to a desire for change in approaches to governance, decision-making,
acting, feeling or wanting to be part of a project. It reflects a shared aspiration to
participate; it highlights the questionable nature of the distinction between those
who have rights and those who do not. It takes into account the blind spot consti-
tuted by those who do not express an opinion. That is why, although it undeniably
derives from management studies, it can also be regarded as a theory critical of
neo-liberalism.
In a well known article, Mitchell et al. (1997) attempted to put an end to the
debate on the identity of stakeholders once and for all. The authors suggested that
Definitions 3

the problematic should be reduced to the following question: who really counts for
the firm? Clearly, the authors consider stakeholder theory exclusively from the point
of view of usefulness to the corporation (Table 1.1).

Table 1.1 What is a “stakeholder”? A chronology

Source Stake
Stanford memo “those groups without whose support the organization would cease to
(1963) exist” (cited in Freeman and Reed 1983; Freeman 1984)
Rhenman (1964) “are depending on the firm in order to achieve their personal goals and
on whom the firm is depending for its existence”
Ahlstedt and “driven by their own interests and goals are participants in a firm, and
Jahnukainen (1971) thus depending on it and whom for its sake the firm is depending”
(cited in Näsi 1995)
Freeman and Reed Wide: “can affect the achievement of an organization’s objectives or
(1983: 91) who is affected by the achievement of an organization’s objectives”
Narrow: “on which the organization is dependent for its continued
survival”
Freeman (1984: 46) “can affect or is affected by the achievement of the organization’s
objectives”
Freeman and Gilbert “can affect or is affected by a business”
(1987: 397)
Cornell and Shapiro “claimants” who have “contacts”
(1987: 5)
Evan and Freeman “have a stake in or claim on the firm”
(1988: 75–76)
Evan and Freeman “benefit or are harmed by, and whose rights are violated or respected
(1988: 79) by, corporate actions”
Bowie (1988a, b: “without whose support the organization would cease to exist”
112, Note 2)
Alkhafaji (1989: 36) “groups to whom the corporation is responsible”
Carroll (1989: 57) “asserts to have one or more of these kinds of stakes” – “ranging from
an interest to a right (legal or moral) to ownership or legal title to the
company’s assets or property”
Evan and Freeman contract holders
(1990)
Thomson et al. In “relationship with an organization”
(1991: 209)
Savage et al. “have an interest in the actions of an organization and … the ability to
(1991: 61) influence it”
Hill and Jones “constituents who have a legitimate claim on the firm … established
(1992: 133) through the existence of an exchange relationship” who supply “the
firm with critical resources (contributions) and in exchange each
expects its interests to be satisfied (by inducements)”
Brenner (1993: 205) “having some legitimate, non-trivial relationship with an organization
(such as) exchange transactions, action impacts, and moral
responsibilities”
(continued)
4 1 From “The Stakeholder” to Stakeholder Theory

Table 1.1 (continued)

Source Stake
Carroll (1993: 60) “asserts to have one or more of these kinds of stakes in the business” –
may be affected or affect …
Freeman (1994: 415) participants in “the human process of value creation”
Wicks et al. (1994: “interact with and give meaning and definition to the corporation”
483)
Langtry (1994: 433) “the firm is significantly responsible for their well-being, or they hold a
moral or legal claim on the firm”
Starik (1994: 90) “can or are making their stakes known” – “are or might be influenced
by, or are or potentially are influencers or some organization”
Clarkson (1995: 5) “bear some form of risk as a result of having invested some form of
capital, human or financial, something of value, in a firm” or “are
placed at risk as a result of a firm’s activities”
Clarkson (1995: 106) “have, or claim, ownership, rights, or interests in a corporation and its
activities”
Näsi (1995: 19) “interact with the firm and thus make its operation possible”
Brenner (1995: 76, “do or which could impact or be impacted by the firm/organization”
Note 1)
Donaldson and “persons or groups with legitimate interests in procedural and/or
Preston (1995: 85) substantive aspects of corporate activity”
Source: Mitchell et al. (1997: 858–859)

These contradictory elements provided the point of departure for an intense

debate in which the term “stakeholder” was transformed from a play on words into
a notion and, finally, into a strategic management problematic which has, since
1984, generated a substantial amount of academic output. Between the year in
which Strategic Management: A Stakeholder Approach was published, and 2010,
which saw the appearance of Stakeholder Theory: The State of the Art, Strategic
Management, and Stakeholders, a plurality of hypotheses and controversies were
developed, illustrating how attractive the theory is. At any event, the notion of the
“stakeholder” makes it possible to develop a theory which offers a representation of
power within a structure of governance, namely that of the corporation, thereby
shining an analytical light on corporate governance and the strategic decision-
making processes of the firm.

Conceptual Framework: R. E. Freeman (1984–2010)

and His Followers

Freeman, a philosopher and Professor of Strategic Management, has always recog-

nized the diversity of his intellectual heritage, which ranges from Ackoff to the logi-
cal and pragmatic philosophers. Indeed, a certain number of mostly American
Conceptual Framework: R. E. Freeman (1984–2010) and His Followers 5

researchers and consultants have followed in his footsteps, including Agle, Boatright,
Bowie, Clarkson, Donaldson, Dunfee, French, Goodpaster, Harrison, Jones,
Kochan, Marens, Mitchell, Parmer, Phillips, Venkataraman, Wicks and Wood.
But the role of the firm and the nature of its obligations to the rest of society had
been analyzed and discussed long before Freeman. After the 1929 crisis, Dodd
(1932) and Barnard (1938) advanced the idea that the corporation should balance
the rival interests of its various participants with a view to ensuring their continued
cooperation. After the 1929 crash, a number of major companies, including General
Electric, recognized four actors as stakeholders: customers, employees, the com-
munity and stockholders (Hummels 1998). Other authors examined the question of
the identity of the main groups participating in the identity of the firm. Rhenman
and Stymne (1965, quoted by Carroll and Näsi 1997) describe the firm as a social
and technical system in which stakeholders play a decisive role; they are, for exam-
ple, at the origin of experiments in industrial democracy in Scandinavia. Blair
(1995) posits that the symbolic foundations of the theory are to be found in the case
brought against Ford by the Dodge brothers in 1919, when the Michigan Supreme
Court found in favor of stockholders who had demanded that the company should
share its profits in the form of dividends. But surely this episode has only limited
relevance to a theory which makes a clear distinction between stakeholders and
stockholders.

Robert Edward Freeman

Robert Edward Freeman was born on December 18, 1951 in Columbus,
Georgia, USA. After studying Philosophy and Mathematics at Duke University
in the 1970s, he gained a PhD in Philosophy at Washington University in St.
Louis in 1978. In the early 1980s, he worked as a researcher in the Wharton
Business School’s Busch Center, directed by Russell Lincoln Ackoff, a pio-
neer in operational research and systems theory. He then moved to the
Wharton Applied Research Center, recently set up by Ackoff (an academic),
and James R. Emshoff (a businessman). These last set up and supported a
research seminar on the notion of the “stakeholder.” The mission of the center
was to act as “Wharton’s window on the world,” but after the initial seminar,
the participants asked themselves whether the subject was not too normative,
revealing as it did questions about distributive justice which no one present
could answer. It was then that the fortune of stakeholder theory was indisso-
ciably linked to R. E. Freeman’s career trajectory.
Freeman, a philosopher, worked simultaneously with experts in strategy
and sociologists. The idea of stakeholder theory was congruent with the ideas
expressed by Ackoff in his 1974 book, Redesigning the Future, written with
Ian Mitroff and Richard Mason. Furthermore, Wharton was in contact with
the Stanford Research Institute where Igor Ansoff, Eric Rhenman, Robert

(continued)
6 1 From “The Stakeholder” to Stakeholder Theory

(continued)
Stewart and Marion Doscher were developing strategic planning and strategic
assumptions analysis. Emshoff, President of Indecap, encouraged Freeman to
start writing about stakeholder management. That was how he came into con-
tact with AT & T and Bell and, in conjunction with the center, produced an
evaluation of the strategy applied by a Mexican brewery. Simultaneously,
Freeman collaborated regularly with Bill Evan, a sociologist from the
University of Pennsylvania. Evan immediately saw in the notion of the stake-
holder the possibility of democratizing large companies. He regarded it as a
concrete idea that could be applied in real life. The objectives of the Wharton
seminar and those of the sociologist coincided. Thanks to Bill Evan, Freeman
learned to reconcile philosophy, the social sciences and management and, as
he later wrote, “continue to be the philosopher that he was, rather than a posi-
tivist social scientist.” In 1984, he published Strategic Management: A
Stakeholder Approach. In 1993, he co-wrote an article with Evan on Kantian
capitalism. Simultaneously, Freeman was appointed as Professor of
Management at the public sector University of Minnesota, an establishment
with over 50,000 students. In 1986, his appointment to the highly prestigious
Darden School of the University of Virginia, itself founded by Thomas
Jefferson, saw him return to the southeast United States. In the same year, the
Olsson Center, focusing on Applied Ethics was set up, and, in 2004, Freeman
became head of the Business Roundtable Institute where he taught business
ethics to middle-managers in large companies. In Virginia, a conservative
state, at once the home of American Republicanism and characterized by
deep-seated religious and ethical values, Freeman focused on business ethics
and corporate governance. It was thus that, in his wake, in 1999, A. C. Wicks,
head of the Olsson Center, produced a convergent theory of stakeholder the-
ory, which he has been developing ever since; J.S Harrison, Professor of
Strategy at the Robins School at the University of Richmond (Virginia)
defends Freeman’s vision in the Academy of Management, an association of
which most academics working in the field of management are members. In
2010, the three authors published a State of the Art of stakeholder theory.
R. A. Philips, also a professor of the Robins School, is one of the most pro-
ductive researchers in the field. In 2010, conjointly with Freeman, he pub-
lished a book simply entitled, Stakeholders.

