Eric W. Orts

The Ethical and Environmental Limits of Stakeholder Theory

We argue that though stakeholder theory has much to recommend it, particularly as a heuristic for thinking about business firms properly as involving the economic interests of other groups beyond those of the shareholders or other equity owners, the theory is limited by its focus on the interests of human participants in business enterprise. Stakeholder theory runs into intractable philosophical difficulty in providing credible ethical principles for business managers in dealing with some topics, such as the natural environment, that do not directly involve human beings within a business firm or who engage in transactions with a firm. Corporate decision-making must include an appreciation of these ethical values even though they cannot be captured in stakeholder theory.

A Reflexive Model of Environmental Regulation

Although contemporary methods of environmental regulation have registered some significant accomplishments, the current system of environmental law is not working well enough. First the good news: Since the first Earth Day in 1970, smog has decreased in the United States by thirty percent. The number of lakes and rivers safe for fishing and swimming has increased by one-third. Recycling has begun to reduce levels of municipal waste. Ocean dumping has been curtailed. Forests have begun to expand. One success story is the virtual elimination of airborne lead in the United States. Another is the rapid phase-out of ozone-layer depleting chemicals worldwide. Nevertheless, prominent commentators of diverse political persuasions agree in an assessment that conventional models of environmental law have “failed.” Many environmental problems remain unsolved: species extinction, global desertification and deforestation, possible global climate change, and continuing severe air and water pollution in urban areas and poor countries. What is more, successful environmental protection has come only at enormous economic cost. By the year 2000, the Environmental Protection Agency (EPA) estimates that the United States will spend approximately two percent of its gross national product on environmental pollution control. Academic economists have pointed out the nonsensical inefficiency of many environmental regulations, but usually to no avail.

War and the Corporation

Recent events have confirmed human societys commitment to building the social institutions needed for peace. It is becoming clear that these institutions will have to include business corporations.