The Stakeholder theory stipulates that the managers of a business or company have a primary role of acting at the interest of the stakeholders. According to the theory, the main purpose of a business is to create value and worth for its stakeholders. This means that the policies, decisions, and strategies adopted by a business/company should be mainly made at the interest of the stakeholders. In corporate social responsibility, a business functions in a manner that benefits social space that is relevant to that business. It involves making policies that factor in various structures of society like the environment and the local community. For instance, it can involve creating an environmentally friendly product.
One similarity between the stakeholder theory and corporate social responsibility is that both are important aspects to the well-being of a business. When an interplay between the two elements is achieved, the performance of a business is enhanced. Another similarity is that the two models are based on the interest of stakeholders. Apart from the shareholders of a business, the environment in which a business operates forms an important aspect of its stakeholder structure. Therefore, both the stakeholder theory and corporate social responsibility are undertaken at the interest of stakeholders.
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Regarding the differences, the stakeholder theory is mainly based on the profitability of business while corporate social responsibility is based on enhancing the social bond of a business. In addition, while the stakeholder theory is mainly centered on a business’ internal environment, corporate social responsibility revolves around an external business environment. According to the stakeholder theory, business managers should seek the highest return on their stakeholders’ investments. However, on most occasions, business managers prefer to strike an amicable balance between the two forces. This is the reason why managers may seek something less for either customers or stockholders. An example is when a business decides to reduce the prices so that it can lure more customers into buying its products.
