Ethical Firm System and Stakeholder Management Theories: A Possible Convergence

• DOI: http://doi.org/10.1111/emre.12162
• Published date: 01 March 2019
• Date: 01 March 2019
• Author: Gianfranco Rusconi

Ethical Firm System and Stakeholder

Management Theories: A

Possible Convergence

GIANFRANCO RUSCONI

Department of Management, Economics and Quantitative Methods of the University of Bergamo, Bergamo, Italy

This paper presents a model for exploring the relationships between the stakeholder management theory

(SMT) and the firm system theory (FST) which are interpreted from an ethical perspective. FST forms part of the

Italian economia aziendale or business administration studies. The author proposes to include SMT in an ethical

application of FST (EFST, ethical firm system theory), where ethical duties are considered to be strictly linked to

the management of the firm system (mutatis mutandis, such as production, marketing, finance and so on). Such a

metaphoricalmerger is useful for many purposes.In particular,this paper focuses on the use of EFSTto tackle three

important and critical ethical points of SMT (the dichotomy between economic success and ethics, stakeholder

engagement and ethical responsibility and competition in a cooperative, but not corporatist context), without

changing the essential nature of the managerialidea underlying SMT, but inserting it in EFSTwith mutual benefits

for both approaches.

Keywords: economia aziendale; stakeholder; equilibrium;ethics; responsibility

Introduction

The focus of this paper is to show how cooperation

between two perspectives such as the stakeholder

management Theory and an ethical interpretation of the

firm systemtheory (a development of theItalian economia

aziendale), which arose and developed independently in

managerial and business ethics studies, may help clarify

some key questions.

The paper starts from the perspective (following on

from Freeman, 1994; Wicks, 1996 to Freeman et al.,

2010) of a refusal of the so-called separation thesis that

would imply the existence in a firm of business operations

without ethical implications and vice versa. Such a view

of a synergic relationship between business and ethics

leaves firms oriented mainly towards a business ethics

framework, but it may also be useful for a managerial

and organizational approach as well.

Although the contribution that this work wishes to

make is not so ambitious as to try and present a new

perspective of business ethics, if it improves our thinking

in business ethics and management in any way, it may

bring satisfactory added value. This cooperation between

SMT and EFST isaided by the fact that the businessethics

and managerial perspectives of both approaches share

some common ideas that are evident even when

examining their individual history (Signori and Rusconi,

2009), although some differences remain in their

identities.

Lastly, it should be specified that the paper focuses

more on improving the stakeholder theory by means of

an ethically interpreted economia aziendale, but this

choice does not mean to undermine the contribution that

the inclusion of stakeholder theory ideas makes to the

economia aziendale approach (Rusconi, 2012).

Similar to some extent to the German

betriebswirtschaftslehre,economia aziendale was

founded in Italymore than eighty years ago as a discipline

that defines azienda as every economic organization

(profit orientedor not, privately or publiclyowned) which

tries to satisfy human needs through the coordination of

aspects such as management, accounting (in the most

general meaning of the word), organizational behavior

and structure. Starting from some implicit insights into

economia aziendale, a number of Zappa’s scholars, first

and foremost Aldo Amaduzzi, thought of applying the

general system theory to economia aziendale. Over the

Correspondence: Gianfranco Rusconi, Department of Management,

Economicsand QuantitativeMethods, Via dei Caniana2, 24127 Bergamo,

Italy, Tel: 00390352052695.E-mail gianfranco.rusconi@unibg.it

European Management Review, Vol. 16, 147–166, (2019)

DOI: 10.1111/emre.12162

©2018 European Academy of Management

last decades, thistheory has also been interpreted from the

point of view of business ethics, leading to an ethical firm

system theory (EFST) (Rusconi, 1997). We wish to show

that EFST and SMT can be mutually beneficial in many

ways.

On examining lit erature concerning SMT f rom the

business ethicspoint of view, some critical questions arise

(for more details on these points see Rusconi, 2009b):

1 What does ‘theorizing stakeholderapproach’mean? Do

possible divergent interpretations of the stakeholder

concept exist, especially between a strategic/

instrumental interpretation and one based on ethics?

