The Defects of Stakeholder Theory

Abstract

Stakeholder theory has been widely offered as a corrective to perceived defects of business and business ethics, and as an alternative model of corporate governance. Indeed, it is now advocated so commonly as to have become a new orthodoxy. Far from being a source of improvements, however, stakeholder theory is fundamentally misguided, incapable of providing better corporate governance, business performance or business conduct. Stakeholder theory is indeed intrinsically incompatible with all substantive objectives, and undermines both private property and accountability.