normative stakeholder theory and aristotle - the link betwee

7/28/2019 Normative Stakeholder Theory and Aristotle - The Link Betwee

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Normative Stakeholder Theoryand Aristotle: The LinkBetween Ethics and Politics Nachoem M. Wijnberg

ABSTILACT. Stakeholder theory is an important partof modern business ethics. Many scholars argue for anormative instead of an instrumental approach tostakeholder theory. Recent examples of such anapproach show that problems appear with respect tothe ethical foundation as well as the specification ofthe norms and the relation between corporate andindividual responsibilities. This paper argues for therelevance of Aristotle's ideas on ethics and politics,and especially the l ink between them, for stakeholdertheory. An Aristotelian approach suggests that thecorporation should be considered as existing to allowthe decision maker, who normally is a manager, tolive a complete and good life and to make decisionsthat involve the interests ofdifferent stakeholders. Thisapproach leads to a number of implications regardingthe role of organizational politics and the managerialfunction.

1. Introduction

In its most basic sense, stakeholder theory arisesfrom the rejection of the idea that the corpora-tion should single-mindedly strive to maximizethe benefits of a single stakeholder, the share-holders. Many scholars have written aboutthe relat ion between the corporat ion and itsstakeholders (e.g. Freeman, 1984; Freeman, 1994;Nachoem M. Wijnberg presently is an associate professor

at the Rotterdam School of Management. He ha s pub-lished on a wide range of subjects but especially on therelation between strategic decision-making and the com-petitive and institutional environment in journals such(15 Journal of Econom ic Issues, Technology Analysisand Strategic Manage-ment, Journal of CulturalEconomics, Cultural Dynamics, De Economist,Journal of Evolutionary Economics.

Evan and Freeman, 1988; Goodpaster , 1991;Langtry, 1994; Donaldson and Preston, 1995;Clarkson, 1995; Q u i n n and Jones , 1995,Mitchell, Agle and Wood, 1997). Donaldsonand Preston (1995) distinguished betweendescriptive, instrumental and normativeapproaches to stakeholder theory. Descriptiveapproachesonly at tempt to ascertain whetherstakeholders' interests are taken into considera-tion by corporat ions or not. Instrumentalapproaches look to the effects of stakeholdersmanagement on corporate performance. Norma-tive approaches are concerned with the reasonswhy stakeholders' interests should be taken intoaccount . Although Aristot le has written litt leon economics and almost nothing on themanagement of business organizations (Meikle,1994), he wrote copiously on ethics andpolitics.There have been earlier attempt to base theoriesof business ethics on Aristotles thoughts on ethics(e.g. Solomon, 1993). It is the main content ionof this paper that precisely the way in whichAristotle saw ethics and politics linked canprovide a new foundation for normative stake-holder theory. This paper does not propose thata modern business organization is a Greek Polis.It does propose that by viewing the ethical andpolitical situation of a manager in a corporat ionalong the same lines as Aristotle viewed thesituation of a citizen in a polis, a n u m b e r ofimportant problems in normative stakeholdertheory can be dealt with more successfully thanbefore.The quest ion has been raised whether thefield of organizational science is still sufficientlyconcerned with the interactions between orga-nizations and society. Recently, Blau (1996)argued that organizational scientists might well


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330 Nachoem M. Wijnbergfollow Weber in paying attention to the linksbetween rationality and the ethics of responsi-bility. She writes that according to W eber, " . . .rationality in collectivities and rationality inmarkets are quite difFerent . . . we might considerthat the basis of validity for rationality in collec-tivities draws from what is reasonable, and thebasis for rationality in markets draws from thebest approximation of connect ing means andends" (Blau, 1996, p. 175).

Twentieth century organizational scienceeagerly used one part of the Weberian inheri-tance, rationality in the sense of optimal means-ends relations and the distinction betweenprocedure and substance. This seemed to supportthe division of labour between decision-makingand decision-implementing tasks within an orga-nization in which (political) confiict can only bea sign of irrationality and inefficiency. How ever,while some scholars (e.g. Pichault, 1995) focusedagain on the possible benefits of political confiictwithin an organization others viewed organiza-tional politics in the (broader) context ofthe par-ticular systems of domination characterisingorganizations, society at large and the interrela-tions between the two (Lefiaive, 1996; Hardy andClegg, 1996). This paper attempts to show howan Aristotelian approach to the organization andits members may help to deepen our under-standing of organizational politics and therebyof the interactions between organizations andsociety. Aristotle defined man as a politicalanimal. Political refers to the "polis", the city,which according to Aristotle is the highest formof association or organization because " . . . whileit comes into existence for the sake of mere life,it exists for the sake of the good life" {Politics,1252b). ' The end or final cause ofthe city is toallow man to live human life as good and com-pletely as possible. Incidentally, as will be dis-cussed below, Aristotle also argues that the cityis best governed by those who are able to lead agood life. Aristotle distinguishes practical wisdomfrom other types of knowledge. Practical wisdomis concerned with things human and things aboutwhich it is possible to deliberate {NicomacheanEthics, 1141b), including both political andethical matters. Decision makers in organizationshave to make use of practical wisdom in matters

of organizational politics as well as organizationethics.This paper will discuss the present state stakeholder theory. Following this, Aristotlideas on ethics and on politics will be presentmaking extensive use of Nussbaums (1990, 199interpretat ion of these ideas. Returning to tmodern organization theory, ethics and politwill again be addressed to demonstrate hlinking the two and returning to the Aristotelidirection of the means-ends relationship can leto a difFerent approach to normative stakeholdtheory in which the business organization can considered to exist for the sake of the good lof those members of the organization who aor, at least, are able to be, politically active.

