The Stakeholder Theory of the Firm

The Stakeholder Theory of the Firm suggests that a company's success depends on balancing the interests of all parties affected by its actions, not just shareholders. These stakeholders include employees, customers, suppliers, communities, and even the environment. The theory emphasizes that a business should create value for all these groups, fostering trust and long-term sustainability. Unlike solely focusing on maximizing profits for shareholders, this approach recognizes that responsible and ethical behavior toward stakeholders ultimately benefits the company's reputation, stability, and overall performance.