Ethics Theory and Business Practice 10.2 The Responsibilities of Business Executives – Part Two Specifying Normative Stakeholder Theory

aims to describe how normative stakeholder theory differs from instrumental stakeholder theory and enlightened shareholder theory

1. distinguishing normative stakeholder theory from instrumental stakeholder theory instrumental stakeholder theory: highlighting the instrumental importance of influential stakeholders normative stakeholder theory: highlighting the ethical importance of all stakeholders

why this distinction matters instrumental stakeholder theory offers no reason for executives to take into account affected stakeholders who are not in a position to influence the success of a company normative stakeholder theory suggests that executives should take all affected stakeholders into account, regardless of whether they are in a position to influence the success of a company

theory in practice do banks have a responsibility to provide all customers with free access to their funds?

2. distinguishing normative stakeholder theory from enlightened shareholder theory enlightened shareholder theory: highlighting the potential commercial importance of all stakeholders influential stakeholders matter because of their instrumental importance non-influential stakeholders matter because influential stakeholders may care about how the company treats them

enlightened shareholder theory: the ethical importance of stakeholders derives from the ethical importance of shareholders normative stakeholder theory: stakeholders have intrinsic ethical importance

why this distinction matters it is often suggested that there is no conflict between shareholder theory and normative stakeholder theory that looking after stakeholders and looking after shareholders amount to the same thing but this is only the case insofar as influential stakeholders are concerned or insofar as influential stakeholders know or care about the plight of non-influential stakeholders the interests of other stakeholders may well conflict with those of shareholders so enlightened shareholder theory should not be used as a basis for dismissing the relevance of normative stakeholder theory

key points instrumental stakeholder theory and enlightened shareholder theory are often used to downplay conflicts between the interests of shareholders and those of other stakeholders however, conflicts between the interests of shareholders and those of some stakeholders frequently occur therefore, the shareholder theory – normative stakeholder theory debate is an important one