2. Stakeholder theoryStakeholder theory is probably the most popuway to treat issues that have to do with "broaderesponsibilities of businesses. Another importaframework is that of corporate social perfmance (Carrol l, 1979; Wart ick and Co chra1985; Wood, 1991) but stakeholder theory acorporate social performance theory are nincompatible. Clarkson (1995) has argued fevaluating corporate social performance in terof stakeholders' satisfaction instead of in termsdemonstrating corporate social responsiveness fulfilling corporate social responsibility. Clarks(1995) provided a systematic listing of "stakholder issues" to facilitate descriptive researwhich could provide data to test instrumenhypotheses such as proposed at the end of tpaper (Clarkson, 1995, p. I l l ) about relatiobetween corporate performance and the levelssatisfaction of stakeholders. One has to nothough, that speaking in terms of corporaresponsibility serves to focus away from personresponsibilities of those acting with the powethat they derive from their position within organization.Freeman (1984) distinguished betweprimary stakeholders, those groups whose cotinuing participation is necessary for the survivof the corporation, and secondary stakeholdewho are not essential to the survival of the co


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Normative Stakeholder Theory and Aristotle 3 3 1

1995) focused on the primary stakeholders and

onnected with the instrumental approach andeems out of place in a normative approach. Inact, Mitchell, Agle and Woods (1997) proposalo identify stakeholders systematically by payingttention to the dimensions of power, legitimacyand urgency, explicitly aimed to serve an instru-ental approach, to increase managers ability tohandle stakeholders claims in the interest of theorganizat ion. The dist inct ion between primaryand secondary stakeholders had indeed disap-eared in Evan and Freeman (1988) and Freeman(1994) In both texts, the normative approachdominated. Evan and Freeman (1988) made theKantian recommendation that every stakeholderhas a right to be treated as an end, not a means.They took this argument one significant stepfurther when they proposed that pursuing theinterests of the stakeholders is the true purposeof the business organization. The corporationshould balance the interests of difFerent stake-holders by astute use oF the Raw lsian veil oFignorance, which makes the decision makersignorant with respect to the question which stakeis theirs. Freeman (1994) described the norma-tive basis oF his thin kin g as pragm atic liberalism,instead oF the Kantianism oF Evan and Freeman(1988), but arrived at the same conclusion. Heproposed three principles to be incorporated incorporate constitutions or even corporation law,the first oF wh ich, the Stakeholder EnablingPrinciple, reads: "Corporations shall be managedin th e interests oF its stake hold ers, defined asemployees, financiers, customers, employees, andcommunities" (Freeman, 1994, p. 417). This isa general prescription in need oF specification.

Freeman suggested that the rights oF stakeholdersshould be considered to be equal and " . . . thatinequalities among stakeholders are only justifiediF they raise the level oF the least well-ofF stake-holder" (Freeman, 1994, p. 415). However, tobalance interest in this Fashion implies that it ispossible to quantiFy accurately the benefitsaccruing to difFerent stakeholders and that thesebenefits can be expressed in terms oF a co m m onunity oF measurement.As mentioned above, Donaldson and Preston(1995) distinguished between descriptive, instru-men tal and norm ative aspects oF stakeholderanalysis. Donaldson and Preston argued thatstakeholder theory has to be Founded in the nor-mative aspect. Significantly, Donaldson andPreston phrase their normative approach asFollows: " . . . m anagers should acknowledge thevalidity oF diverse stakeholder interests and shouldat tempt to respond to them within a mutual lysupportive Framework, because that is a moralrequirement For the managerial Function"(Donaldson and Preston, 1995, p. 87). They alsoargued For the useFulness, or at least the non-harmFulness, oF "co nstitu enc y statutes " as a steptowards a more "legal" approach, linked to their

recommendation to ground the normative basisoF stakeholder theory in property rights theo ry(and twentieth-century legal pract ice in mostdeveloped countr ies) in which the extent oFproperty rights is limited by restrictions againstusing the property in a manner that causes harmto others. This is a highly interesting but alsoproblematical suggestion. Legal limitations to therights oF property owners most ly con cern thenegative duty oF not h arm ing others wh ile n or-mative stakeholder theory, as Formulated byDonaldson and Preston, implies a positive dutywh ich seldom , iF ever, appears in the co nte xt oFproperty ownership. One should not bore orirritate one's neighbours by playing the violin allnight long. However, iF one is a first-class playerand owns a Stradivarius, one is allowed not toplay or to build a soun d-proo F wall so that noothers can derive enjoyment From one's playing.O ne may even burn the Stradivarius. Stakeholdertheorists, and certainly Donaldson and Preston,expect more From corporations than the lawexpect oF individual property own ers. And p re-


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332 Nachoem M. Wijnbergcisely From the point oFview oFlegal theory, thisseems eminently reasonable because by makingincorporation possible, the law extends the rightsindividual persons can have and allows themcollectively to acquire more power than theywould have otherwise. The law usually asksFor more responsibility where there is morepow er, an d seen From the legal po int oF viewDonaldson and Preston advocate, s takeholdertheory could be considered the logical comple-me nt oF corpo ration law.

