25. “‘I Paid for this Microphone!’ The Importance of Shareholder Theory in (Teaching) Business Ethics”

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Abstract: Two prominent normative theories of business ethics are stakeholder and shareholder theory. Business ethicists generally favor the former, while business people prefer the latter. If the purpose of business ethics is “to produce a set of ethical principles that can be both expressed in language accessible to and conveniently applied by an ordinary business person” (Hasnas 1998), then it is important to examine this dichotomy.

While superficially attractive, the normative version of stakeholder theory contains numerous limitations. Since balancing multiple stakeholder preferences is difficult, competing claims often become tests of political strength rather than justice. Furthermore, stakeholder theory has significant normative weaknesses.

Although less attractive to academic ethicists, shareholder theory may provide superior results for society. The shareholder model focuses companies on meeting society’s material needs. Wise owners often balance other stakeholders’ views well since it is necessary for the business’s long-term success. Finally, shareholder theory has a strong normative basis in autonomy.

In light of this analysis, it is incumbent upon academic business ethicists to emphasize the value of shareholder theory when teaching business ethics courses.

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