Russell L. Ackoff (1974, 1994) seems to have been the first to have genuinely
recognized the conceptual potential of the notion of stakeholders. He oriented his
research toward a representation of the corporation and developed an embryonic
form of stakeholder theory by defining the objectives of organizations. According to
Ackoof, the corporation should reconcile the contradictory interests of groups to
which it is directly linked, adjusting its objectives with a view to satisfying the
Conceptual Framework: R. E. Freeman (1984–2010) and His Followers 7

needs of those groups in an equitable manner. Although profit is one of its objec-
tives, it is not the only one. But, with the exception of Ackoff and a number of
authors working between the late 1960s and the mid-1980s, the theory received
little attention in the fields of management, strategy and ethics. Indeed, when
Freeman presented an article on stakeholder for publication, the evaluators sug-
gested that he should perhaps use the term “stockholder” instead.
The most all-encompassing version of stakeholder theory is the one outlined in
1984 (republished in 2010) by Freeman in Strategic Management: A Stakeholder
Approach. In his book, Freeman suggests that the generally separate concepts of the
organization and the corporation should be linked to produce a strategic, political
and moral conception which includes negotiation and communication. For the
author, the corporation is a wheel whose spokes represent particular interests
(Aggeri 2008; Cazal 2011). This observation is based on the dependence of firms on
third parties, these last expressing requests concerned with risks engendered by
economic activity. It is in this context that Freeman’s key concept (1984) acquires
its full meaning: “Simply put, a stakeholder is any group or individual who can
affect, or is affected by, the achievement of the organization’s objectives.” According
to the American professor, stakeholders include any group or individual who can
either help or analyze a corporation by calling its strategy into question. By focusing
on these groups and their wellbeing, whether they are internal or external to the
corporation, it should be possible for an organization to establish its strategies by
ensuring that they are consonant with societal expectations. Nevertheless, this
approach requires a theoretical framework in order to deal with various groups,
which are not merely aggregations of particular interests. Thus, theoretical research
into the role of stakeholders would provide a concrete analytical context making it
possible to examine in a relevant way the relationship between the corporation and
its internal and external environment. With this in mind, Freeman starts by drawing
up a map of the stakeholders in a specific firm. He then analyzes potential negotia-
tion processes based on specific themes concerning particular groups of stakehold-
ers. Negotiation is, in this context, based on dialogue, with a view to guaranteeing
free and voluntary collaboration (Freeman 1984: 74). Later, Freeman (1984: 83)
demonstrated that stakeholder theory could be used to define the fundamental
visions and aims of a corporation. Analyzing stakeholders is the same thing as ana-
lyzing the values and social problems by which the corporation is confronted. From
the author’s point of view, this analysis is a part of the value of the corporation,
enabling it to measure not just its financial value but also its social and societal per-
formance (Fig. 1.1).
With Strategic Management: A Stakeholder Approach (1984), Freeman became
a pioneer who, not content with underlining the need for a theoretical framework
(the creation of value by stakeholders versus the creation of financial value) sug-
gested new approaches to elaborating corporate strategy. His approach to the objec-
tives of the corporation and to how it fitted into its environment overturned the
traditional frameworks of strategy. Responding to directors and shareholders who
remained unconvinced of the relevance of his representation of the firm, he main-
tained that, in respecting stakeholders, the firm would be better able to make profits.
8 1 From “The Stakeholder” to Stakeholder Theory

Fig. 1.1 Impact of the corporation on stakeholders/Impact of stakeholders on the corporation

(Source: R.E. Freeman, Strategic Management, Pitman Publishing Inc, Boston, 1984)

In sum, Strategic Management: A Stakeholder Approach suggests a pragmatic

approach. Indeed, Freeman has always claimed to belong to a pragmatic current
(Freeman et al. 2010). In this instance, pragmatism means that identifying and
negotiating with stakeholders is the best way of advancing and developing business.
Consequently, as Freeman has explained on a number of occasions, stakeholder
theory is an operational theory enabling firms not only to define and develop their
strategy, but also to evaluate it.

Parameters of the Theory

After 30 years of controversy, we can now say that stakeholder theory is principally
a theory of corporate strategy which has been taken up by researchers in the fields
of business ethics, organization theory, political and moral philosophy (Phillips
et al. 2003), political sociology and political science. In many strategic management
encyclopedias, such as those published in 2001 and 2005, stakeholder theory is
presented as a promising and idiosyncratic approach.
In effect, stakeholder theory is a recent and increasingly important current in the
field of strategy (Freeman 1984, 2001; Martinet 1984; Martinet and Reynaud 2001).
The current is concerned with reappraising the concept of the corporation, domi-
Parameters of the Theory 9

nated by agency theory (Jensen and Meckling 1976; Jensen 2000), which considers
the organization exclusively in terms of its ability to create value for shareholders.
Noble Prize-winner Milton Friedman declared in the New York Times in 1970 that
“the social responsibility of business is to increase its profits.” Since profits are the
result of an implicit contract with non-shareholders, each group of non-shareholders
has a contractual relationship with the corporation in that they all receive payment
(employees) that they freely accept. The financial objective not only serves the
interests of the owners of the corporation but also provides a framework which
makes it possible to ensure that limited resources are allocated, managed and
deployed as effectively as possible (Stewart 1994). But this approach describes the
corporation as a combination of production factors which transform “inputs” into
“outputs,” which, in turn, create value by being sold on competitive markets
(Martinet 1984). In stakeholder theory, the corporation is not exclusively based on
the particular interests of its owners and stakeholders. Shareholder value (short
term) can thus be contrasted to stakeholder value (medium- to long-term). That is
why the choice of value creation through stakeholders is, above all, strategic
(medium-term, long-term), informed as it is by the twin objectives of survival and
development. But by making that choice, the corporation is confronted with agents
(other than shareholders) which limit its access to resources. The presence of these
agents obliges it to develop a competitive strategy which satisfies a range of inter-
ests. The corporation thus attempts to build within a society and not merely in a
market (Martinet 1984).
The strategic management of stakeholders is primarily based on a capacity to
understand their expectations as a factor in the development of the organization, and
to acknowledge their contribution to value creation, be they internal (investors, the
ensemble of collaborators) or external (consumers, suppliers, civil society, public
authorities) to the corporation. With this aim in mind, the corporation is encouraged
to define the nature of its relationship with its stakeholders (Thomson et al. 1991).
These interests are de facto “stakeholders” in the strategic policies of the corpora-
tion (Freeman 1981, 1984, 2007, 2010; Hitt et al. 2001). The corporation thus “man-
ages” on behalf of its stakeholders (Freeman 2007). But what does managing on
behalf of one’s stakeholders imply?
Attempts to separate the economic from the social represent a stumbling block
which continuously threatens corporate legitimacy. While capitalism guarantees the
corporation a degree of autonomy based on an a priori trust in economic actors –
specifically, in private firms (which oil the wheels of the economy), that autonomy
is also based on an a priori trust in society, since the corporation’s institutional legiti-
macy underpins its right to make profits freely without the need for self-justification.
However, the fact that its pragmatic legitimacy is often contested encourages the
corporation to recognize its dependence on external factors. It is here that the idea of
corporate social responsibility emerges. Stakeholder theory is part of a debate about
the role of business in society. Like business ethics, it highlights the way in which
the economic sphere is socially embedded. In effect, if one takes the view that the
corporation exists not only in the market, but also in society, then the sociality of the
10 1 From “The Stakeholder” to Stakeholder Theory

History of idea
Adam Smith (1759)
Berle and Means (1932)
Barnard (1938)

Stakeholder
Concept
SRI (1963)

Corporate Corporate Social Organization

Planning Systems Theory
Responsability Theory

Strategic
Management

Fig. 1.2 A history of the stakeholder concept

economy and the embeddedness of the corporation in society is a given. This obser-
vation originates in Karl Polanyi’s The Great Transformation (1944). The advent of
globalization has led to an increasing recognition of the embedded nature of the
corporation. But a variety of approaches are taken to the phenomenon. More than a
moralizing approach external to economic activity, stakeholder theory deals prag-
matically and strategically with the issue. That is why business ethics encompasses,
in the shape of stakeholder theory, a strategic aspect (Fig. 1.2).

Epistemological Debates and Theoretical Pluralism

While in the 1980s only one article on stakeholder theory was published in a leading
management journal, from the 1990s an increasing number of articles and books on
the subject began to appear. Between 2000 and 2007, 135 articles were published in
the eight leading international management and business ethics journals (Laplume
et al. 2008). This trend gave rise to a form of theoretical, methodological and practi-
cal pluralism.
Epistemological Debates and Theoretical Pluralism 11

Is Stakeholder Theory a Theory?

Is stakeholder theory a bona fide theory? In English, the term “stakeholder view” is
generally preferred. For Freeman, it is more of a “genre” than a theory (Hitt et al.
2001). But could it not be seen as a as a kind of practical methodology based on a
more general theory, that of a civil society backed up by the economic and geostra-
tegic power of the multinationals (Bonnafous-Boucher and Porcher 2010). If so, the
corporation would have to guarantee the rule of law in the same way that the state
does in the classical, Hegelian theory of civil society (Bonnafous-Boucher 2006;
Bonnafous-Boucher and Porcher 2010). However, as far as we are aware, it is not
the role of the corporation to guarantee the rule of law, even if certain political sci-
entists and legal experts attempt to replace civil society with a society made up of
stakeholders (Ackerman and Alstot 1999). It is thus legitimate to question the unify-
ing ambitions of a theory which is applicable to numerous fields, including business
ethics, strategy, law, economics and organization theory (Freeman and Philips 2002:
333).

A Concrete Theory: Categorizing the Actors Who Count

in Corporate Strategy

The effectiveness of a unifying theory is conditioned by two issues, both of which

have been addressed by researchers, namely, the identity of stakeholders, and who
really counts and for whom (Mitchell et al. 1997).
Identifying the Stakeholders First, it is evident that stakeholders are not neces-
sarily individuals. They can be a group, an organization, an institution, an associa-
tion, or a thing, for example an aspect of the natural environment. But if this is true,
then surely anything could be a stakeholder. Unsurprisingly, authors have asked
who is a stakeholder and who isn’t. The confusion caused by an exaggeratedly
broad conception of the notion prompted Bowie (1988a, b), Freeman (1994) and
Näsi (1995) to attempt to formulate a more specific definition. An essential criterion
was introduced: stakeholders were invoked when the survival of an organization or
a corporation was dependent on one or more third parties. Although this definition
is not often applied (stakeholders are generally thought of as groups or individuals
influenced by and influencing the organization), it does nevertheless represent prog-
ress in terms of the recognition of stakeholders. The task of strategic management
is thus to identify the third parties concerned and to decide how to work with those
parties. This approach means that the strategic context is no longer exclusively
associated with gaining a competitive edge (Porter 1985). The corporation once
again becomes the center from which expectations, stakes and interests, be they
convergent or divergent, are analyzed (Table 1.2).
12 1 From “The Stakeholder” to Stakeholder Theory

