Ethical Performance
inside intelligence for responsible business


abuse of stakeholder idea has become 'dangerous'

May 2000

The definition of stakeholders is now so inclusive it is becoming ‘deeply dangerous’ and counter-productive, according to an analysis by a leading business ethics expert.

Elaine Sternberg, a research fellow at the University of Leeds Centre for Business and Professional Ethics, argues in a new discussion paper that the original understanding of stakeholders to mean shareholders, customers, suppliers, lenders and society ‘has been extended to include any group or individual who could affect, or be affected by, the achievement of a company’s objectives’. This means stakeholders can now be ‘everyone, everything, and everywhere’.

As a result, non-governmental organizations (NGOs) are using the stakeholder concept as a Trojan horse to promote non-business and even anti-business objectives, Sternberg claims.

Her paper, published by the UK-based Foundation for Business Responsibilities (FBR), which was set up in 1966 and carries out research into business ethics, says advocates of the wider ‘entitlement’ version of stakeholding can use it ‘to rationalise almost any kind of government intervention’ and ‘shift the costs of government regulation from the public to the private sector’.

Sternberg, who spent 15 years as an investment banker in New York, Paris and London before becoming principal of Analytical Solutions, a business ethics consultancy, told EP the stakeholder concept was too often being misused by many NGOs as a way of weaving their own agendas into business matters.

‘The terms stakeholder and stakeholder dialogue are very casually used, and while some definitions are perfectly reasonable, others are deeply dangerous,’ she said.

In her paper, The stakeholder concept, she argues that supporters of the widest definition of stakeholding are ‘fundamentally mistaken’ about its benefits, and claims any move to reform UK law to make company directors accountable to such a wide array of stakeholders ‘would be unworkable’.

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