Corporations by their very essence as entitieswh o are more than the sum oF the peop leinvolved in them, raise problems with respect tothe distinction between the legal and moralresponsibilities oF the c orp ora tion and those oFnatural persons acting o n behalF oF the corpo ra-tion. Q uin n and Jones criticized both Freeman'sstakeholder approach and Donaldson andDunFee's (1994) implicit social contract approachon the grounds that these approaches regard thefirm and not the manager as the "relevantunit oF moral analysis" (Q uinn and Jones, 1995,p. 32). Against the widely held opinion thatcorporations have legal responsibilities but onlypersons can have moral responsibilities, French(1984) argued that corporations can be treatedas moral persons when the "corporations internaldecision structure" allows one to redescribe theactions oF individuals as intentional actions oF th ecorporation. French explicitly argued that evenwhen the Formal organization chart does notaccurately represent the internal decision struc-ture, no problem ensues because all that is neededis to co nstru ct a map oF the n on-Form alized realstructure. The way organizational politics isviewed in this paper (below) makes it hard toagree that the real internal decision structure oFa corporation is sufficiently stable and visible tobe mapped For this purpose. And even iF it werethat moral responsibilities could be ascribed tocorporations, these would scarcely detract, aslegal responsibilities often do. From the personalresponsibilities oF the persons c on cer ned withmaking the relevant decisions.

Q ui nn and Jones (1995) also distinguishedbetween instrumental and non-instrumentalethics, much in the same way as Donaldson andPreston distinguished between the instrumental

and the normative approach. But whDonaldson and Preston (1995, p. 66) consider three approaches they distinguish to be mutuasupportive, Q ui nn and Jones explicitly opt non-instrumental ethics. They went Further arguing that instrumental ethics is not a tenaapproach because oF a num ber oF problems suas the Fact that corporate perFormance will more directly linked with the confidence corporation inspires than with its actual ethibehavior and that it is possible to inspire trwith out taking the roun dab out ro ute oF behavethically. Because Q ui nn and Jones (1995) staat the star t that the problem with non-instmental ethics is that it oFten produces only vagrecommendations, they at tempted to prese(relatively) concrete proposals based on premise that both market competi t ion and principal-agent relation are Fundamental to society: "Market competi t ion depends on texisten ce oF liberty, w hi ch Follows From twprinciples - avoiding harm and respecting autonomy oF others. Principal-agent relations premised on the reco gnition oF two principleshonoring agreements and avoiding lying" (Quiand Jones, 1995, p. 38). This seems a stranconclusion to the preceding argument becauthese Four principles are presented and explainin terms oF their instrumental value. W ithothem Free markets would not operate efficien(or at all), and neither would principal-agerelationships. Only the last sentence oFthe pentimate section stated that these principles are aconsistent wi th " . . . the Judeao-Chr is t ian thological view oFmany US citizens" (p. 38).

It appears From this discussion oF the curr estate oF norm ative stakeholder theory that theis need For improvement or elaboration wregard to three issues. First, even those scholwho choose to pursue a normative approaseem hesitant to make explicit the ethical prciples From which norms are to deriveSecondly, even where ethical principles aproposed in connection with stakeholder theoit rema ins hard to specify th e co nte nt oF tnorms in such a way that they provide a useFFoundation For managerial decision makinThirdly, speaking about corporate responsibilittowards stakeholders tends to underplay t


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Normative Stakeholder Theory and Aristotle 333oF individual decision makers, and theirresponsibilities. In the next two sections

be discussed to seeit contains elements that could be oFuse

. Aristotle and ethicsis concerned wi th the

has moral value. Havingthe ability to

a certain value, a certain form of thethe sophists had raised doubt with

to traditional views on the good and evento the existence of a non-relativistic

(de Romilly, 1992), Platois an idea of "the good", whichn be k n o w n by philosophic contemplat ion.ommentators on Plato do not find it easy to

a precise definition oF the good accordingthe concept is not treated

the same way in different dialoguesas always, opinions can differ with respect

the tricky question wh ich opinions oF wh ichin the dialogues can be considered to

F thou ght. However,in Protagoras argues that everythinghas value shares in the single nature oF theood (see also the illuminating analysis oF thisialogue in Stokes, 1986). In Nussbaums (1990,1993) view, this means that all values are com-

It is impor tant to appreciate theoF Nussbaums interpretat ion oF

IF only one type oF goodnessxists and only differences in the amount or theoF goodness are possible, a science oF

asure me nt (oF goodness) seems Feasible. Suc hbe used toptimize decision making. Interestingly, com-oF values would also provide a

For obtaining Pareto-optimalityas Freeman(1994) suggested. The decision maker couldompare the a m o u n t oF " g o o d " his decision

to stakeholder A with themo unt oF "go od " with regard to B.Aristotle rejected the core oFPlato's approach,a single universal

good which can be recognized, in greater orsmaller quantities, in everything that is good orhas value, allowing rational optimising choices tobe made concerning ethical matters. Aristot le" . . . m akes it clear that it is in the very natureof truly rational practical choice that it cannotbecome more 'scient if ic ' without becomingworse . . . Aristotle's attack has three distinctdimensions, closely interwoven. These are: anattack on the claim that all values are c o m m e n -surable; an argument For the priority oF part icu-lars judg me nts to universals; and a deFense oF th eemot ions and the imaginat ion as essential torational choice" (Nussbaum, 1990, p. 59).Aristotle maintained that reducing difFerent

