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Business Ethics and Stakeholder Theory

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  • Cragg, Wesley

Abstract

Stakeholder theorists have typically offered both a business case and an ethics case for business ethics. I evaluate arguments for both approaches and find them wanting. I then shift the focus from ethics to law and ask: “Why should corporations obey the law?†Contrary to what shareholder theories typically imply, neoclassical or profit maximization theories of the firm can offer answers based only on instrumental justifications. Instrumental justifications for obeying the law, however, are pragmatically and normatively incoherent. This is because the modern corporation is a legal artifact. It exists because communities create the legal framework necessary for its existence. Individual corporations can therefore be said to owe their existence to a partnership (what might be called a social contract) between shareholders and governments, a partnership that is itself built on the shared though often implicit understanding that corporations have an unconditional (categorical) obligation both to obey the law and to treat their stakeholders ethically while generating wealth for their shareholders.

Suggested Citation

  • Cragg, Wesley, 2002. "Business Ethics and Stakeholder Theory," Business Ethics Quarterly, Cambridge University Press, vol. 12(2), pages 113-142, April.
    • Handle: RePEc:cup:buetqu:v:12:y:2002:i:02:p:113-142_00
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    Cited by:

    1. Silvija Vig & Ksenija Dumicic, 2016. "Impact of commitment to business ethics to nonfinancial business performance," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 14(2), pages 165-181.
    2. Carson Young, 2019. "Putting the Law in Its Place: Business Ethics and the Assumption that Illegal Implies Unethical," Journal of Business Ethics, Springer, vol. 160(1), pages 35-51, November.
    3. Fracarolli Nunes, Mauro & Lee Park, Camila & Shin, Hyunju, 2021. "Corporate social and environmental irresponsibilities in supply chains, contamination, and damage of intangible resources: A behavioural approach," International Journal of Production Economics, Elsevier, vol. 241(C).
    4. Julie Pirsch & Shruti Gupta & Stacy Grau, 2007. "A Framework for Understanding Corporate Social Responsibility Programs as a Continuum: An Exploratory Study," Journal of Business Ethics, Springer, vol. 70(2), pages 125-140, January.
    5. Joseph Petrick & Wesley Cragg & Martha Sañudo, 2011. "Business Ethics in North America: Trends and Challenges," Journal of Business Ethics, Springer, vol. 104(1), pages 51-62, April.
    6. Moeller, Miriam & Harvey, Michael & Griffith, David & Richey, Glenn, 2013. "The impact of country-of-origin on the acceptance of foreign subsidiaries in host countries: An examination of the ‘liability-of-foreignness’," International Business Review, Elsevier, vol. 22(1), pages 89-99.
    7. Pascual Berrone & Jordi Surroca & Josep Tribó, 2007. "Corporate Ethical Identity as a Determinant of Firm Performance: A Test of the Mediating Role of Stakeholder Satisfaction," Journal of Business Ethics, Springer, vol. 76(1), pages 35-53, November.
    8. Carl Rhodes, 2017. "Ethical Praxis and the Business Case for LGBT Diversity: Political Insights from Judith Butler and Emmanuel Levinas," Gender, Work and Organization, Wiley Blackwell, vol. 24(5), pages 533-546, September.
    9. Rosa Lombardi & Manlio Giudice & Andrea Caputo & Federica Evangelista & Giuseppe Russo, 2016. "Governance and Assessment Insights in Information Technology: the Val IT Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 7(1), pages 292-308, March.
    10. Hernandez-Perdomo, Elvis A. & Mun, Johnathan & Rocco S., Claudio M., 2017. "Active management in state-owned energy companies: Integrating a real options approach into multicriteria analysis to make companies sustainable," Applied Energy, Elsevier, vol. 195(C), pages 487-502.
    11. Reinhard Steurer, 2006. "Mapping stakeholder theory anew: from the ‘stakeholder theory of the firm’ to three perspectives on business–society relations," Business Strategy and the Environment, Wiley Blackwell, vol. 15(1), pages 55-69, January.
    12. Kevin Clark & Narda Quigley & Stephen Stumpf, 2014. "The Influence of Decision Frames and Vision Priming on Decision Outcomes in Work Groups: Motivating Stakeholder Considerations," Journal of Business Ethics, Springer, vol. 120(1), pages 27-38, March.
    13. John F. Gaski, 2022. "Toward social responsibility, not the social responsibility semblance: marketing does not need a conscience," AMS Review, Springer;Academy of Marketing Science, vol. 12(1), pages 7-24, June.
    14. Vranceanu, Radu, 2003. "Manager Unethical Behavior During The New Economy Bubble," ESSEC Working Papers DR 03026, ESSEC Research Center, ESSEC Business School.
    15. Saurav Dutta & Raef Lawson & David Marcinko, 2012. "Paradigms for Sustainable Development: Implications of Management Theory," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 19(1), pages 1-10, January.

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