Normatively reconciling shareholder and stakeholder theories: The ethical responsibility of a business is serving its owners by serving its stakeholders

Shareholder theory and stakeholder theory are often regarded as contrasting perspectives. Numerous studies have attempted to reconcile these perspectives by arguing and empirically demonstrating that serving stakeholders can be profitable for shareholders. However, the risk of this instrumental approach is that a corporation may not feel compelled to serve its stake-holders if empirical evidence for such benefits is lacking or even contradicts the premise in its specific context. Therefore, this article adopts a normative–ethical approach that offers a moral foundation applicable to all corporations. By revising a single flawed presumption in the argument of Milton Friedman, the most prominent advocate of shareholder theory, it becomes possible to normatively reconcile shareholder theory with stakeholder theory. From a normative–ethical perspective, shareholders, as owners of the corporation, should not be focused solely on their own interests but should also consider their corporation’s responsibility to serve the interests of other stakeholders. This stakeholder responsibility of shareholders has significant theoretical and managerial implications.