goods or values or virtues to quantities oF thesame standard, means ignoring precisely whatmakes the difFerent goods good. Courage iscourage because it is not justice. Values areheterogeneous. They can confiict and man, indi-vidually and collective, has to make decisionswithout optimising rules. Rules have their use;iF tim e is short or one lacks confidence in one'sjudgement , one can Fall back on a rule - the ruleas a distillation oF precedents - or one can profitFrom a rule to approach the particulars in anmore systematic Fashion - the rule as an aid topercept ion. But rules by themselves do notsuFfice in matters oF deliberat ion, oF practicalwisdom. Deliberat ing with the aim oF makingdecisions means conFronting dilemma's and is(potentially) tragic. One can not give rules Forsolving dilemma's just as one cannot give rulesFor telling jo ke s.Aristotle's reasoning did not, however, lead tocomplete subjectivism and relativism. Althoughhe opposed a simple concept oF the good, hesuggested that it is possible to distinguish thegood From the bad in an objective manner,". . .by reFerence to reasons that do not derivemerely From local traditions and practices, butrather From Features oF humanness that liebeneath all local traditions and are there to beseen whether or not they are in Fact recognizedin local traditions" (Nussbaum, 1993, p. 243).However, it should be noted here already thatlocal background can infiuence the relativeweights attached to particular virtues and,thereby, the nature oF the "local" good man. A


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334 Nachoem M. Wijnberggood man in Sparta would be difFerent From agood man in Athens. Aristot le at tempted todivide human liFe in spheres oF experience inwhich choices have to be made that are more orless virtu ou s. DifFerent types oF hu ma n relatio n-ships also signify difFerent sp heres oF ex pe rien ce .O n e can display courage towards enemies inbattle, magnanimity towards enemies one hasconquered. As will be seen, this idea can also beapplied to stakeholder theory. Only aFter identi-Fying the spheres oF experience did Aristotleproceed to fill in the "mean ing" oF the virtuesthat are relevant to the particular spheres oFexpe-r ience . Then the doct r ine oF the mean comesinto play. Excess and deFect should be avoidedin every sphere oF experienc e. It is important totake n ote oF three issues in connect ion with thedoctrine oF the mean.

The first is that the mean is not necessarily themathematical mean between the most extremepossibilities, even iF these can be quantified. Thesecond is that the mean is not the same For allpersons in all circumstances; only with closeregard to the characteristics oF the actor and thesituation he finds himselF in can be determinedwha t the mean is (Hardie, 1977). Finally,al though most can agree that to be too coura-geous means to become rash, which is not avir tue, some commentators have wondered howit is possible to be too just or too loyal. Withrespect to justice, Aristotle had to employ a bitoF sophistic (in the modern sense) reasoningwhen he argued that the mean is not i n t e rme-diate between too just and too little just butbetween acting unjustly and being justly treated{Nicomachean ethics, 1133b). There is another wayoF construc ting justice as a mean, resulting Fromthe essential heterogeneity oF values AristotledeFends. Being too just then means acting as iFjustice was the only value or as iFall other valuescould be reduced to justice or to something interms oF wh ich justice c ould be fully described- homogenous Platonic goodness.

Justice is the value which first comes to mindwhen thinking about making decisions thatinvolve confiicting interests, such as the interestsof stakeholders. How ever, justice is not the onlyvalue which might be relevant. A managerialdecision also can be courageous, magnanimous.

friendly, etcetera. An Aristotelian good manno t a man who expresses one great valw h o has one great virtue, but a man who is ato express many values without effacing thdifferences and their potentially confiictdemands. Also, according to Aristot le, humare not born with vir tues. We acquire amaintain virtues by vir tuous act ion. " . . . iby doing just acts that the just man is producand by doing temperate acts the temperate m. . ." {Nicomachean Ethics, 1105b). Also, "Vithen, is a state of character concerned wchoice . . ." {Nicomachean Ethics, 1106b). A becomes a good man by acting virtuously, whmeans making choices, in an human envi rment , which means , a poli t ical environmeLater Aristotle writes that of a god it cannotsaid that he is excellent because his state is higthan excellence {Nicomachean Ethics, 1145Surpassing the excellence of being just , or of aother virtue, is a matter for a god, who likeanimal, is not a political creature. But if owants to know about the human good one hto pay attention to politics.

4. Aristotle and politicsAristotle was concerned wi th the politicscities, not of organizat ions. However, wAristotle has to say about the politics of citieshighly relevant to the politics of organizatioAs PfefFer argues with respect to the relevanoF the study of modern government to orgazat ion theory: " . . . organizations, particulalarge ones are l ike governments in that theyfundamentally political entities" (PfefFer, 199p. 29). Aristotle classified political systems alotwo dimensions: first, the number and charteristics oF those who have power and make tdecisions on matters that are impor tant to tcommuni ty and secondly, the extent to whthe wider interests oF the community at largetaken into account by the decision-makers. Wrespect to the first dimension, Aristotle distguished between const i tut ions in which powis in the hands of one person, of few personsof all citizens. With respect to the second dimsion, the extreme possibilities are that the perso


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Normative Stakeholder Theory and Aristotle 335ho exercise power can do this to further thenterests of the community or to further onlytheir own interests. If the last-mentioned possi-ility occurs, Aristotle calls the constitution"perverted". Thus, he envisaged six possible con-stitutions. If the rulers rule for the benefit of all,monarchy is the best option, followed by aris-tocracy, and finally "polity", which is a mixtureof oligarchy and restricted democracy with strong"rule of law". If the constitutions are perverted and, according to Aristotle, all norm ally are butmonarchy is more easily perverted than oligarchyand oligarchy than polity the sequen ce isreversed and the rule of the many, democracy, ispreferable to the rule of one, tyranny, or of the