Table 1.2 Specific expectations of different stakeholders

Les attentes directes des Informations fournies par les
Partenaires Stakeholders entreprises
Salariés Rémunération, sécurité de l’emploi, Rapports de l’entreprise, nouvelles
formation sur l’entreprise, négociations
Actionnaires Dividendes et appréciation du cours Rapports et comptes annuels,
boursier informations sur les fusions et les
OPA
Clients Qualité, service, sécurité, bon Publicité, documentations, entretien
rapport qualité-prix
Banquiers Liquidité et solvabilité de Ratios de couverture, nantissement,
l’entreprise, valeur des garanties, prévision de trésorerie
production de trésorerie
Fournisseurs Ratation stable et durable Paiement dans les délais
Gouvernement Respect des lois, de l’emploi, de la Rapports aux organisms officiels,
compétitivité et données fidéles communiqués de presse
Public Sécurité des opérations, Rapports sur la sécurité, reportages
contribution à la communauté
Environment Substitution des ressources non Rapports sur l’ environnement.
durables et activités non polluantes Rapports de conformité
Source: Clarke T, “The Stakeholder Corporation: A Business Philosophy for the Information Age”,
Long Range Planning, 1998, 31/2,182–194. The table was taken and adapted from Caby (2003)

Translation
Partners Direct stakeholder expectations Information supplied by firms
Employees Remuneration, job security, training Company reports, news about the
firm, negotiations
Shareholders Dividends and increase in share Annual reports and accounts,
value information about mergers and
acquisitions
Clients Quality, service, security, value for Publicity, documentation,
money maintenance
Bankers Liquidity and solvency of the firm, Coverage ratios, collateral, cash flow
value of guarantees cash flow forecasts
Suppliers Stable long-term rotation Prompt payment
Government Respect for the law, employment, Reports for official bodies, press
competitiveness, accurate data releases
Public Operational safety, contribution to Safety reports, reportages
community
Environment Replacement of non-sustainable Environmental reports, compliance
resources, non-polluting activities reports

In the wake of these various clarifications, classifications designed to identify

stakeholders have given rise to an abundant literature. Aware of the difficulty of
identifying all the stakeholders in an organization, some authors have attempted to
establish categories of actors. These authors have focused on the task of generaliz-
ing categories of actors beyond cases of specific firms.
Epistemological Debates and Theoretical Pluralism 13

The Hierarchy and Typology of Mitchell, Agle and Wood One of the most
effective stakeholder classifications is that of Mitchell et al. (1997). Their classifica-
tion is based on three questions: What real or potential power do stakeholders have
in society enabling them to impose their will on a corporation? What kind of legiti-
macy do they possess? And how urgently does an organization have to respond to
their demands? When the interests of stakeholders do not converge with those of
either the corporation or other stakeholders, the parties are obliged to negotiate.
Negotiation can be approached in different ways depending on the perceptions of
various stakeholders and the way in which they themselves are perceived. Groups
possessing the three qualities (power, legitimacy, urgency) are termed definitive
stakeholders and are thus included in the negotiation process. The degree of partici-
pation of various actors depends on the number of qualities they possess. Those with
two attributes – urgency and legitimacy – are considered dependent stakeholders.
But stakeholders with power and urgency can be dangerous. Stakeholders with
power and legitimacy are termed dominant. Those with only one attribute are termed
dormant (power), discretionary (legitimacy), or demanding (urgency) (Fig. 1.3).
There are other, less operational and less relevant classifications than Mitchell
et al.’s (1997). These classifications are based on an initial distinction between pri-
mary and secondary stakeholders. Some of them are content to distinguish between
internal and external stakeholders. While this distinction is a practical one, it is also
simplistic in that it does not take the relational content of the theory into account. It
also fails to take account of the ubiquity of stakeholders (Martinet 1984) in the

Fig. 1.3 Stakeholder POWER

typology (Mitchell, Agle
and Wood) (Source:
LEGITIMACY
Mitchell, Agle and Wood, 1
“Toward a Theory of Dormant
Stakeholder Identification Stakeholder
4
and Salience: Defining the
Dominant
Principle of Who and What Stakeholder
Really Counts”, The
Academy of Management
2
Review, 1997, 22/4, 874) 5 7 Discretionary
Dangerous Definitive Stakeholder
Stakeholder Stakeholder
6
Dependent
Stakeholder
3
Demanding
Stakeholder 8
Nonstakeholder

URGENCY
14 1 From “The Stakeholder” to Stakeholder Theory

shape of actors within the corporation and outside it. In effect, an employee can also
be a consumer of the products he or she manufactures. Thus, the relationship
between the stakeholders and the corporation takes on a particular importance for
Cornell and Shapiro (1987), Freeman and Evan (1990), and Hill and Jones (1992).
All of these authors talk of contracting parties. It could also be added that the analy-
sis of the relationship between stakeholders (and not only between the corporation
and its stakeholders) establishes a non-dual explanatory framework which does not
refer the corporation back to a faceoff with all that is external to it. Thus, in its diag-
nostic and management approaches, the corporation has to deal with unusual alli-
ances or with the divergent interests of individual stakeholders.
Two years before Mitchell, Agle and Wood published their typology, Clarkson
(1995) distinguished between stakeholders who take on risk by investing human or
financial capital, and those who do not take any risk. For the author, stakeholders
fall into two categories: voluntary and involuntary. In this sense, a stakeholder is
someone who has everything to lose and who will thus make legitimate claims
based on the risks he or she has run. In this case, shareholders are clearly considered
stakeholders, as are entrepreneurs. Indeed, why not? But surely this veers away
from the stakeholder approach which, from the outset, has made a distinction
between stakeholders and shareholders and presented an alternative to the orthodox
vision of corporate governance.
Other, secondary, typologies focus on different categories of actors: public actors
(Tichy et al. 1997); archetypal actors (shareholders, employees, clients, suppliers);
recognized actors (banks, insurance companies, enterprise networks, unions, public
authorities, international organizations, civic associations, NGOs); controversial
actors (competitors, the media, activists, the natural environment) (Lépineux 2005).
Mention could also be made of tertiary stakeholders, those which do not have the
capacity to speak for themselves, for example natural elements (oceans, mountains,
animals), and future generations (Starik 1994). Some authors have also talked of
silent or mute stakeholders represented by third parties (NGOs) who plead on their
behalf.
Typologies and classifications, particularly that of Mitchell et al., are useful in
that they furnish an actionable model which can be used to make decisions and nego-
tiate for and with stakeholders. But, let’s not be naive, they can also be used against
them. The theory can always be instrumentalized. Regardless of their degree of
sophistication, the limit of such typologies is to be found in the way in which they
represent society as a series of actors of varying value (or threat) to the corporation
(and particularly to the very large corporation). One of the key factors in Agle et al.’s
typology is the hierarchization of categories of actors in function of the interests of
the firm. In this sense, although stakeholder theory makes it possible to represent the
actors, the typologies developed do not focus on the interests and issues that they
bring to the fore. From this point of view, stakeholder theory can be criticized on the
grounds that it offers only a partial conception of civil society, which it considers as
a series of self-centered, interest-based struggles. In our opinion, an analysis of the
controversies and arguments on which the motivations of stakeholders are based
Epistemological Debates and Theoretical Pluralism 15

would make it possible to take into account issues originating beyond specific groups
of actors. In terms of typologies, it should also be noted that exhaustive investiga-
tions of lists of actors are of only limited value, even if probability calculus is used.

A Theoretical Pluralism Revealed by Donaldson and Preston

(1995)

The perspective from which issues are identified, and from which the relationship
between stakeholders and the organization is dealt with, exerts an influence on theo-
retical perspectives elaborated by researchers. Three approaches to the theory have
been identified.
The descriptive approach to stakeholders reveals a constellation of cooperative
and competing interests (Moore 1999). It describes the growing complexity of orga-
nizations (multinationals, transnational companies, subcontracting networks and
associations). It explains the conditions of emergence of new forms of organization
that encompass multiple interests (Kochan and Rubinstein 2000). It takes account of
relationships between the organization and the environment by calling into question
the environment as an objective given, or, in other words, as an ensemble of forces
external to the organization and beyond its control (Desreumaux and Selznick
2009). And it helps to articulate various organizational levels – intra, inter, exter-
nal – by mitigating the dichotomy between the organization’s internal environment
(components), and its external environment (degree of complexity, stability, avail-
ability of resources).
The advantage of the descriptive approach is that, despite its explicative nature,
it can also be applied instrumentally as a methodological framework (Caroll and
Bucholtz 2000). It provides strategic analysis since, while dealing with the task of
identifying stakeholders, it also attempts to manage them. In this sense, the theory
is a decision-making tool for directors.
The instrumental approach is close to the strategic vision of the corporation: it
aims to manage the firm vis-à-vis the stakeholders with a view to reconciling its
profit and performance with other interests which influence it either directly or indi-
rectly. It not only identifies stakeholders but also measures their relative influence
(Jones and Wicks 1999; Hosseini and Brenner 1992), comparing the triple bottom
line and the interests of the corporation by postulating that the more it satisfies
expectations, the more it grows. However, the shortcoming of this approach is that
it telescopes divergent interests into a knot of contracts between shareholders, direc-
tors and stakeholders. The arena of negotiation is triangular, open only to the inter-
ests of the three parties. Nevertheless, advocates of certain currents of the
instrumentalist approach attempt to reconcile this paradoxical aspect of the theory
(Goodpaster 1991) by claiming that the idea according to which shareholders and
stakeholders have specific obligations is contradictory. The concept of the “bal-
anced scorecard” means that the corporation must take into account three areas of
16 1 From “The Stakeholder” to Stakeholder Theory

performance: environmental, social and economic. Another instrumental applica-

tion is based on the profit a corporation can pass on to its stakeholders. This approach
was described by Jones (1995). However, it is legitimate to ask if an operational
conception of the theory is necessarily associated with an instrumental approach.
The normative approach insists on the intrinsic legitimacy of the expectations of
stakeholders even when the response to those expectations is not closely linked to
the survival of the corporation. The normative approach becomes an ethical theory
when it enjoins the corporation to act responsibly vis-à-vis its stakeholders (corpo-
rate stakeholder responsibility). Several professional codes, values and corporate
missions are inspired by the concept of stakeholders, for example those promoted
by the Caux Roundtable (1994). Clarkson (1998) develops responsible management
principles based on the notion of the stakeholder. According to these principles,
managers must be aware of the legitimacy of interests external to the firm because
its activities represent a risk to society. Since stakeholders are vulnerable, managers
must be aware of any conflicts that they might engender. This conception gives eth-
ics a strategic dimension.
In affirming the intrinsic legitimacy of stakeholders (Donaldson and Preston
1995), the normative approach provides them with access to corporate governance,
thus once more linking business ethics to strategy (Gibson 2000). But we are touch-
ing here on the limits of the normative approach in that governance is exercised
within the framework of asset-based salaried capitalism. “Asset-based” because
shareholders traditionally invest capital in order to increase their assets. “Asset-
based and salaried” because the capital invested does not only come from profes-
sional investors but also from private individuals, for example pension funds created
by commercial banking products (life insurance, retirement savings plans), and
human capital in the form of the corporation’s human resources. While stakeholder
theory is associated with a break with the traditional (and often simplified) repre-
sentation of shareholder value (Charreaux and Wirtz 2006), it nevertheless adheres
to a contemporary framework of governance, that of an asset-based salaried capital-
ism, presupposing open participation on the part of stakeholders. The presupposi-
tion is that all stakeholders can become shareholders. The theory aims to broaden
the scope of asset-based capitalism. What, then, is the future of the normative
approach? The formation of a collective interest in the activities of the corporation
expressing itself in the form of a recognized objective accepted by the stakeholders?
(Aglietta and Rebérioux 2004).
The three approaches suggested by Donaldson and Preston provide a reassuring
framework for those willing to immerge themselves in an abundant, often iterative,
and sometimes confusing literature. Unifying its various aspects, Wicks (1999) pro-
vides a convergent theory of the stakeholder approach. But the question remains –
are the three approaches (descriptive, instrumental and normative) irreconcilable or
can a synthesis be achieved? In the same year, Freeman addressed the entire aca-
demic management science community, asserting that there was no neutral form of
stakeholder theory and calling for divergent approaches (Freeman 1999).
Critiques of the Theory 17

