A Good Story but not the Whole Story: Stakeholder Theory as an Ethics of Capitalism

The term “stakeholder capitalism” has become part of our shared business lexicon. This is due in large part to the work of R. Edward Freeman and his collaborators who conceive of stakeholder theory not simply as an approach to ethics in business but also of a new narrative for the ethics of capitalism. We argue that stakeholder thought as it is developed in this literature remains deficient as an ethics of capitalism because it fails to fully appreciate the distinction between business firms as one institution of capitalism and capitalism as an interrelated network of institutions. Failing to appreciate this distinction thwarts any facile movement between the theory's account of the ethics of business, which is concerned with the aims that guide business management, and the ethics of capitalism, which is concerned with how various institutions should be designed as a system with an internal division of moral labor. This difference suggests a prospective way forward for stakeholder theory that focuses more attention on the responsibilities that business firms owe to support the legal and economic institutions of capitalism.