few, oligarchy.^Thus it can be seen that Aristotle's reputationas an o ppo nen t of democracy is largely incorrect.It would be more exact to say that with respectto the spectrum of possible democratic constitu-tions Aristotle preferred the moderate type, witharistocratic or oligarchic elements mixed in, andis an opponent of an extreme form of directdemocracy, a caricature of the Athenian systemin its most democratic phase. Aristotle arguedthat in a city in which political equality wouldbe total, decisions would be taken by majorityand all public offices would be distributed bychance, the poor would rule since they are thelargest group and the poor could not be expectedto rule with science and understanding, becausethey are insufficiently educated, or for the benefitofthe whole, because the acuteness of their needsblinds them to the needs of others. The distrib-ution of public office by election, which we tendto consider an essential element of the moderndemocracy, was to Aristotle already a recom-mendable step away from complete democracy.Aristotle has praise for a moderate democracy,comprised mainly of moderately well-ofF farmers,in w^hich ". . . all the citizens wiU enjoy the threerights of electing the magistrates, calling themto account and sitting in the law courts; on theother hand the most important offices will befilled by election and confined to those who cansatisfy a property qualification' {Politics, 1318b)His third-best (but most likely to be sustained)type of unperverted government, the polity, canin fact be recognized in this description. In this

type of const i tut ion decisions concerning thecommunity are made by those who, according toAristotle, are most likely to be qualified and totake interests other than their own into account.Aristotle was very aware of the dangers of con-stitutional instability and uncontrolled factionalconfiict. He saw a number of ways to minimizethese dangers {Politics, 1309a-1310a). First ,officeholders should be loyal to the constitution,capable, and good. Secondly, the majority shouldwant the constitution to continue. Thirdly, inaccordance with the doctr ine of the mean, noconstitution should be applied in an extreme way,democracies should not be too democratic (itshould be like a polity), oligarchies not too

oligarchic (it should, again, be like a polity).Finally, and most importantly, the citizens shouldbe educated in the spirit of their constitution.Aristotle returned to the subject of educationin the final books ofthe Politics. One should dis-tinguish between the rulers and the ruled. Theruled only have to be educated to fulfil practicaltasks. The rulers - the oligarchs in an oligarchy,the citizens in a democracy - have to learn howto be good men and to express their virtues inthe exercise of their practical judgement. As

mentioned already above, although the virtuesare, according to Aristotle, everywhere the same,the character of a good man can differ from placeto place according to the local moral preferenceswhich are, of course, also strongly linked to theprevailing political constitution. The potentialgood man in Athens needs a difFerent educationthan the potential good man in Sparta. But bothneed a liberal education. Leo Strauss (1968)po inte d out that to the Greeks oF classical timesthe word "liberal" had a ". . . political meaningalmost the oppo site oF the presen t politicalmeaning in the United States. Originally, a liberalman was a man who behaved in a mannerbecoming to a Free man, as distinguished From aslave. 'Liberality' reFerred then to slavery andpresup pose d it" (p. 10). Becau se oF his wealth,which allows him to be generous, the liberalgen tlem an will, iF he is well educ ated (and on lythe gentleman will have the means to becomesuFFiciently educated), be more likely to rulesociety For the in terest oF the w ho le societyinstead oFhis narrov^^ personal interest. This does


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336 Nachoem M. Wijnbergnot mean that the good man will let the inter-ests oF othe rs always prevail over his o wn inte r-ests. The good man is not a saint. But the goodman will take notice oF the interests oF others andoFthe communities to which he belongs and willmake an efFort to exercise his virtues in balancingthese interests It would be a mistake to concludeFrom all the attention Aristotle gave to theproblem oFhow to educate citizens that the aimof educating good men is to provide the citywith capable rulers and thus perpetuate the well-ordered cities. The aim oFthe city is to allow itscitizens to live good lives.

5. Politics and business organ izationsAn increasing nu m ber oF scholars has bec om eattentive to th e political nature oF organizationsand the need to understand organizationalpolitics and the n ature oF pow er relationshipswithin organizations to make sense oF organiza-tional behavior (e.g. PFefFer and Salancik, 1978;PFefFer, 1981, 1992; Bacharach and Lawler,1980). At the same time, the political processwithin organizations has been given a much mo repositive valuation than beFore. Where earlierscholars w ho did take no te oF political confiicttended to consider it a source oF inefficiency anddemotivation (Pettigrew, 1973), later scholarspoint out the positive efFects politics may haveon the adaptability and learning capacity oForga-nizations (Pichault, 1995). However, difFerentau tho rs oFten use difFerent defin itions oF org an i-zational politics.

Drory and Romm (1988, 1990) reviewed andclassified a large nu m be r oF definitions and sug-gested (Drory and Romm, 1990) that threeessential elements of organizational politicscould be distinguished: political behavior aims toinfluence someone elses behavior or attitude byinformal means in a situation of (potential) conflict.It can be argued that Drory and Romms defin-ition is unnecessarily narrow because it assumesthe background of the ideal-typical rational andhierarchically structured organization in whichlegitimate decision making exclusively occurstop-down and in which organizat ional pol i t icstherefore has to make use of informal means.

Their definition excludes formal means that explicitly political in organizations that havequasi-political structure , e.g. a wo rkers co uncto infiuence the behavior of others. More imptantly, making a distinction between formal ainformal means of infiuencing others in situatiof conflict also at least suggests, along with muof the mainstream literature on the subject, tthe use or creation of pow er in the course of tprocess of organizational politics is somehow ilgitimate and to be contrasted with the legitimsystem of authority (Hardy and Clegg, 199p. 626) which can be and, in the modern businorganization, usually is, heavily formalized. Tother two elements do, however, seem essentto an adequate definition. Political behavshould infiuence someone elses behavior situations of (potential) confiict. The next sis to consider more carefully the two cardiquestions Aristotle used to classify political costitutions: who makes decisions and whose intests are taken into consideration, starting with tfirst.

