Stakeholder Theory

Abstract

Stakeholder Theory is a foundational framework in business ethics, corporate governance, and strategic management that challenges the traditional shareholder-centric view of the firm. Unlike the classical perspective, which assumes that the primary responsibility of an organization is to maximize shareholders’ wealth, Stakeholder Theory posits that firms exist within a broader network of relationships and are accountable to multiple parties whose interests may be affected by organizational activities (Freeman, 1984). These parties referred to as stakeholders include shareholders, employees, customers, suppliers, creditors, regulators, host communities, and society at large.