"The Stakeholder Concept in Biotechnology" *

Chris MacDonald, Ph.D.
Department of Philosophy
Saint Mary's University

The stakeholder concept is one of the most attractive conceptual devices in business ethics. This concept has its origins in a theory of management, but has been seized upon by scholars in business ethics as a way of expressing the idea that businesses have obligations to a wide range of parties, beyond the stockholders to whom corporate heads were traditionally thought to be beholden.1 According to Freeman, the author responsible for popularizing the concept within the field of business ethics, stakeholders simply "are those groups who have a stake in or claim on the firm."2 

Stakeholder theory has served as part of a reconciliation between forward-thinking business leaders, on one hand, and public interest groups and consumer advocates, on the other. It involves a reinterpretation of the social role of business, and a move away from the view, famously advocated by economist Milton Friedman, that the only proper function of corporate leaders is to increase the wealth of stockholders. The stakeholder concept, whatever its weaknesses, gives due credit to the fact that the motives of agents involved in business are relatively complex. The conflict between those varied motives has been a central theme in the business ethics literature.

Freeman includes in his list of stakeholders suppliers, customers, employees, stockholders, and the firm's local community. This list, though typical of the lists given by stakeholder theorists, is not uncontroversial. Indeed, the stakeholder concept itself has its critics. Those critics charge that the stakeholder approach is incapable of guiding necessary improvements in corporate governance,3 that the multiple lines of accountability implied by acknowledging a multiplicity of stakeholders reduces efficiency,4 and that indeed the very idea of stakeholders as morally significant undermines the morally significant relationship between corporate executives and stockholders.5

Nonetheless, the stakeholder concept can be a useful one. In particular, the process known as "stakeholder analysis" can provide biotechnology companies with a lens through which to pay attention to the full range of interested parties. Stakeholder theory suggests that we should pay attention to the interests of any group or individual who is affected by, or who may affect, a decision or policy. A rich body of literature exists on the extent to which the interests of various stakeholders should be integrated into corporate decision-making, and ways in which that can be accomplished.6 I will not venture to take a position on just how long, or short, a list of relevant stakeholders would be. Nor will I stake a claim on the critical question of whether those stakeholders deemed relevant should merely have their wishes or needs accounted for, or whether they should instead be consulted directly. I will simply suggest that the concept of a stakeholder, and the understanding that a very wide range of individuals and groups have a stake in the workings of a given company, can serve as a focal point for discussing what obligations a company has, and to whom.

Stakeholder analysis, in practice, is a relatively complex process, aimed at "identifying and understanding multiple (often competing) political, social, legal, economic, and moral claims of many constituencies."7 A simplified stakeholder analysis for a biotech firm, conducted in relation to its efforts at determining appropriate modes of benefit sharing, would proceed in approximately the following manner. The first, descriptive phase of the analysis would begin with listing the range of parties having a stake in the issue. These might include: employees, stockholders (if these exist), providers of biological resources (i.e., human research subjects), local communities, competing firms, firms in related fields (such as traditional pharmaceutical firms), government agencies (at home and abroad), and university-based researchers. All of these parties, and perhaps others, can be said to have a stake in the benefit sharing practices of a particular corporation. The next step in this descriptive process would be to assess the nature of each stakeholder's interest in this issue, perhaps categorizing such interests as ethical, political, economic, legal, and so on.

The second, normative phase of the stakeholder analysis would include an assessment of the kinds and degrees of obligation that the corporation has to each stakeholder. With regard to some stakeholders, for example, the obligations will be written, contractual obligations. With regard to other stakeholders, they will be what are known as "fiduciary," or trust-based, obligations. Other stakeholder obligations might be grounded in theories of what good neighbours owe each other. In other cases, the conclusion may be that a particular stakeholder is owed no obligations at all. There is no straightforward, uncontroversial algorithm for determining the nature and extent of obligations to various stakeholders. The point here, however, is not to settle upon a canonical rank-ordering of the corporation's obligations to various stakeholders, but rather to accurately situate the corporation as enmeshed in a range of ethically significant relationships, and to begin the complex task of meeting the demands of those various relationships.

The stakeholder concept has, of course, already played a role in discussions related to biotech benefit sharing. For example, both the World Bank8 and the World Intellectual Property Organization9 have made use of the concept in discussion documents. But the use of the stakeholder concept in such discussions has occurred in relative isolation from the rich literature that exists concerning the plausibility and application of that concept. A more well-informed application of the concept is required.10

*[This is an extract from a longer paper that is forthcoming.]


1. See Kenneth E. Goodpaster 1991. Business Ethics and Stakeholder Analysis. Business Ethics Quarterly, 1:1. 53-72. See also T. Donaldson and L. Preston, 1995. "The stakeholder theory of the corporation: Concepts, evidence, implications." Academy of Management Review, 20: 65-91.

2. Freeman RE. A Stakeholder Theory of the Modern Corporation. In Beauchamp TL and Bowie NE, eds, Ethical Theory and Business, 6th edn. Prentice-Hall, 2001. 56.

3. Sternberg E. Corporate Governance: Accountability in the Marketplace. London: Institute of Economic Affairs. 1998.

4. Beausang F. Democratising Global Governance: The Challenges of the World Social Forum (Discussion Paper 59). Unesco / MOST. 2002.

5. Marcoux AM. Business Ethics Gone Wrong, CATO Policy Report CATO Institute July 24, 2000.

6. Goodpaster KE. Business Ethics and Stakeholder Analysis. Business Ethics Quarterly, 1991; 1:1. 53-72.

7. Weiss JW. Business Ethics: A Stakeholder and Issues Management Approach, 3rd edn. Thomson, 2003. 35.

8. Grimble R, Laidlaw M. Biological Resource Management: Integrating Biodiversity Concerns in Rural Development Projects and Programs. The World Bank, 2001.

9. WIPO Secretariat. Matters Concerning Intellectual Property And Genetic Resources, Traditional Knowledge And Folklore - An Overview. World Intellectual Property Organization. 2001.

10. See also Dhanda RK. Guiding Icarus: Merging Bioethics with Corporate Interests. Wiley, 2002. 98.