Critiques of the Theory

In 2010, at the start of his book on the state of the art of stakeholder theory (Freeman
2010: 3), the author identifies his adversaries as Milton Friedman, Michael Jensen,
Michael Porter, and Oliver Williamson. Let us examine the main critiques levied at
Freeman.
First, stakeholder theory is criticized on the methodological level: without iden-
tifying stakeholders precisely and defining their role in corporate governance,
everything and everyone is a stakeholder and the frontiers of the theory are so
porous that any number of interpretations are possible, thus depriving the theory of
all credibility. Second, the normative and ethical approach to the theory (Phillips
et al. 2003) has been called into question by the advocates of an orthodox style of
governance – a focus on stakeholders enables managers pursuing their own personal
interests to make subjective choices. According to this perspective, the theory offers
an excuse for managers not to promote the interests of the corporation’s sharehold-
ers and owners. If the expectations of stakeholders are taken into account, the cor-
poration no longer has a single objective (profit) and it becomes impossible to
manage by applying an approach based on economic rationality (Jensen 2000: 236).
(To this it can be objected that, in spite of its complexity, stakeholder theory serves
the cause of the maximization of corporate profit). Third, from an opposing view-
point, the theory often provides a fragmentary vision of the relationship between
stakeholders and the organization. The relationship is generally seen from a single
perspective whether in terms of the relationship of the corporation vis-à-vis its
stakeholders (instrumental approach) or of the stakeholders vis-à-vis the corpora-
tion (normative approach). Relationships between the stakeholders themselves are
rarely envisaged. However, the social and democratic conception which attempts to
render social justice possible in a capitalist system of production in a social democ-
racy makes it possible to take into account the inter-relationship between a plurality
of stakes and interests by relativizing the dualism of interests between the corpora-
tion, on the one hand, and stakeholders, on the other. Fourth and last, stakeholder
theory calls into question the meaning of a regional ethics, such as business ethics.
In effect, in our view the theory possesses a universal value even if it is associated
with a particular ethical perspective (business ethics) (Table 1.3).
By comparing a number of critiques, we have obtained a clearer image of stake-
holder theory, which displays a certain degree of porosity in regard to fields which
are generally kept separate: the market and politics; philosophical theories of action,
on the one hand, and theories of management, on the other; various fields of knowl-
edge. Stakeholder theory’s conception of management thus implies a recognition
not only of the corporation’s place in the economic market but also of the social
structure of society.
18 1 From “The Stakeholder” to Stakeholder Theory

Table 1.3 The limits of stakeholder theory. What the theory isn’t
Critical distortions Friendly misinterpretations
Stakeholder theory is an excuse for Stakeholder theory requires changes to current
managerial opportunism (Jensen 2001; law (Hendry 2001a, b; Van Buren 2001)
Marcoux 2000; Sternberg 2000)
Stakeholder theory cannot provide a Stakeholder theory is socialism and refers to
sufficiently specific objective function for the the entire economy (Barnett 1997; Hutton
corporation (Jensen 2001) 1995; Rustin 1997)
Stakeholder theory is primarily concerned Stakeholder theory is a comprehensive moral
with distribution of financial outputs doctrine (Orts and Studler 2002)
(Marcoux 2000)
Allstakeholders must be treated equally Stakeholder theory applies only to corporations
(Gioia 1999; Marcoux 2000; Sternberg 2000) (Donaldson and Preston 1995)
Source: Stakeholder Theory and Organizational Ethics, Robert Phillips, Berrett-Koahler
Publishers, San Francisco, 2003

The Scope of the Theory and Its Potential for Expansion

Stakeholder theory is at its apogee and the range of interpretations to which it has
been subject means that it possesses significant heuristic capacity and potential for
expansion. However, these qualities were not noticed immediately and the theory is
still almost exclusively viewed as an alternative to the orthodox financial approach
(agency theory) to corporate governance. Inscribed from the outset in the fields of
administrative and management science (disciplines long depreciated by other dis-
ciplines on the grounds that they are too performative), its scope, or one would have
imagined, could only have been local. But while the theory was developing, the role
of the corporation at the center of the public space was posing questions that called
for answers. Far from being marginal, the theory, with its multiplicity of variants
and currents, is fecund in a number of different ways; indeed, over the course of the
years, it has imposed itself as an explanatory vector of contemporary currents of
liberalism and capitalism.
From the point of view of stakeholders (whether those influenced by the activi-
ties of organizations or the “damned of the earth”), the theory touches upon political
philosophy, political sociology and studies in international relations by pointing
civil society toward a civil society of international stakeholders in which negotiation
becomes a flexible regulatory framework. Consequently, it is based on a potentially
voluntary agreement between stakeholders with divergent interests (social contract
theories). Moreover, it reappraises the nature of theories of distributive justice popu-
lar in certain currents of liberalism (Rawls, Theory of Justice). Still from the point
of view of political philosophy, Philips, following Rawls, appeals to the idea of fair-
ness, and develops the possibility of achieving a greater degree of equity and justice
by accommodating stakeholders within the management process. “Organizational
justice” (Philips 2003b) implies that the interests of all members of the organiza-
tion, as well as all those outside it should be respected. The concept of fairness
The Scope of the Theory and Its Potential for Expansion 19

becomes an essential component of stakeholder theory. From the point of view of

moral philosophy, it partakes of the traditional theory of the common good. Although
the common good is a common denominator that individuals living in society seek
out and define for themselves, it cannot be viewed purely and simply as an aggrega-
tion of the needs and interests of individuals. It is a political, moral and practical
quest for the smallest and largest common denominator enabling us to live together
(sovereign good). Dialoguing with stakeholders would be the best gauge of access
to a definition of the common good. By extension, the quest for the common good
is associated with an approach to political and moral philosophy based on Aristotelian
propositions (Nicomachean Ethics). Although, in the social sciences, stakeholder
theory poses an open question to the sociology of actors (Crozier and Friedberg
1977), it is closer to Actor-Network Theory or ANT (Latour 1984; Callon 1986;
Akrich 1987). In effect, the essential problem addressed by stakeholder theory is not
related to the identification of groups, but, rather, to the concept of “relationships”
and actor networks (for example, the relationship between the organization, power-
ful stakeholders and dormant stakeholders). As such, stakeholder theory questions
the systemic conceptions of organization theory. As in the systemic approach to
engineering, biology and sociology of the post-war period (Wiewer 1948;
Bertalanffy 1968; Crozier and Friedberg 1977), it represents the organization as a
coherent ensemble in dynamic interaction with its environment. But what creates a
system is the combination and association of mediations which hold it together by
translating arguments and enabling actors (individuals and groups) to define
themselves.
In the final analysis, the theory serves as a bridge between contemporary political
and moral philosophy, economic policy and management.
From the point of view of the corporation, stakeholder theory provides an alter-
native conception of corporate governance; it accords business ethics a strategic
role; it offers a new, systemic theory of organization which accords a place to eco-
logical concerns; it contributes to research in the field of marketing (Knox and
Gruar 2007); and it can be applied to developing a strategic vision of human
resources in which the corporation as a social body is reflected in all its diversity,
with all its roles receiving due consideration. Last, far from being an abstract theory,
it seeks to be actionable. Freeman is a philosopher and researcher who bases his
analytical method on pragmatism. He has given his theory a universalist aspect
(Evan and Freeman 1993). He supposes that the theory defends the universal rights
of stakeholders.
Could the theory be exported to disciplines in which it has not yet found its
place, such as the study of public policy? Although the term “stakeholder” is much
used by both theorists and practitioners of political life, they are not necessarily
referring to the theory, whose central focus is on the relationship between the cor-
poration and its environment. Care should be taken in regard to the extension of the
theory, for such an extension would risk encompassing not only the relationship
between the corporation and its stakeholders, but also the whole of society con-
ceived of as stakeholders. This may lead to society being represented, in the
20 1 From “The Stakeholder” to Stakeholder Theory

American manner, as being composed of pressure groups and interest groups

(Courty 2006). But as Phillips and Freeman observe (Freeman and Phillips 2002),
there is a difference of principle between the organizational level and the social
level. The view taken here, however, is that the most promising interpretation of
stakeholder theory is as a political and moral philosophy providing democratic
foundations and principles relevant to all forms of governance.
Chapter 2
Stakeholder Theory in Strategic Management

