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Global Business in a Stakeholder Society: Stakeholder Capitalism R. Edward Freeman The Darden School University of Virginia

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Presentation on theme: "Global Business in a Stakeholder Society: Stakeholder Capitalism R. Edward Freeman The Darden School University of Virginia"— Presentation transcript:

1 Global Business in a Stakeholder Society: Stakeholder Capitalism R. Edward Freeman The Darden School University of Virginia Vienna, EBEN, 2006 © R. Edward Freeman, 2006.

2 Traditional Models of Capitalism Labor Capitalism Government Capitalism Investor Capitalism Managerial Capitalism Entrepreneurial Capitalism © R. Edward Freeman, 2006.

3 Global Business in a Stakeholder Society: Theory The Problem of Competition The Problem of Business Ethics The Problem of Business in a Liberal Democracy © R. Edward Freeman, 2006.

4 Global Business in a Stakeholder Society: Practice Value Chain Responsibility Chain Strategy Purpose Shareholders Stakeholders Execution Stakeholder Engagement Motivation Inspiration © R. Edward Freeman, 2006.

5 The Principles of Stakeholder Capitalism Stakeholder Cooperation Stakeholder Responsibility Stakeholder Engagement Complexity © R. Edward Freeman, 2006.

6 The Principle of Stakeholder Cooperation Value can be created, traded, and sustained because stakeholders can jointly satisfy their needs and desires by making voluntary agreements with each other, that for the most part are kept. © R. Edward Freeman, 2006.

7 The Principle of Stakeholder Responsibility Value can be created, traded, and sustained because parties to an agreement are willing to accept responsibility for the consequences of their actions. When third parties are harmed, they must be compensated, or a new agreement must be negotiated with all of those parties who are affected. © R. Edward Freeman, 2006.

8 The Principle of Stakeholder Engagement To successfully create, trade and sustain value, a business must engage its stakeholders. Almost every business transaction involves: customers, suppliers, communities, employees, and financiers. Other stakeholders such as media, additional civil society representatives, NGOs, etc. are often affected or can afffect value creation. © R. Edward Freeman, 2006.

9 The Principle of Complexity Value can be created, traded, and sustained because human beings are complex psychological creatures capable of acting from many different values and points of view. © R. Edward Freeman, 2006.

10 Two Subsidiary Principles The Principle of Continuous Creation The Principle of Emergent Competition © R. Edward Freeman, 2006.

11 Example: The Principle of Complexity Assumption of Authenticity –We know our own values and it possible to “be true to ourselves”. Such authenticity and the resulting transparency drives markets. What can we learn from Freud and his followers? –Authenticity is multi-layered –Must deal with unconscious –Must deal with the other. Assumption of Authenticity becomes Project of Self Creation © R. Edward Freeman, 2006.

12 The Enlarged and Connected Self The self never exists without the other. –Relational or Interactionist View of Self No such thing as the “isolated self” Role of recognition and destruction Objects become subjects –Transference –The Search for Glory –Domination/Recognition and Individuality/Mutuality The Connected and Enlarged Self is a Project that seeks to understand alternative stories about the past, and alternative stories that we could tell about the future. –Person as artist –Artist as connected to others, rather than lone heroic figure © R. Edward Freeman, 2006.

13 The Enlarged and Connected Self What do my relationships with others make possible? How does the web of relationships affect my actions? How can I re-describe my relationships with others to live better? What relationships and behaviors from the past am I transferring to this relationship and behavior? How do mirroring, ideal and alter ego transference work here? Am I engaged in the Search for Glory? © R. Edward Freeman, 2006.

14 The Enlarged and Connected Enterprise What do relationships with stakeholders make possible? How does the web of relationships affect what we stand for and what we do? How can we re-describe our relationships with stakeholders to enable us to live better? What behaviors and processes from our past do we transfer to stakeholder relationships? How do mirroring, ideal and alter ego transference work here? Are we engaged in the Search for Glory? © R. Edward Freeman, 2006.

15 Miles’ Question: So What? We need to replace our outmoded ideas of capitalism with something like “stakeholder capitalism”. Stakeholder capitalism implies the joint project of self-creation and community creation. Is there a matrix of relevant ethical concepts that can be combined with our understanding of business, such as: –Responsibility-Freedom-Authenticity –Autonomy-Solidarity-Relationships –Individuality-Community © R. Edward Freeman, 2006.

16 Miles’ Question: So What? What kinds of theories of responsibility can we develop that have sophisticated understandings of the way that value creation and trade works, and what kind of creatures we really are and can be? Are there more robust theories of human beings to be developed for business, that do not depend on “The Great Jackass Fallacy”? We need a radical rethinking of the way we educate and train leaders and managers. © R. Edward Freeman, 2006.

17 Acknowledgements I wish to thank many co-authors and conversation partners for help in developing these ideas, especially: –Jeffrey Harrison, Andrew Wicks, Bidhan Parmar, Kirsten Martin, Simone de Colle, Robert Phillips, S. Venkataraman, Jeanne Liedtka, John McVea, Laura Dunham, Molly Painter-Morland, Ellen Auster, Gordon Sollars, and the many students and executives who have been engaged in thinking about stakeholder capitalism.


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