Few scholars think that fuU and direct, or evrepresentative, democracy is advisable or evfeasible in modern corporations (see, for instanPagano and Rowthorn, 1996) . Most organiztions, as well as corporation law in most devoped nations, opt for a "constitution" in whirepresentatives of employees have the right to consulted or at least informed on matters tdirectly touch upon their interests but in whithe power to make decisions on matters strategic management is reserved to senior maagement. However, few CEOs can act as tyraand senior management usually is not a monlithic and confiict-free entity. Senior managattempt to infiuence other senior managers, instance by building coalitions or by influencior allying themselves with groups that have decision-making power but whose behavior attitude can have a significant efFect on the pame ters oF the situation in wh ich the d ecisiontaken. Against those writers, such as Mich(1962), who argued that even in democracies rpo we r is always in the hands oF political eliwho act as dominant minorities pursuing thown limited interests, Dahl (1989, p. 27pointed out that : "IF. . . the dominant minor


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Normative Stakeholder Theory and Aristotle 337a heterogeneous col lect ion of groups, and ifhe interests of these groups sometimes diverge,hen political competition may in some circum-tances induce leaders to seek support among theajority by advancing their interest."T h i s phenomenon of coalition building hasalso been remarked upon in organization theory(e.g. Strauss, 1978). Child (1997, p. 60) wrote:"Strategic choice is recognised and realizedthrough a process whereby those with the powerto make decisions for the organization interactamong themselves (so const i tut ing a shifting'dominant coalition'), with other organizationalmembers andwith external parties". On the onehand, emphasizing not only the political natureof decision-making but also the fluidity of theprocess also makes it harder to envisage con-structing realistic maps of "corpora te in ternaldecision structures" that enable moral responsi-ilities to be assigned to corporat ions, as French(1984) proposed. On the other hand, the conceptof changing coalitions in which even outsiders(who are not direct participants in the politicalrocesses within the organization) are involvedoints the way back towards the role of stake-holders and Aristotles second question: whose

interests are taken into consideration.Coalitions are built among decisions-makersbut also with other organizational membersand with external parties. Other organizationalmember s are those employees who are notdirectly involved in the decision-making process.Aristotle would call a corporate const i tut ionunperver ted if the decision makers would takethe interests of those internal stakeholders intoaccount. However, Aristotle pictured his polis asfundamentally autarkic andneutral or even antag-onistic to outsiders. Already in Aristotles timethis picture was at best anachronistic. In thispaper, decision-makers in organizations arecompared to citizens in a polis. Modern businessorganizations certainly cannot picture themselvesas autarkic and independent of the rest of society.Decision-makers in organizations can also buildcoalitions with external parties, external stake-holders. Leflaive (1996) argued that the politicalprocesses within organizations rarely are explic-itly linked to the relationships of power anddomination between organizations and environ-

ments . The ideas referred to above suggestthat the more the organization allows instabledominant coalitions to exercize power, the moreit can be expected that internal and externalstakeholders' interests are taken into account. Byallying oneself with a powerful group of stake-holders, persons or groups within the organiza-t ion can at tempt to build new dominantcoalitions. Under such circumstances, one couldargue that organizational politics can be consid-ered to increase the chance that the corporat ionpays attention to its stakeholders' interests. Ofcourse, some stakeholders will carry more polit-ical weight than others and information is imper-fect and costly. Even a well-functioning politicalprocess does not ensure opt imal outcomes butorganizational politics seems at least to offer away towards implementing the norm that thecorporat ion should be managed for the benefitof its stakeholders, which is the basic norm ofstakeholder theory as stated, for instance, byFreeman (1994) or Donaldson and Preston(1995). However, this argument runs counter toth e way in which in Aristotle's thought politicsand ethics are l inked.

6. Stakeholder management for goodmanagers?

Evan and Freeman (1988) made the Kantianrecommendation that every stakeholder has ar ight to be treated as an end, not a means. Theytook this argument one significant step furtherwhen they proposed that pursuing the interestsof the stakeholders is the t rue purpose of thebusiness organization and that the decisionmakers should act as if they did not knowwhich stake is theirs. As Donaldson and Preston(1995) pointed out this certainly is a normativeapproach, al though probably not one that iseasily operationalized. Evan and Freeman bringthe issue of ends emphatically back into thediscussion. The end of the corpora t ion is toincrease stakeh olders' satisfaction. As ment ioned.Freeman's (1994) first principle stated that thecorporation should be managed in the interestsof the stakeholders. In Freeman's principle,managers are not even named separately but


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338 Nachoem M. Wijnbergare included in the stakeholder "employees".However, it makes sense to treat (senior) man-agement differently from the other employeesbecause of their decision-making powers. Hilland Jone s (1992) emph asize exactly the pow ersmanagers have to decide on issues that affect theinterests of all the other stakeholders. But evenwhen management is considered to be a stake-holder, and a very impo rtant and powerful o ne,stakeholder theory such as discussed in section 2,as well as the rhetoric of the managers them-selves, suggests that managers prefer to considerthemselves as a mean s - as servants to the en ter-prise (and its other stakeholders) - and that tosee it otherwise would be unethical.