(Donaldson and Preston, 1995; Jones, 1995; Wicks,

1996; Wicks and Freeman, 1998; Donaldson, 1999;

Jones and Wicks, 1999; Freeman, 1999; Freeman and

McVea, 2001; Phillips et al., 2003, Elms et al., 2010);

2 How might stakeholders be identified? (Freeman and

Reed, 1983; Freeman, 1984; Clarkson, 1995 and

1999; Mitchell et al., 1997; Donaldson, 2002; Orts

and Strudler, 2002; Phillips, 2003a);

3 How does SMT relate to shareholder rights?

(Goodpaster, 1991; Boatright, 1994; Freeman, 1994;

Goodpaster and Holloran, 1994; Marens and Wicks,

1999);

4 How can the very significant merger of ethics and

success-based strategy, which for Freeman and others

is fundamental for overcoming the ‘Stakeholder

Paradox’, be achieved? (See authors quoted in point 1

and 3)

5 Does an ethical hierarchy exist for stakeholders and, if

so, what is it? (see authors quoted in point 2); and

6 What could the ‘sound philosophical foundation’of

SMT be? (Freeman, 1994; Wicks et al., 1994;

Argandona, 1998; Phillips and Reichart, 2000; Orts

and Strudler, 2002, 2009; Phillips et al., 2003).

In this paper, we will examine the three following

critical aspects of SMT that could be tackled more

appropriately if linked to EFST:

1 relations between competitive success and ethical

principles in managerial decision making;

2 speaking about ‘stakeholder responsibility’;and

3 consideration of the risks that, when exported to other

contexts such as the European one, for example, SMT

may be interpreted with a corporatist mindset,

jeopardizing the free initiative of every stakeholder,

from investors tounions, from consumers to producers,

from top management to shareholders.

Our aim is to show that issues 1, 2 and 3 of SMT may

be easier to understand if we allow SMT and EFST to

facilitate us with a sort of merger (metaphorically

speaking) of SMT with FST that starts with a systemic

application of theSMT theory, anticipated to some extent

by Evan and Freeman (1993), Freeman (1994) and in an

interview with Freeman in an Italian journal (Baldarelli

et al., 2005).

According to theEMST/SMT approach, questions 1, 2,

3 above are answered as follows:

1firms’managers have to pursue an integrated and

complex concept of equilibrium which is not only

strictly economic, but can imply a more intrinsic

relationship between ethics and business and may give

additional suppor t to the refusal of the separation thesis

(on the separation thesis see: Freeman, 1994: Wicks,

1996; Dienhart, 2008; Harris and Freeman, 2008;

Sandberg, 2008a, 2008b; Wempe, 2008);

2 while maintaining the central role of top management

as ‘upholding the equi librium’among stakeholders,

we will also examine the ethical problems arising for

individual stakeholders when relating to others in a

complex network of relationships in a firm system.

Such an intellectual operation implies an extension of

‘stakeholder responsibility’(Goodstein and Wicks,

2007) which also proves useful in promoting a better

understanding of business systems by top management

as well; and

3thismerger could also explain more clearly the role of

competition in a stakeholder systemic mindset,

avoiding, in particular, a shift from stakeholder

satisfaction and cooperation to a corporatist system.

In synthesis, the first section of the paper presents the

origins of the Italian economia aziendale, its systemic

development (FST) and the emergence of studies from an

ethical perspective (EFST) in which the emphasis is placed

on two concepts: the study of the firm system ethics and, in

this context, the two interacting stages of strategic and

‘pure’ethics. We will consider possible links and

similarities between FST and the stakeholder approach

and, consequently, between EFST and SMT. For this

purpose, it seems essential to show that both EFST and

SMT (Freeman, 1984) view corporate ethics (and,

consequently, also responsibilities) as an essential part of

core business decisions, and not as single acts of ethics or

corporate responsibility. The second section applies a

systemic view of SMT (used for various purposes and

applications in Rusconi, 2009b, 2009a), a model which,

although consistent with SMT, enables the latter to be

inserted into the general EFST as a contribution towards a

better understanding and guideline for companies’ethical

management. The three sections that then follow examine

how the merger proposed above allows SMT to consider

these critical fundamental ethical points more clearly.

The conclusion underlines how the contents of this

paper may help to achieve a better understanding of the

above-mentioned critical points 1, 2 and 3 of SMT and

148 G. Rusconi

©2018 European Academy of Management