Analysis Of The Stakeholder Theory

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The stakeholder theory initially developed by Freeman (1984), Perez, Martinez and Rodriguez (2013). They defined stakeholders as those groups or individuals who can affect or are affected by the achievement of the organization’s objectives or those with direct or indirect interest in the company. According to Freeman (1984), when companies doing business, they need to consider the interest of their stakeholders (as cited in Öberseder, Schlegelmilch, & Murphy, 2013). This view is supported by Perez (2013), where he addressed that companies need to satisfy the stakeholders because they are the main target of audience. Typically, stakeholders include employees, customers, suppliers (McWilliams, Siegel, & Wright, 2006), shareholders, non- governments …show more content…

Khojastehpour and Johns (2014) emphasized that implement CSR activities appropriately should result in an increase of profitability because CSR is appropriated to the society. Implementation of CSR will also increase the brand image of a company and influence the consumers’ purchasing behavior. Gupta (2012) highlighted that organizational survival and success are depending on satisfying of both economic and non-economic objectives by meeting the needs and wants of the stakeholders. The economic objective can be profits maximization, whereas the non-economic objective can be corporate social responsibility. Thus, stakeholder theory is important and appropriate for this research which explains the effect of economic concern on the consumers’ purchasing …show more content…

According to Deegan (2002), based on the concept of social contract, if the society is unsatisfied with a company that operating in an acceptable manner, the society may revoke the company’s contract to continue its operation and it might affect the consumers’ purchasing behavior. Under legitimacy theory, not only consider the rights of investors, but also consider the public at large. Therefore, if a company fails to comply with the social contract, the company will have negative implications towards its reputation. As O’ Donovan (2002) said, the lower the perceived legitimacy of a company, the less likely a company to provide social and environmental

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