Paper

The allegation that BP put profits ahead of the environment shouldn’t be a surprise. In fact, BP’s failure to stop the worst oil spill in U.S. history is indicative of a much larger problem with companies that have embraced one of the central ideas in management today: stakeholder theory. The idea that companies can meet the needs of “stakeholders” leaves them open to moral abuse without normative principles at its core.

[pic]It was R. Edward Freeman’s 1980 book Strategic Management: A Stakeholder Approach that developed stakeholder theory into management practice arguing for a widening of managerial focus away from the exclusivity of stockholders to include any individual or group having an interest or is affected by organizational activity. In its broadest terms, stakeholder theory helps managers create organizational mechanisms and procedures for dealing with social issues in a proactive, rather than a reactive, way of achieving economic gains.

Stakeholder theory includes environmental stewardship under its rubric, since the environment can be affected by corporate activity. And many companies pay homage to the environment as stakeholder in their glossy reports. BP does likewise. In their 2009 sustainability report they state, “At BP we define sustainability as the capacity to endure as a group: by renewing assets; creating and delivering better products and services that meet the evolving needs of society; attracting successive generations of employees; contributing to a sustainable environment; and retaining the trust and support of our customers, shareholders and the communities in which we operate.”

Stakeholder theory is massively popular but without strong normative principles as its foundation, it can be usurped by short-sighted self-interested initiatives leaving ethical considerations excluded from managerial analysis. The oil spill in the Gulf of Mexico by British Petroleum is one such example.

Preliminary results into the cause of the...