Strategy consists in making choices and taking decisions involving an organization

while being aware of the interactions between the corporation, its environment, and
its existing or potential resources. Linked to corporate policy, it is an activity which
requires reflection and action. As practice, it “gradually constructs ensembles of
opportunities and imagines trajectories of development in a rapidly changing and
partially unpredictable environment” (Desreumaux et al. 2005, 2006). As reflection,
it “renders the world comprehensible, simplifying it with a view to facilitating
action” (Desreumaux et al. 2005, 2006). As such, it is praxeological reflection
because it seeks efficacy and efficiency (yields and the relationship between assets
and results) (Martinet et al. 1990). From the outset, stakeholder theory has cast itself
as a practical and useful theory associated with strategy, as is demonstrated by both
the oldest and most recent publications on the subject, those of Freeman and his co-
authors: Stakeholder Theory, written by Phillipps and Freeman (2010); Stakeholder
Theory: A State of the Art, coordinated by Freeman et al. (2010); The Handbook of
Strategic Management, edited by Hitt et al. (2001); Strategic Management: A
Stakeholder Approach (1984); “Manager les parties prenantes” (1982); and Manager
pour les parties prenantes: survie, réputation et succès (2007). To this list can be
added the recent book by Wicks, Freeman and Werhane: Business Ethics: A
Managerial Approach (2009). For the advocates of the theory, the managerial or
strategic management approach encompasses planning, systems theory, corporate
social responsibility, and organization theory.
But in spite of its origins and embeddedness in strategy, stakeholder theory has
long been contested as an operational model for corporations. Yet, over the course
of the last decade, many companies (from those listed on the CAC40 to mid-sized
firms and small family enterprises (Bingham et al. 2010) have drawn up stake-
holder maps, identifying stakeholders in order to negotiate with them in function of
strategic priorities. These maps are an acknowledgement of the theory’s usefulness.
But other advantages should be highlighted: (1) Stakeholder theory reconciles
strategy and ethics to provide an approach to analyzing the purposes of economic
action rather than merely attempting to moralize the actions of business leaders. (2)

© The Author(s) 2016 21

M. Bonnafous-Boucher, J.D. Rendtorff, Stakeholder Theory, SpringerBriefs in
Ethics, DOI 10.1007/978-3-319-44356-0_2
22 2 Stakeholder Theory in Strategic Management

It offers a representation of the “management of management” (Perez 2003) and

of governance as a space of negotiation and deliberation about value creation. In
other words, it defines corporate governance as something more than just the rules
pertaining in boards of directors, and this when most of the finance literature
(Shleifer and Vishny 1997) restricts it to the dominant definition of governance
[which] covers all the mechanisms that guarantee various lenders a return on
investment, while preventing directors and dominant shareholders from appropri-
ating excessive value (Wirtz 2008). (3). It focuses on a conception of economic
activity and strategy that depends on (because it is related to) its environment.
Before being a group or individual that influences or is influenced by the corpora-
tion, stakeholders are “symbiotes,” or, in other words, “those elements of the envi-
ronment on which the corporation is dependent for inputs” (Freeman 2010, 86,
quoting MacMillan 1978: 66). The term “symbiote” means that each element pur-
sues a sort of symbiosis with the environment. (4). This aspect of the theory is a
rich source of information for management science and entrepreneurship, this last
field promoting above all the heroic action of free and voluntarist creators whose
actions are not dependent on any social, legal or cultural context. This did not
escape Venkataraman (2002: 46) for whom, “the essence of the corporation is the
competitive claims made on it by diverse stakeholders. It is a fact of business life
that different stakeholders have different and often conflicting expectations of a
corporation.”
Consequently, stakeholder theory is, with the blessing of Ackoff (1919–2009), a
concrete theory which enables corporations to represent themselves and to act on
their environment. As such it functions on two levels: as corporate strategy and busi-
ness strategy.

Representations of the Corporation in Strategic

Management and the Emergence of Stakeholder Theory
(1980–1990)

Over the course of the years, the discipline of strategic management has gradually
constructed a representation of the corporation and of the legitimacy of its action.
The various representations of the corporation proposed in the field of strategic
management outline power relations that fashion legitimacy (Martinet and
Reynaud 2001) and which, rather than being associated with a specific, all-pow-
erful industrialist, are linked to negotiations with public opinion and institutions
(legal, social, political). Following A.-C. Martinet (1990), the following schema
outlines the evolution of those representations and traces the emergence of stake-
holder theory.
Representations of the Corporation in Strategic Management and the Emergence… 23

Between 1950 and 1968, an Economistic Approach

to the Corporation

Due to the financial demands of shareholders, the objectives of corporations were

economic reconstruction, expansion and an emphasis on growth. Within the corpo-
ration, the gap between leaders and led was wide, and clashes between bosses and
unions were harsh.

1968 and 1985: Strategic Representations of the Corporation

In the period situated between the euphoric crisis of 1968 and the globalization of
the mid-1980s, multiple strategic representations of the corporation emerged.
Monetarism and its guru, Milton Friedman, who asserted that the corporation should
almost exclusively meet the expectations of society by “serving the interests of
shareholders as effectively as possible” (1962), was called into question. A number
of approaches to the organizational design of corporations emerged, with global
enterprises and firms based on the idea that “small is beautiful” existing side-by-
side. Between 1968 and 1985, emphasis was placed on strategic visions of the orga-
nization, with its fundamental choices constituting the corporation’s raison d’être,
an approach which ran counter to the financial vision which, according to Martinet,
was largely indifferent to the substantial content of the firm’s choices: What activi-
ties? What products? What clients?

1985 and 1995: A Financial Vision Combined with Multi-

Criteria Performance and a Conception Offering an Alternative
to Financial Orthodoxy

Two contradictory tendencies co-exist. On the one hand, preventive strategies con-
cerning other firms and a substantial focus on shareholder value, and, on the other,
an emphasis on societal performances and sustainable policies.

Since 1995: A Multitude of Different Perspectives

The leading model among those which have emerged since 1995 is based on an
economy of knowledge and learning combined with the corporation’s reactivity and
ability to adopt simple, readily understandable rules governing their actions in the
multiple channels of global distribution (Table 2.1).
24 2 Stakeholder Theory in Strategic Management

Table 2.1 Another summary of currents in strategic management

Auteurs
Courants et écoles Modèles représentatifs représentatifs Observations
Design School de SOWT (Forces, Andrews Approche rationnelle
Harvard Corporate Faiblesses, Menaces, équipe de «conceptuelle» pour
Strategy Opportunités) Harvard Mintzberg
1960–1965
Planification Modèle de Ansoff Ackoff Approche systématique et
stratégique planification 1965–1975 analytique «formelle» pour
Mintzberg
Business Strategy Modèles de Levitt, Kotler Grilles, check lists
Stratégies portefeuille Modèles Henderson Processus «analytique»
opérationnelle de positionnement 1965–1980 pour Mintzberg
Marketing stratégique Stratégies génériques Abell
Management Domaines d’activités Hofer et
stratégique stratégiques Schendel 1978
Stratégies de Modèles de croissance: Ansoff, Marris, Forte diversité des
développement Économiques, Penrose approaches. Non
financiers, 1960–1970 mentionné par Mintzberg
organisationnels, etc.
Courant Modèles d’économie Porter Conflit entre les
environnemental et d’organisation 1975–1990 approaches déductive
industrielles Approche Nelson, Winter (déterministers) et
évolutionniste 1980–1990 empiriques (contingentes)
Transaction Williamson qualifié de « processus
1975–1990 passif » (?) par Mintzberg
Courant Modèle de capacitiés Mintzberg Grande diversité des
organisationnel Modèles contingents Lawrence et approches. Mintzberg
Transaction (interne) et Lorsch retient I’approche «
économie des Chandler, politique » et « culturelle »
organisations Cyert et March
1960–1990
Courant décisionnel Modèle IMC et Simon et Aproche empirique.
heuristique de la Mintzberg Mintzberg distingue les
décision. Processus de Crozier approches «cognitives» et
prise de decision 1955–1990 «d’apprentissage»
individueks et
organisationnels
Courant Typologies Smith, Gasse Approche typologique
entrepreneurial d’entrepreneurs 1960–1990 Processus « visionnaire »
Source: Marchesnay M, Management stratégique (2002: 38)
The Role of Stakeholder Theory in Corporate Strategy 25

Translation
Representative
Currents and schools Representative models authors Observations
Harvard Design SWOT (Strengths, Andrews’ team at For Mintzberg, a
School Corporate Weaknesses, Harvard rational, “conceptual”
strategy Opportunities, Threats) (1960–1965) approach
Strategic planning Planning model Ansoff, Ackoff Systematic, analytical
1965–1975 approach, “formal” for
Mintzberg
Business strategy Portfolio model Levitt, Kotler Grids, check lists
Operational Position-based models Henderson For Mintzberg, an
strategies 1965–1980
Strategic marketing Generic strategies Abell “analytical” process
Strategic Strategic fields of Hofer and
management activity Schendel
Development Growth models: Ansoff, Marris, Wide range of
strategies economic, financial, Penrose approaches, not
organizational, etc. 1960–1970 mentioned by
Mintzberg
Environmental Economic, Porter 1975–1990 Conflict between
current organizational Nelson, Winter deductive (determinist)
industrial models 1980–1990 and empirical
Williamson (contingent) approaches
1975–1990 described by Mintzberg
as “passive [?]
processes”
Organizational Capacities model Mintzberg Wide range of
current Contingent models Lawrence and approaches Mintzberg
(Internal) transactions Lorsch Chandler, retains the “political”
and economy of Cyert and March and cultural approach
organizations 1960–1990
Decional current IMC model and heurist Simon and Empirical approach.
decision-making. Mintzberg Crozier Mintzberg distinguishes
Individual and 1955–1990 between “cognitive”
organizational and “learning”
decision-making approaches
processes
Entrepreneurial Entrepreneurial Smith, Gasse Typological approach
current typologies 1960–1990

The Role of Stakeholder Theory in Corporate Strategy

The Corporation Between Dependence on the Environment

and Policy Self-Determination

As a discipline, strategic management evolved from general corporate policy or

“corporate strategy” (1908–1959) to strategic planning, or “corporate planning”
(1960–1969) to “business strategy” (1970–1979). But it was in the 1980s that it
26 2 Stakeholder Theory in Strategic Management

became established as “an object of research in the sense of autonomous practices

and normative prescriptions” (Laroche 2007). Stakeholder theory was at the heart
of a number of currents and controversies within strategic management. In effect, it
was defined both as a field of research within strategic management (an explicative
framework of the environment) and as a toolbox for managers (a map of stakehold-
ers providing a model of the competitive advantage of a firm on a particular market
and determining its capacities for negotiation. It also reintroduced the possibility of
corporate policy and of the prescriptive role of the corporation vis-à-vis public orga-
nizations and associations. Indeed, for corporate policy, stakeholders are a constric-
tive factor in terms of the strategy of the firm. In sum, the theory is located at the
heart of strategic management (as is witnessed by the title of Freeman’s 1984 book),
since it is based on the most operational level of the corporation and seeks an
improved articulation between the group as a whole and each of its product-market
divisions. The theory’s flexibility prompted a number of different interpretations
within the field of strategy. For some authors, it encourages a “regeneration of strat-
egy by means of the positive and normative actualization of policy in terms of eth-
ics, styles of governance, responsibilities and operational approaches” (Martinet
2006). In the view of others, Freeman and his co-authors were thinking less about
the frameworks of strategy and more about liberating managers from Porter’s com-
petitive approach and Pfeffer and Salancik’s resource dependence theory (RDT)
(Aggeri 2008). Furthermore, it has often been suggested that stakeholder theory is
an alternative to a restrictive conception of strategy focusing on relations between
managers and shareholders (agency theory) (Fig. 2.1).
These interpretations address the dilemma within strategy involving the choice
between a deterministic and a proactive approach, a dilemma reflected in the famous
debate, which took place in Pittsburgh in 1978, between, on the one hand, Ansoff
and his content-based analysis, and, on the other, Pettigrew and his process-based
approach (Dery 1996). However, when stakeholder theory emerged in the 1980s it
was influenced by both content-based and process-based approaches in strategy.
Moreover, stakeholder theory is still an object of debate in corporate strategy
between authors who advocate a relatively deterministic and adaptive vision (a
descriptive stance which accords great importance to questions of positioning and
the implementation of strategy), and scholars who support a more voluntaristic and
proactive approach (a prescriptive stance encouraging strategic prescription).

