Stakeholder Theory: The State of the Art by R. Edward Freeman

(why business needs more than just profit.)

The main idea

We’re usually told: “Profit is the main thing. Everything else comes later.”
But this book says the opposite. Stakeholder Theory offers a different view of capitalism: business is not about transactions — it’s about relationships. It doesn’t exist for a single metric, but to create value for everyone it touches or depends on.

At the center of this theory are not shareholders, but all stakeholders: employees, customers, suppliers, local communities, ecosystems. Companies that consider all of them live longer, build trust, and grow sustainably.

“We need a new narrative about business, one that reflects the way business can and should work.”
— R. Edward Freeman

What’s the core idea?

If you act only in the interest of investors, you might get short-term gains. But in the long run, it leads to toxicity, loss of trust, and broken relationships.

The stakeholder approach is not about “being nice” — it’s about surviving and evolving in a complex, interconnected world. It’s a strategy where business works with people, not against them.

Six ideas that shift the business mindset

Trust matters more than contracts
Things hold together not on paper, but through honest interaction.

Listen to everyone your decisions touch
Even if they’re silent. Often, the quietest voices matter most.

Take responsibility, don’t look for someone to blame
Ethics isn’t a burden — it’s maturity. It’s how you act deliberately.

People are not logic and numbers
They have fears, hopes, inner contradictions. That needs to be seen, not ignored.

Value is created daily, not on a schedule
Dialogue, care, involvement — this is where real innovation comes from.

Competition is not war
It’s a space for choice and growth. Not a zero-sum game, but mutual development.

What stood out

The principle of complexity
- People aren’t always rational — and that’s their strength. Understanding this is the foundation of wise leadership.
Stakeholder vs. shareholder is a false choice
- You don’t have to pick sides. A good business balances interests instead of pitting them against each other.
Connection to Kant and ethical theory
- It’s not just about “being better.” It’s about understanding why business exists as a human practice.

Key nuances that are easy to miss

The stakeholder model is not just a management tool
- It’s not a checklist or a CSR patch. It’s a normative framework — a philosophy of business centered on values.
Critique of shareholder capitalism
- The authors make a solid case for why focusing only on shareholder profits is an unstable model — historically, ethically, and practically.
Value creation > Value extraction
- The job of business is to create value, not just extract it. This changes everything — from strategy to everyday decisions.
Integration with other disciplines
- The book weaves together philosophy, economics, organizational theory, even politics. It’s not detached theory — it’s a bridge between business and society.
Reflection prompts
- A set of useful questions:
  - — Who are the stakeholders we’ve forgotten?
  - — Whose perspective could change our decision?
  - — Where are we using the language of control instead of dialogue?

Conclusion

Business is not a set of relationships around profit. It is relationships instead of profit. Money follows. When interactions are honest and sustainable, value emerges naturally.

Ethics doesn’t get in the way of decision-making — it gives it structure. In uncertainty, values are the compass — not the trendiest framework, but a sense of what’s right.

If someone is silent, it doesn’t mean they’re unaffected. Silence often comes from lack of power. You need to hear more than just the loudest voices.

Listening to stakeholders is cheaper than fixing the damage later. Conflict, resistance, and reputational loss are what you get when you ignore those involved.

Responsibility isn’t about saying sorry — it’s about seeing ahead. Not reacting to crises, but anticipating who might be hurt by your choices.

Competition without respect quickly turns into destruction. Without trust and ground rules, it stops being a game and becomes a war. And when that happens, all that’s left are burned-out markets and burned-out people.

R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan L. Parmar, Simone de Colle – Stakeholder Theory: The State of the Art (2010)