Considering business ethics from the point ofview of Aristotle could lead one to very differentconclusions. As discussed above, in Aristotle'view, the polis exists to allow the citizen to livea complete and good life, not vice versa.Analogously, one could argue that the organiza-tion exists to allow the decision maker within theorganization, the manager, to live a complete andgoo d life, no t as a craftsman and n ot as a philo so-pher, but as a man of practical wisdom whodeliberates on and makes decisions about mattersthat concern other human beings. What a goodman of practical wisdom needs, in fact, are moraldi lemmas. Solving problems of a "technical"nature, problems to which solutions can be foundby skilfully applying rules, is work for craftsmen.Contemplat ing the unchanging things is thework of the philosopher. Aristotle does state thatliving a purely contemplative life, without rela-tions to others, certainly is a good life. If not," . . . there would be something wrong wi th GodHimself'' and the whole of the universe, whohave no activities other than those of their owninternal life" {Politics, 1325a). However, it is hardto envisage a human being living a purely con-templative life. Men who are not godlike haverelations with others, have to act politically andhave to deal with conflicting interests. Facedwith conflicting interests, contemplation is notvirtuous; one has to act and make choices. Assection 3 already quoted in part:

" . . . i t is by doing just acts that the just m anis produced, and by doing temperate acts thetemp erate ma n. . . . But m ost peop le do not do

these, but take refuge in theory and think thare being philosophers and will become goodthis way . . . {Nicomachean Ethics, 1 1 0 5 b ) .

One needs practical wisdom to act well aby act ing well one bec omes a vir tuous mMoral virtues have to be exercised. A humbeing who lives in circumstances which do allow him to make decisions which affect interests of others cannot live a complete agood life. From an Aristotelian point of view,corp oratio n is a political association in w hidecisions have to be made that affect the intests of different stakeholders and express values of the decision makers. Today, in "catalistic" society, due to the characteristics of btechnology and culture, decisions are mainmade by (senior) managers. The existence the corporation allows the decision makers, managers, to be confronted by ethical dilemminvolving different stakeholders, to exercise thdeliberative faculties and virtues, and thus to lgood lives.The Aristotelian approach to normative staholder theory could also suggest a way to hanthe problem of specifying further the contentthe virtues. As, discussed in section 3, Aristoinvestigated the nature of the virtues by distguishing various spheres of activity of a persascribing virtue-names to each of these spheand using the doctr ine ofthe mean to determithe meaning of being virtuous in that particusphere. Identifying various stakeholders couassist in identifying spheres of experience athereby virtues. Because a person has relatiowith friends, the virtue "friendliness" exist aone can attempt to define the exact meaningthis virtue. Because a manager has to make desions with respect to the natural environmand has, therefore, relations with people whowelfare is affected by what happens to the natuenvironment , the managerial vir tue "enviromental consciousness" exists and can be definThe quest ion then becomes what kind a const i tut ion a corporat ion should have conduce to the goal of allowing the manager act virtuously. This paper is not the place to readiscuss the many forms of political structures ainstitutions that have been or can be propose

It is interesting to note that in the "mix


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Normative Stakeholder Theory and Aristotle 33 9regime" of the polity, the "laws", in the senseof fundamental constitutional laws, are relativelyimportant , in contrast to e.g. monarchy ruled bya perfect monarch where law is unnecessary orfull democracy where any law can be set aside bya simple majority vote. It should be kept in mind,however, that Aristotle was quite clear about thescope of laws, just as about the scope of rules ingeneral. "Matters which belong to the sphere ofdeliberation are obviously ones on which it isnot possible to lay down a law" {Politics, 1287b).The best law cannot be a substitute for practicalwisdom. Of course, this does not mean thatAristotle urged citizens to ignore the laws of th estate whenever their deliberations lead them toprefer a course of action which is prohibited bylaw. But, in his view, a rule cannot tell the citizenwhat he has to decide to be a just or courageousman. As stated above, rules have their use if t ruedeliberat ion is impossible because of ci rcum-stances or as tools to aid t rue del iberat ion, byoffering a fixed and clear framew^ork to theprocess of observat ion and judgement.

Although many wri ters are sceptical about theimportance of corporate codes of behavior, andmission statements in shaping and changingactual practice in the organization, some writersargue that they at least have the potential tosupport future changes in the nature of th e cor-poration. Parker (1997) suggested that expressionsof corporate culture such as mission-statementscould be considered as first steps in the direc-tion of the development of true organizationalcitizenship, involving rights as well as duties foremployees. Although he admitted that to treatmission statements as if they were constitutionswould be naive, he points out that " . . . a practiceof organizational democracy might begin from atext that metaphorically mimics an organizationalbill of r ights" (p. 86). The Aristotelian approachcould lead to different suggestions. In the firstplace, a mission statement could function tomake explicit which virtues the managersdesire to practice via the organization and howthey want their organization to excel amongother organizations. Secondly, andperhaps moreimportantly, the mission statement (or the codeof behavior, etc.) could express the ruleswhich should frame the process of deliberation.

including, for instance, rules on how far thedecision maker(s) should go in investigating theinterests of inside and outside stakeholders beforemaking a decision and rules on how much of theprocess of deliberation has to be made explicitand public, so that individual decision makers canbe held responsible by other stakeholders, if notlegally, than at least morally.As referred to above. Freeman (1994) recom-mended including basic principles in corporateconstitutions or in corporation law. His first prin-ciple stated that the corporat ion should bemanaged in the interest of stakeholders. Thesecond and third principle state: " . . . directorsof the company should have the duty of care touse reasonable judgem ent to define and direct theaffairs of the corporat ion [in accordance withthe first principle]; Stakeholders may br ing anaction against the directors for failure to performthe required duty of care" (Freeman, 1994,

p. 417). Freeman's suggestion seems similar to theone proposed here but there is an impor tant dif-ference. Freeman's principles exact a duty ofcareful deliberation of decision makers, or atleast of directors, with the aim of safeguardingstakeholders' satisfaction. The approach advo-cated here makes stakeholders' satisfaction, andprocedural rules which open decision makers 'deliberations to the scrutiny of unsatisfied stake-holders, instrumental to the goal of having thedecision makers behave virtuously.