Stakeholder Theory: Promoting Strategic Management,

1970–1980

In terms of the evolution of strategic currents, the strategic planning of the 1960s
and 1970s gave way to the strategic management of the 1970s–1990s.
Strategic planning is often confused with the development of plans and the
implementation of budgetary procedures. The plan, a general policy tool, is used for
The Role of Stakeholder Theory in Corporate Strategy 27

Fig. 2.1 Comparison between the economic paradigm and the stakeholder paradigm (Source:
Sachs S. and Ruhli E., Stakeholders Matter: A New Paradigm for Strategy in Society (2011: 76))

predicting (fixing objectives, organizing resources) and monitoring (ensuring that

objectives are met). In the 1970s, corporations in mass consumer goods industries
were faced with a decline in the market. This decline prefigured trade competitive-
ness problems between 1975 and 1985 and, later, in the second decade of the third
millennium. As early as 1984, strategic planning no longer exactly corresponded to
the needs of large companies in which strategy was situated on two levels: the
ensemble, or group (corporate strategy) and individual product-market divisions
(business strategy).
In the period in which globalization first took hold, corporate strategy was criti-
cized on two grounds: first, because planning pre-supposed a stable and predictable
environment, while conditions were increasingly less stable and predictable;
moreover, activities, including operational activities, are permanently subject to
strategic thinking and adapted, on a day-to-day basis, to new external factors (the
28 2 Stakeholder Theory in Strategic Management

expectations of clients and suppliers, the perception of strong or weak signals about
the emergence of new technologies). Furthermore, during this period, multinational
companies were organized into product-market divisions, thus acquiring a degree of
autonomy in the decision-making process (product life-cycle). Seeking support and
information from operational collaborators, strategic management was applied first
and foremost to unstable contexts characterized by continuous change. Thus, strat-
egy was not defined once and for all for a 3- or 5-year period but continuously
through successive approximations, errors and corrections. The corporate level
increasingly focused on the ways in which decisions were taken at all levels.
Second, corporate and business aspects were combined and articulated (Hofer and
Schendel 1996). The term strategic management was used because it is in fact a
question of coordinating decisions characterized by uncertainty. The approach
attempts to establish a correspondence between global aims and fields of strategic
activity. Third, corporate and business strategy increasingly focused on market
expectations. Emphasis was placed on marketing aspects; first product-market, and
second, product-market-technology (Abell 1980).
Stakeholder theory emerged against the backdrop of the kind of issues that stra-
tegic management attempts to resolve by focusing on decision-making processes
and negotiation processes between parties. The notion of “internal” and “external”
stakeholders became centrally important (Figs. 2.2 and 2.3). It was applied in order
to ensure that the expectations of the market, consumers, suppliers and publics in
general corresponded to the offer. Consequently, stakeholder theory is useful in
terms of strategic marketing. However, an original aspect of the theory is that it is
able to provide a guide for strategic marketing by identifying what, in the market,
does not represent a threat to society. It is not, therefore, merely a question of con-
stantly renewing products, or increasing market share, or anticipating the time at
which a particular product enters its saturation phase, but, instead, of developing
responsible products.

A Pluralist Representation of the Corporation

and of the Organization: Toward Partnership-Based Corporate
Governance

We have already highlighted the fact that stakeholder theory was, above all, an alter-
native to the orthodox, or rather, monist, theory of corporate governance according
to which the corporation is a contractual relationship between shareholders and
directors (Jensen and Meckling 1976; Shleifer and Vishny 1997). Although alterna-
tive, stakeholder theory has sometimes been reduced to a dual relationship between
shareholders and non-shareholders. But value also depends on cooperation (Aoki
1984) not only between stakeholders, shareholders and directors, but also creditors,
employees, suppliers and public authorities.
The Role of Stakeholder Theory in Corporate Strategy 29

Fig. 2.2 The stakeholder wheel (1984–2007) (Source: R. Edward Freeman, Jeffrey S. Harrison,
and Andrew C. Wicks, Managing for Stakeholders: Survival, Reputation, and Success (2007), New
Haven: Yale University Press)

Freeman made a major contribution to changing approaches to corporate gover-

nance (Freeman and Reed 1983; Freeman and Evan 1990). Other authors have sup-
ported him, notably Cornell and Shapiro (1987), who compared the advantages of a
corporate model based on stakeholders with a financial model. Indeed, in terms of
research into strategic and financial management, shareholders have gradually lost
their primacy to stakeholders (Caby 2003) since, if all individual categories of
stakeholders have their expectations vis-à-vis the corporation, it is because each one
of them contributes, or believes that they contribute to value creation. However, one
current of the French school of management science – G. Charreaux, P. Desbrières,
P-Y Gomez, F Parrat, J.M. Plane, P. Wirtz – paints a less utopian picture than
Freeman’s of the rootedness of stakeholders in corporate governance (Table 2.2).
Charreaux and Desbrières have worked since 1998 on developing a method for
measuring and maximizing partnership value with a view to promoting a pluralist
30 2 Stakeholder Theory in Strategic Management

Fig. 2.3 Another version of the stakeholder wheel (2011) (Source: Sachs S and Rühli E,
Stakeholders Matter: A New Paradigm for Strategy in Society (2011: 83))

vision of the corporation. In 1999, Parrat (1999) published an overview of the vari-
ous contributions of stakeholders. He defined value creation as the difference
between opportunity costs for the client and the sum of opportunity costs for part-
ners as a whole (clients, suppliers, shareholders, employees, directors). In the tradi-
tional financial approach, the value created is equal to the rent received by
shareholders. Partnership value measurement is based on the overall measurement
of the rent generated by the corporation in relation to the various stakeholders
(Charreaux and Wirtz 2006). The authors highlight a form of managerial slack, or,
in other words, an excess representing the leeway enjoyed by the director in his or
her negotiations with various partners. This “slack,” which is not shared by all the
stakeholders, is reinvested or conserved in the form of liquidities. What distin-
guishes the pluralist view of Charreaux and Desbrières from Freeman’s perspective
is that Freeman specifically calls for corporate democracy (Freeman and Reed
1983), while the French partnership value current is situated in a normative perspec-
tive of corporate governance informed by the objective of guaranteeing the viability
of coalitions favoring wealth creation (Charreaux 1997).
Strategic Models Which Are Not Congruent with Stakeholder Theory: Michael Porter 31

Table 2.2 Typology of Narrow Stakeholder Strategy

strategies in function of
Maximize benefits to one or a small set of
relationships between
stakeholders
stockholders and stakeholders
Stockholder Strategy
Maximize benefits to stockholders
Maximize benefits to «financial
stakeholders»
Utilitarian Strategy
Maximize benefits to all stakeholders
(greatest good for greatest number)
Maximize average welfare level of all
stakeholders
Maximize benefits to society
Rawisian Strategy
Act to raise the level of the worst-off
stakeholder
Social Harmony Strategy
Act to maintain or create social harmony
Act to gain consensus from society
Source: R. E. Freeman, Strategic Management
(1984: 102)

Strategic Models Which Are Not Congruent with Stakeholder

Theory: Michael Porter

Michael Porter’s Competitive Advantage

While stakeholder theorists attempted to make a breakthrough in strategic manage-

ment, Michael Porter’s theory of competitive advantage, elaborated in his books
Competitive Strategy (1980) and Competitive Advantage (1985) was recognized by
many managers, consultants and academics as THE leading theory in the field. Even
today, Porter’s competitive advantage is a dominant model in management strategy,
as if all thinking in the field had come to an end in 1985. Competitive advantage was
a development of the LCAG model (Learned et al. 1965), which gave rise to SWOT
analysis (Strength, Weakness, Opportunity, Threat). In an approach based on the
product-market relationship, Porter asks how a corporation can seek to achieve a
quasi-monopolistic position, thus guaranteeing substantial levels of profit. In his
view, corporations have a permanent objective, namely to increase their size, and,
consequently, negotiating power and economies of scale by boosting production
and thereby decreasing marginal costs. In fact, the more product the corporation
produces, the less the unit cost will be. To the LCAG model, which diagnoses the
corporation on the basis of its market share and its rate of growth in a specific sector
with a view to managing a portfolio of areas of activity, Porter adds five forces
competing with the SWOT model: (1) rivalry between competitors in the market;
(2) clients’ negotiating power (demand for a reduction in cost price and,
32 2 Stakeholder Theory in Strategic Management

consequently, a reduction in margins); (3) suppliers’ negotiating power (demand for

