Father of stakeholder theory visits MBS

Oct, 2009

Everyone, even criminals have a code of honour. That's not the problem with today's business ethical dilemmas. The problem lies with conflicting values.

So claims this year's Gourlay Visiting Professor of Ethics in Business*, Ed Freeman. Also known globally as the father of stakeholder theory, Ed's elective subject on management and ethics has been swamped with interest.

The class, which was held in a hyper-intensive mode over two long weekends, attracted 70 students - double the normal number.

Ed's theory is that you can't teach people ethics and it's disrespectful to try. He says that the problem isn't that people don't have ethics. The problem is that they are torn between prioritizing their values.

For example, they may be torn between wanting to make employees better off on the one hand and fulfilling shareholder obligations on the other. He claims that reconciling these sorts of dilemmas requires understanding how to frame them.

"The right question is not, how do I trade off employees with shareholders, but how do I innovate my products and services to get employees interest and shareholder interest heading in the same direction.

"You have obligations to both, but we shouldn't automatically assume as most of the theory does, that they conflict with each other."

"Ethics is about reframing and innovating so we can realise more than one value at a time."

Ed gets students to build their own framework in his course. This framework is defined as a set of questions that they can take away from the course and use when they get into a tough situation.

They include things like, who are the stakeholders here? How are they harmed and benefited? What principals are at stake? Will this withstand publicity? Could I tell my children about it? Am I really just deceiving myself about this? Am I doing what's convenient versus what I really want to do?

According to Ed, this is no different to the teaching methods used in any other subject. "Every business course teaches you a set of questions to ask. In finance we learn to ask questions about cash flow and present value. In marketing we learn to ask questions about customers, distribution and price. In ethics we learn to ask questions about stakeholders, values, rights, principles and human behaviour."

How is this taught? Students examine a variety of topics, involving bribes and payoffs, employees and shareholders, and even environmental concerns, using existing case studies, then Ed gets them to write cases from their own experience as managers.

He says this is a great part of the course. "They own these cases and by listening to their peers talk about what they could have done and what they should do, helps them refine their ideas about good questions to ask."

Ed is at MBS until the end of October, and then returning here the same time next year.

*Established in 2004, the Gourlay Visiting Professor of Ethics in Business brings to life the Gourlay family's passionate belief that the exercise of uncompromising integrity and morality delivers imporved business outcomes. MBS is most grateful to the Gourlay Family for their vision in endowing the Professorship and Trinity College for its partnership with the School.

Ed Freeman
At home Ed is the Elis and Signe Olsson Professor of Business Administration at The Darden School, Academic Director of the Business Roundtable Institute for Corporate Ethics, and a Senior Fellow of Darden's Olsson Center for Applied Ethics. He is also Professor of Religious Studies and a Faculty Advisor to the University's Institute for Practical Ethics and Adjunct Professor of Stakeholder Management at the Copenhagen Business School in Denmark. Currently he holds honorary professorships, as the Welling Professor at George Washington University. Freeman is perhaps best known for his award-winning book: Strategic Management: A Stakeholder Approach, published in 1984, in which he suggested that businesses build their strategy around their relationships with key stakeholders.