Corporate community:a theory of the firm uniting profitability and responsibility

The general concept of stakeholder management seems to be widely accepted, but its central tenet of “balancing” interests was prominently abandoned during the 1990s, as corporations favored financial interests rather than the balanced treatment proposed by stakeholder theory. The prevailing logic of business provides little incentive to do otherwise. Managers and scholars generally think about stakeholders in terms of morality, ethics, and social responsibility rather than economic value and competitive advantage. This article presents an economic theory of the firm and supporting evidence that reconcile the conflict between profitability and responsibility. Rather than passive recipients of responsible treatment, modern stakeholders work with managers to improve their own benefits while also enhancing corporate profitability. Thus, the wealth‐creating role of business arises directly out of integrating stakeholders into a productive whole – a “corporate community.”