an increase in sale price and thus a reduction in the firm’s margins); (4) the threat
represented by substitute products, and, (5) potential entrants on the market.
Commentators talk of competitive advantage when a firm has the capacity to
increase its negotiating power vis-à-vis suppliers and clients and, therefore, vis-à-
vis competitors. Nevertheless, this kind of negotiation is based on a simple domi-
nant-dominated relationship and not on a relationship between parties who are
potentially equal in terms of the pressure they are able to exert.
In spite of an efficient conceptual framework (the industrial structure influences
the rules of the competitive game and the strategies potentially available to the
firm), the theory has been criticized on a number of grounds. The environment is
presented in a fragmentary manner: only the industrial structure of the sector in
which the firm in question operates is taken into account, while convergence phe-
nomena between industries are neglected. Relationships between firms are exclu-
sively competitive, as are relationships between large companies and small
enterprises, and between clients and suppliers. Porter thus confines himself to the
market environment, or, in other words, to a standard representation based on a
belief in a kind of pure and perfect, monopolistic or oligopolistic from of competi-
tion (Marchesnay 2002).
Stakeholder theory provides a broader vision of the strategic environment by
encompassing factors that are not purely competitive. It focuses on the articulation
between the structural parameters of the macro-environment and the corporation,
while at the same taking into account the role of institutions, regulations, the emer-
gence of new actors, and the impact of technological breakthroughs. Above all,
stakeholder theory refutes the idea that relations between competitors are merely
hierarchical. It describes an environment characterized by an increasing number of
relations and, consequently, a potentially infinite number of interactions. To rela-
tions with clients and suppliers are added relations with economic, political and
administrative institutions at various levels. This is why Freeman (2010) suggests
that Porter’s well known value chain should include the stakeholders who compose
it. In this regard, Porter himself believes in the value of an enriched representation
of the strategic environment no longer exclusively made up of competitors, a view-
point he expresses in The Competitive Advantage of Corporate Philanthropy (Porter
and Kramer 2002) and “Creating Shared Value” (Porter and Kramer 2011). In effect,
the concept of “shared value” means implies that the corporation should meet vital
social needs (health, habitat, care, environment) that can be described in terms of
stakeholder theory. It should be acknowledged that the strength of the theory to
which Porter has partially rallied is its emphasis on the corporation’s dependence on
its multiple relations with other entities. This aspect of the theory differs from
numerous currents in strategy and management for which entrepreneurship is a rela-
tively autonomous activity (Fig. 2.4).
In spite of these rapprochements, it is unlikely that stakeholder theory will ever
be entirely appropriated by the competitive advantage perspective. Other currents
have more in common with stakeholder theory, including the relational view (Dyer
and Singh 1998) and the coopetition model (Brandenburger and Nalebuff 1995). To
Strategic Models Which Are Not Congruent with Stakeholder Theory: Michael Porter 33

Fig. 2.4 Competing stakeholder networks (Source: R. E. Freeman and al, Stakeholder Theory. The
State of the Art, Cambridge University Press (2010: 118))

paraphrase these last we could say that: “making the biggest cake is cooperation;
sharing it is competition” (quoted by Desreumaux et al. 2006).
According to the coopetition model developed by Bradenburger and Nalebuff
(1995), competition is compatible with selective cooperative projects, including, in
terms of products, substitutes (substituor) and complements (complementor) that
are relative values. More concretely, in coopetition, the type of behavior to be
adopted in regard to “S”s and “C”s is a choice (linked to the creation or capture of
value). For example, Lancôme and Estée Lauder are substitutes from the point of
view of their customers. The concept of “S” is more wide-ranging than that of the
direct competitor. The “C”s are firms from whom clients buy complementary prod-
ucts or to whom suppliers sell complementary resources. This relationship makes it
possible to describe the interdependence of certain sectors, something that Porter
has found it hard to do. Recourse to the concepts of “S” and “C” makes it possible
to identify certain organizations, interdependent vis-à-vis a given firm, which create
or recuperate the value associated with that firm. The value created is greater than
the interactions outlined in the value chain.

Richard D’Aveni’s Hyper-Competition Model (1994–2010)

To talk about hypercompetition is to describe an economic context in which com-

petitive advantages such as cost, price, time, quality, technological advantages,
innovation and funding have been replaced by ephemeral and variable
34 2 Stakeholder Theory in Strategic Management

combinations. Richard D’Aveni writes of an “age of temporary advantage” (2010).

“Strategy is no longer based on the construction of sustainable advantages, but on
the art of continually challenging the status quo: speed and aggression in terms of
action taken, multiple initiatives, a constant modification of the rules of the game
and arenas of competition is the leitmotiv of competitors who spend a great deal of
time imitating one another” (Desreumaux et al. 2006).

Strategic Models Compatible with Stakeholder Theory

As is by now clear, the emergence and development of stakeholder theory took

place against a backdrop of multiple strategic theories elaborated in response to
the globalization of trade and profound transformations in private organizations.
In the words of Franck Aggeri (2008), an attempt was made to “regenerate the
frameworks of strategy.” The author adds: “To the different Porterian, post-Porte-
rian and anti-Porterian currents, should be added approaches to strategy applying
a multi-level reading (Pettigrew, Mintzberg) based on a collective construction of
meaning (Weick 1995), or on an institutional construction of meaning (Desreumaux
2004; Hualt 2004) implying the in situ application of cognitive resources” (Aggeri
2008). Some approaches are strikingly congruent with stakeholder theory, par-
ticularly the French current led by Jarniou (1981) and Martinet (1984), which
developed the work of Tabatoni and Jarniou (1975). This current was pursued by
Baron in Quebec (1995). Its advocates’ intention is to deconstruct the determinis-
tic aspects of corporate policy or, in other words, to rethink corporate strategy. At
the same time, R.E. Freeman (1984) in the United States, and A.-C. Martinet in
France developed the foundations of an alternative corporate strategy. Another
model, this one based on the work of Edith Penrose (1959), developed by Birger
Wernerfelt (1984) and J.B. Barney (1989) came to challenge Porterian orthodoxy
in the 1990s.

The Corporation as a Political System: The Francophone School

of 1980–2009

The Corporation as the Fundamental Unit of Social Organization A site of

production and work, the corporation is a source of creativity and wealth. It has
become common to consider it as a fundamental organization within society (Hafsi
and Martinet 2007; Gomez and Korine 2009; Aymard-Duvernay 2004) in the same
way as other institutions. The fact that external actors demand that it meets expecta-
tions previously associated with the public good is a symptom of major institutional
changes. In effect, the corporation is located at the heart of displacements of legiti-
mate and political powers, of the emergence of new organizations which are neither
Strategic Models Which Are Not Congruent with Stakeholder Theory: Michael Porter 35

public nor private (see Part 3). The legitimacy of the sovereign entities that are the
nation-states was long based on the exclusive right to exercise political authority
(legislative, legal and executive) in a given geographical area or over a give popula-
tion. This legitimacy persists, but is now counterbalanced by organizations already
located on a level that is at once regional and international. Thus, international orga-
nizations, for example the European Union, possess some degree of sovereignty due
to their substantial legislative competencies in highly strategic areas such as energy,
the environment, chemicals and agriculture, in which it passes between 60 and 70 %
of new legislation To this it should be added that, in most of the EU, trade is con-
ducted in a single currency, the euro. The erosion of national public legitimacies can
above all be observed in three regards: first, the development of the activity of inter-
national organizations (IOs), principally those which exist to promote inter-state
coordination. As well as international organization designed to defend the interests
of major geographical regions like the Association of Southeast Nations (ASEAN),
there are also international organizations whose mission is to reduce the level of
global economic disparities, like the EBRD (European Bank for Reconstruction and
Development), the Ibrd (International Bank for Reconstruction and Development),
and the IDB (Inter-American Development Bank). Second, the development of
inter-governmental organizations (IGOs), for example, the WTO, as well as organi-
zations like the IFAD (International Fund for Agricultural Development), the IMF
(International Monetary Fund), the ICAO (International Civil Aviation Organization),
the ILO (International Labor Organization), and the UNITAR (United Nations
Institute for Training and Research). Third, non-governmental organizations
(NGOs). Fourth, multinational companies which are powerful actors, since most
political organizations are either limited to a specific territory (the nation-state) or
are under construction. Moreover, multinationals possess human resources quanti-
tatively superior to most public administrations of nation-states and their turnover
figures are often higher than the GDP of some countries. We believe that, confronted
with multinational organizations that are over a 100 years old, most regional orga-
nizations are still under development. This is true of the EU. Private organizations,
particularly very large companies, negotiate directly not only with all these organi-
zations (IOs, IGOs, NGOs), but also with the individuals who either affect or are
affected by them.

The Political Firm The idea of a political company was very far from familiar,
either to members of the public or to members of the academic community when,
in 1981, Pierre Jarniou published L’entreprise comme système politique, which fol-
lowed in the wake of the sociologist and economist, Pierre Tabatoni (Tabatoni and
Jarniou 1975). These authors advance the idea of a crisis of legitimacy of public
institutions (Laufer and Paradeise 1982). Researchers in strategic management,
Alain-Charles Martinet in France (1984), and Jean Pasquero in Quebec (1980,
2008), underline the importance of describing the social and societal environment.
Alongside competitive forces, alongside the structural variables of change, be
they societal (demographic evolution), political (new regulations), economic (inter-
est rates, exchange rates), competitive (the impact of new technologies, price
36 2 Stakeholder Theory in Strategic Management

variations, new products), or market-related (new product uses, new markets), an

increasing number of socio-political pressures are emerging in the shape of demands
made on the corporation by specific sectors of society. These last generate new
social costs, generally borne by the corporation’s production activities. Beyond the
Francophone world, other researchers have applied similar hypotheses and come to
similar conclusions (Preston and Post 1975; David P. Baron 1995, 2006). Baron
underlines the importance of non-market strategies, particularly the 4Is, namely
“issues”, or questions to be resolved; “interests”; “institutions”, or relevant institu-
tional actors; and “information” to which the corporation has only partial access.
Corporate policy includes lobbying, or efforts by groups of activists to control mar-
ket opportunities, as distinct from market strategy, which focuses on the relation-
ship between products and markets. In this sense, there is a political aspect to
strategy corresponding to the corporation’s political strategies. Thus, while the cor-
poration is often presented as a technico-economic unit or a local social organiza-
tion, stakeholder theory presents it as “an entity in a political space” (Martinet 1984,
2006). Much more than this, the corporation is transformed into a specific
institution.

