Further on the Theory of Stakeholder Salience: Defining Why and When Does the Who Really Counts

Ever since Freeman (1984) made a persuasive case for attention to stakeholder interests as critical to firm success overriding the erstwhile dominant shareholder model, a debate has raged consistently about which aspect is central to the stakeholder theory, and more importantly, what might be the process of stakeholder identification (Berman et al., 1999). The recent increase in awareness of corporate governance issues led the proponents of stakeholder theory to focus primarily on the normative model which is concerned with how should the managers of firms deal with corporate stakeholders (Collins & Porras, 1994; Freeman, 1994; Paine 1994, Donaldson & Preston, 1995), neglecting the instrumental and descriptive realms which address the why and when the managers deal with such issues. The normative stakeholder model is widely accepted by researchers, however some questions remains as to how do firms identify their stakeholders, and what factors determine the institutional structure they adopt to reflect their interests in these stakeholders. Furthermore, once adopted, is this structure immutable or is there a convergence amongst the different institutional structures; and finally what factors cause this modification and what actions predict this process.