7. Conclusions

Stakeholder theory has a prominent place incurrent ideas about business ethics. If normativestakeholder theory is to mature further, at leastthree issues seem in want of further at tent ion.First, making the non-instrumental ethical prin-ciples more explicit, taking a posi t ion withrespect to what one considers to be good in itself,a final end and not a means to something.Aristotelian ethics makes this foundation quiteclear: the final end is the human life in whichhuman capabilities can be optimally realized inall relevant spheres of experience. The completehuman life explicitly includes making decisionson issues that have to do with the interests of


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340 Nachoem M. Wijnbergother humans and necessitate the applicationof practical wisdom . In mod ern corporat ionsmaking decisions is usually the province of(senior) managers. An Aristotelian approach tobusiness ethics would therefore focus on allowingthese potential good men or women to becomeactual good men or women. Looking at organi-zational politics as an essential feature of organi-zations and not as an aberration also serves toemphasize the fact that managers do not use theirpower neutrally and unproblematically (Hardyand Clegg, 1996) but in accordance with theirvirtues of lack of them. This leads to an unusualperspective on normative stakeholder theory. Inthis perspective, the existence oft he corp orationand its interaction with its stakeholders becomeinstrumental to the manager's desire to actvirtuously, according to ethical norms. It alsogives a significant role to organizational politicsbecause the corporate "const i tut ion" - organi-zational institutions and procedures and particu-larly the actual distribution of power in thecorporation - has to allow the manager sufficientscope to practice his practical wisdom; themanager has to be suflBciently empowered toconfront ethical dilemmas. Incidentally, the morethe constitution of the corporation allows outsidestakeholders to play a part in organizationalpolitics, the more can it be expected that societyat large will benefit from the actions of a cor-poration led by virtuous managers. But this isan incidental, but happy, outcome because in theAristotelian framework, the end is the good lifeofthe individual decision-maker, not the welfareof the corporation or of society. Although, toround off this point, it could be argued that bothcorporation and society have to enjoy at least aminimum of well-being to al low managerialdecision-makers to function at all.

A second problematic issue in modern stake-holder theory is that even where ethical princi-ples are proposed in connection with stakeholdertheory, it remained hard to specify the contentof the norms in such a way that they couldprovide a firm foundation for corporate behavior.The Aristotelian approach certainly doesnot solve this problem completely. However,Aristotle's systematic method to demarcatespheres of ethical experience, spheres in which

values can be expressed as virtues, can also applied to business ethics. Identifying stakholders and their interests in a more systemafashion could b e a mean s to identify significaspheres of experience, and specify further tmeaning of the virtues the decision maker shoustrive to acquire and to exercise. As has bediscussed above, the relative weights attached the virtues can vary from one society to the neand the nature of the good man or the goomanager will vary accordingly. However, tnature of the Aristotelian virtues themselves non-relativistic. For instance, greed is not virtue, even if a particular society seems to treit as such.The third issue is the relation between indvidual and corporate responsibility. Althougmost scholars in the field of ethics hesitate ascribe moral responsibilities to collectivemuch of current stakeholder theory tends focus on corporate responsibilities and givhttle attention to the role of individual decisimakers, and their personal responsibilitieThe Aristotelian approach focuses on individuresponsibilities. The good man of practicwisdom should not hide his deliberation behia corporate facade. The preceding section cotained some suggestions about the use of missistatements or codes of behavior to enforce at least encourage courageous and responsibbehavior.Of course, the best mission statements and tbest corporate constitution are by themselvinsufficient to make managers act virtuouslEducation is of crucial importance. The fact thin classical Greece only the rich few had tleisure and wealth to receive the necessary edcation to become good men is Aristotle's mareason to prefer government of the few, in restricted democracy, over that of the (unedcated) many. In his view, only a well-educateman can become a liberal gentleman who acpolitically out of generosity. Therefore, Aristotdevotes a sizeable part of the Politics to tquestion how the citizen should be educateAristotle's precise recommendations are not much use to reform the curriculum of modeSchools of Management. However, the approac

presented in this paper clearly implies th


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Normative Stakeholder Theory and Aristotle 341prospective managers should be educated tounderstand that management means not applyingrules but serious deliberation and that delibera-tion means being liberal with one's self in thesense that one is willing to show, in the practiceof making decisions involving the interests ofdifferent stakeholders, what kind of a personone is.

AcknowledgementsThe author wishes to thank Wynand Bodewes,Bar t Nooteboom, Ben Wempe , and two anony-mous referees for their helpful comments onearlier versions of this paper.

Notes' Page num bers in references to and quotations fromAristotle's works are, as is comm^on, the page numbersin the 1831 Bekker edit ion. Quotations from theNicomachean ethics are as translated by W.D. Ross ,revised by J. L. Ackrill and J. O Urmson, Oxford &New York, Oxford University Press, 1980; from thePolitics as translated by E. Barker, revised by R. F.Stalley, Oxford & New York, Oxford University Press,1995.^ As often, significantly disagreeing with Plato who,at least in The Republic, seems to prefer oligarchyover dem^ocracy if forced to choose between pervertedconsti tutions.' God, to Aristotle, is rather different from theJudeo-Chr is t ian Dei ty . Contemplat ion is His onlyactivity.

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normative stakeholder theory and aristotle - the link betwee

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