Resource and Skills-Based Strategy

While Porter’s competitive analysis was sweeping all before it, a less deterministic
model, focusing on the specificities of the firm rather than on the sector in which it
operated, emerged in the wake of research carried out by Edith Penrose. This model
is based on resources and skills. Instead of emphasizing growth in terms of size,
proponents of the approach focus on exploiting and intensifying the corporation’s
main skills and resources, leaving other activities to partners or sub-contractors.
Resources in this context include not only human resources, but also raw materials,
labor, capital, equipment, knowledge and market opportunities for products and ser-
vices. Resources include tangible and intangible assets possessed by a firm that
enable it to determine its strategy and improve its performance. Managers must
envisage ways of counterbalancing the firm’s dependence on its resources.
Stakeholder theory is close to Barnay’s model in a number of respects: first,
because it focuses on a sustainable competitive advantage that is not exclusively
constituted by business opportunities; and second, because its value is based on
resources. This unique combination of the firm’s skills and resources associated
with their intrinsic characteristics is at the origin of competitive advantage. Because
skills are rare, they are strategic; they can only be imperfectly imitated by existing
or potential competitors. Such skills are hard to exchange because they are the result
of a long individual and collective learning process that integrates the knowledge
and aptitudes of individuals, specific kinds of management, values, norms, and the
way in which knowledge is monitored.
In Stakeholder Theory: The State of the Art, Freeman et al. (2010: 95) recognize
that “resource-based and stakeholder perspectives are complementary rather than
Other documents randomly have
different content
My last recollections of General Lee, when making a visit of several
weeks at his house the year before his death, although not coming
properly under the head of "plantation reminiscences," may not be
inappropriate here.
It has been said that a man is never a hero to his valet; but this
could not have been said of General Lee, for those most intimately
connected with him could not fail to see continually in his bearing
and character something above the ordinary level, something of the
hero.
At the time of my visit the Commencement exercises of the college
of which he was president were going on. His duties were
necessarily onerous. Sitting up late at night with the board of
visitors, and attending to every detail with his conscientious
particularity, there was little time for him to rest. Yet every morning
of that busy week he was ready, with his prayer-book under his arm,
when the church bell called its members to sunrise service.
It is pleasant to recall all that he said at the breakfast, dinner, and
tea table, where in his hospitality he always insisted upon bringing
all who chanced to be at his house at those hours—on business or
on social call.[21] This habit kept his table filled with guests, who
received from him the most graceful courtesy.
Only once did I hear him speak regretfully of the past. It was one
night when, sitting by him on the porch in the moonlight, he said to
me, his thoughts turning to his early childhood:
"It was not my mother's wish that I should receive a military
education, and I ought to have taken her advice; for," he continued
very sadly, "my education did not fit me for this civil life."
In this no one could agree with him, for it seemed to all that he
adorned and satisfactorily filled every position in life, civil or military.
There was something in his manner which naturally pleased
everyone without his making an effort; at the same time a dignity
and reserve which commanded respect and precluded anything like
undue familiarity. All desirable qualities seemed united in him to
render him popular.
It was wonderful to observe—in the evenings when his parlors were
overflowing with people, young and old, from every conceivable
place—how by a word, a smile, a shake of the hand, he managed to
give all pleasure and satisfaction, each going away charmed with
him.
The applause of men excited in him no vanity; for those around soon
learned that the slightest allusion or compliment, in his presence, to
his valor or renown, instead of pleasing, rather offended him.
Without vanity, he was equally without selfishness.
One day, observing several quaint articles of furniture about his
house, and asking Mrs. Lee where they came from, she told me that
an old lady in New York city—of whom neither herself nor the
general had ever before heard—concluded to break up
housekeeping. Having no family, and not wishing to sell or remove
her furniture to a boarding-house, she determined to give it to "the
greatest living man" and that man was General Lee.
She wrote a letter asking his acceptance of the present, requesting
that, if his house was already furnished and he had no room, he
would use the articles about his college.
The boxes arrived. But—such was his reluctance at receiving gifts—
weeks passed and he neither had them opened nor brought to his
house from the express office.
Finally, as their house was quite bare of furniture, Mrs. Lee begged
him to allow her to have them opened, and he consented.
First there was among the contents a beautiful carpet large enough
for two rooms, at which she was delighted, as they had none. But
the general, seeing it, quickly said: "That is the very thing for the
floor of the new chapel! It must be put there."
Next were two sofas and a set of chairs. "The very things we want,"
again exclaimed the general," for the platform of the new chapel!"
Then they unpacked a sideboard. "This will do very well," said the
general, "to be placed in the basement of the chapel to hold the
college papers!"
And so with everything the lady had sent, only keeping for his own
house the articles which could not possibly be used for the college or
chapel,—a quaint work-table, an ornamental clock, and some old-
fashioned preserve-dishes—although his own house was then bare
enough, and the donor had particularly requested that only those
articles which they did not need at their home should go to the
college.
The recollection of this visit, although reviving many pleasant hours,
is very sad, for it was the last time I saw the dear, kind face of Mrs.
Lee, of whom the general once said, when one of us, alluding to
him, used the word "hero": "My dear, Mrs. Lee is the hero. For
although deprived of the use of her limbs by suffering, and unable
for ten years to walk, I have never heard her murmur or utter one
complaint."
And the general spoke truly,—Mrs. Lee was a heroine. With
gentleness, kindness, and true feminine delicacy, she had strength of
mind and character a man might have envied. Her mind, well stored
and cultivated, made her interesting in conversation; and a simple
cordiality of manner made her beloved by all who met her.
During this last visit she loved to tell about her early days at
Arlington—her own and her ancestors' plantation home—and in one
of these conversations gave me such a beautiful sketch of her
mother—Mrs. Custis—that I wish her every word could be
remembered that I might write it here.
Mrs. Custis was a woman of saintly piety, her devotion to good
works having long been a theme with all in that part of Virginia. She
had only one child—Mrs. Lee—and possessed a very large fortune.
In early life she felt that God had given her a special mission, which
was to take care of and teach the three hundred negroes she had
inherited.
"Believing this," said Mrs. Lee to me, "my mother devoted the best
years of her life to teaching these negroes, for which purpose she
had a school-house built in the yard, and gave her life up to this
work; and I think it an evidence of the ingratitude of their race that,
although I have long been afflicted, only one of those negroes has
written to inquire after me, or offered to nurse me."
These last years of Mrs. Lee's life were passed in much suffering,
she being unable to move any part of her body except her hands
and head. Yet her time was devoted to working for her church. Her
fingers were always busy with fancy-work, painting, or drawing,—
she was quite an accomplished artist,—the results of which were
sold for the purpose of repairing and beautifying the church in sight
of her window, and as much an object of zeal and affection with her
as the chapel was with the general.
Indeed, the whole family entered into the general's enthusiasm
about this chapel, just then completed, especially his daughter
Agnes, with whom I often went there, little thinking it was so soon
to be her place of burial.
In a few short years all three—General Lee, his wife and daughter—
were laid here to rest, and this chapel they had loved so well
became their tomb.

CHAPTER XX.
All plantation reminiscences resemble a certain patchwork, made
when we were children, of bright pieces joined with black squares.
The black squares were not pretty, but if left out the character of the
quilt was lost. And so with the black faces—if left out of our home
pictures of the past, the character of the picture is destroyed.
What I have written is a simple record of facts in my experience,
without an imaginary scene or character; intended for the
descendants of those who owned slaves in the South, and who may
in future wish to know something of the lofty character and virtues
of their ancestors.
The pictures are strictly true; and should it be thought by any that
the brightest have alone been selected, I can only say I knew no
others.
It would not be possible for any country to be entirely exempt from
crime and wickedness, and in Virginia, too, these existed; for
prisons, penitentiaries, and courts of justice were here, as
elsewhere, necessary; but it is my sincere belief that the majority of
Southern people were true and good. And that they have
accomplished more than any other nation toward civilizing and
elevating the negro race may be shown from the following
paragraph in a late magazine:
"From a very early date the French had their establishment on the
western coast of Africa. In 1364 their ships visited that portion of the
world. But with all this long intercourse with the white man the
natives have profited little. Five centuries have not civilized them, so
as to be able to build up institutions of their own. Yet the French
have always succeeded better than the English with the negro and
Indian element."
Civilization and education are slow; for, says a modern writer:
"After the death of Roman intellectual activity, the seventh and
eighth centuries were justly called dark. If Christianity was to be one
of the factors in producing the present splendid enlightenment, she
had no time to lose, and she lost no time. She was the only power at
that day that could begin the work of enlightenment. And, starting
at the very bottom, she wrought for nine hundred years alone. The
materials she had to work upon were stubborn and unmalleable. For
one must be somewhat civilized to have a taste for knowledge at all;
and one must know something to be civilized at all. She had to carry
on the double work of civilizing and educating. Her progress was
necessarily slow at first. But after some centuries it began to
increase in arithmetical progression until the sixteenth century."
Then our ancestors performed a great work—the work allotted them
by God, civilizing and elevating an inferior race in the scale of
intelligence and comfort. That this race may continue to improve,
and finally be the means of carrying the Gospel into their native
Africa, should be the prayer of every earnest Christian.
Never again will the negroes find a people so kind and true to them
as the Southerners have been.
There is much in our lives not intended for us to comprehend or
explain; but, believing that nothing happens by chance, and that our
forefathers have done their duty in the place it had pleased God to
call them, let us cherish their memory, and remember that the Lord
God Omnipotent reigneth.

"For he who rules each wondrous star,

And marks the feeble sparrow's fall,
Controls the destiny of man,
And guides events however small.

"Man's place of birth, his home, his friends,

Are planned and fixed by God alone—
'Life's lot is cast'—e'en death he sends
For some wise purpose of his own."

THE END.
 FOOTNOTES:

[1]
Robert Logan, of Roanoke, Va
[2]
Rev. G. W. Leyburn
[3]
John Randolph of Roanoke
[4]
Colonel Tom Preston
[5]
General Watts's place, Roanoke
[6]
George P. Tayloe, Esq
[7]
The old seat of the Breckinridges, Botetourt County
[8]
Mrs. Cary Breckinridge
[9]
"Miss Fanny."
[10]
William M. Radford, of Greenfield, Botetourt County
[11]
John Preston, afterward Governor of Virginia
[12]
Colonel Burwell's
[13]
On the route to Rustic was a small village called
Liberty, approaching which, and hearing the name,
"English Louis" swore he would not pass through any
such——little republican town, and, turning his horses,
traveled many miles out of his way to avoid it
[14]
From this vicinity went nine ministers who were
eminent in their several churches: two Episcopal bishops,
one Methodist bishop, three distinguished Presbyterian
and three Baptist divines of talent and fame
[15]
Dr. Cunningham's
[16]
General Scott
[17]
General Robert Toombs
[18]
General Toombs and General Floyd
[19]
Charles Mosby
[20]
This interesting girl married Mr. Sigourney of
Massachusetts, and after the war, as she was crossing
the ocean to Europe with her husband and all her
children (except one son) the ill-fated ship sank with
nearly all on board. We have heard that, as the ship was
going down, Amélie, her husband, and her children
formed a circle, hand in hand, and were thus buried in
the deep
[21]
Here was seen the Mount Vernon silver, which had
descended to Mrs. General Washington's great-grandson,
General Custis Lee, and which was marvelously preserved
during the war, having been concealed in different places
—and once was buried near Lexington in a barn which
was occupied by the enemy several days
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