What a difference a decade makes. Ten years ago the term “stakeholder” was slang for any neglected group affected by a corporation. To be sure, the word had been molded with precision by a thin, important line of management theorists. And to be sure also the word was sometimes used by managers who wanted to justify their personal commitments to groups other than stockholders, such as employees and customers. But like slang, “stakeholder” seemed perfectly plastic and therefore conceptually flawed. It meant one thing to one person, something else to another.

Today the term has arrived. Management journals and consultants flaunt it, and articles devoted to one or another interpretation of stakeholder theory are commonplace. Both the Encyclopedia of Management (Freeman 1998) and the Blackwell Encyclopedic Dictionary of Business Ethics (Freeman 1997) identify stakeholder theory as one of a tiny handful of recognized models for interpreting corporate responsibility. As the term rose to prominence, it acquired more solidity, and while varying interpretations of it can be found, a core of meaning pervades current stakeholder literature.

The success of the stakeholder terminology and of its accompanying theory has not been accidental. One of the influential forces galvanizing attention was the six-year effort on the definition of the corporation, sponsored by the Sloan Foundation, that situated the stakeholder concept at the center of its project. Through this project, books, conferences, meetings with stakeholder groups, and finally the “Principles of Stakeholder Management,” commonly referred to as the “Clarkson Principles,” brought energy and interest to stakeholder research.

Stakeholder theorists have typically offered both a business case and an ethics case for business ethics. I evaluate arguments for both approaches and find them wanting. I then shift the focus from ethics to law and ask: “Why should corporations obey the law?” Contrary to what shareholder theories typically imply, neoclassical or profit maximization theories of the firm can offer answers based only on instrumental justifications. Instrumental justifications for obeying the law, however, are pragmatically and normatively incoherent. This is because the modern corporation is a legal artifact. It exists because communities create the legal framework necessary for its existence. Individual corporations can therefore be said to owe their existence to a partnership (what might be called a social contract) between shareholders and governments, a partnership that is itself built on the shared though often implicit understanding that corporations have an unconditional (categorical) obligation both to obey the law and to treat their stakeholders ethically while generating wealth for their shareholders.

This paper discusses global corporate citizenship in the twenty-first century. The primary focus is on the responsibility of management educators to foster among students an understanding of the causes and consequences of business activitiy that creates organizational wealth, including the role of stakeholders. The modern corporation is a stakeholder enterprise: stakeholders enable the business to create wealth and require that it distribute wealth appropriately. The stakeholder enterprise model, which has been so economically successful, also implies corporate citizenship responsibilities. The Clarkson Principles are discussed as a means through which educators and managers can better understand and address the challenges of corporate citizenship in the modern world.

In this article we first review the development of the concept of global business citizenship and show how the libertarian political philosophy of free-market capitalism must give way to a communitarian view in order for the voluntaristic, local notion of “corporate citizenship” to take root. We then distinguish the concept of global business citizenship from “corporate citizenship” by showing how the former concept requires a transition from communitarian thinking to a position of universal human rights. In addition, we link global business citizenship to global business strategy and to three analytical levels of ethical norms. Finally, we trace a process whereby global businesses can implement fundamental norms and learn to accommodate to legitimate cultural differences.

In providing an ethical guide for managers, the Clarkson Principles offer one part of a possible professional code, namely, that managers have a fiduciary duty—a duty of loyalty of the corporation’s stakeholders. However, the Clarkson Principles contain little advise for managers when they act politically to fashion the regulatory framework in which stakeholders negotiate. When managers participate in these arenas, I argue that they ought to assume a second fiduciary duty—a duty of loyalty to fair bargaining. Where the first duty of loyalty pertains to the firm’s “constituents,” the second refers to the firm’s “constitution”—to the rules by which the firm’s stakeholders bargain and to the background conditions that distribute advantages. Together, these two fiduciary duties establish the large good—development as freedom—from which a managerial profession can mature.

We argue that though stakeholder theory has much to recommend it, particularly as a heuristic for thinking about business firms properly as involving the economic interests of other groups beyond those of the shareholders or other equity owners, the theory is limited by its focus on the interests of human participants in business enterprise. Stakeholder theory runs into intractable philosophical difficulty in providing credible ethical principles for business managers in dealing with some topics, such as the natural environment, that do not directly involve human beings within a business firm or who engage in transactions with a firm. Corporate decision-making must include an appreciation of these ethical values even though they cannot be captured in stakeholder theory.

In this article, I offer a proposal to clarify what I believe is the proper relation between value maximization and stakeholder theory, which I call enlightened value maximization. Enlightened value maximization utilizes much of the structure of stakeholder theory but accepts maximization of the long-run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders, and specifies long-term value maximization or value seeking as the firm’s objective. This proposal therefore solves the problems that arise from the multiple objectives that accompany traditional stakeholder theory. I also discuss the Balanced Scorecard, which is the managerial equivalent of stakeholder theory, explaining how this theory is flawed because it presents managers with a scorecard that gives no score—that is, no single-valued measure of how they have performed. Thus managers evaluated with such a system (which can easily have two dozen measures and provides no information on the tradeoffs between them) have no way to make principled or purposeful decisions. The solution is to define a true (single dimensional) score for measuring performance for the organization or division (and it must be consistent with the organization’s strategy), and as long as their score is defined properly, (and for lower levels in the organization it will generally not be value) this will enhance their contribution to the firm.

The large, professionally managed corporation is the distinctive economic institution of the twentieth century. It has proved uniquely effective in mobilizing resources and knowledge; increasing productivity; and creating new technologies, products, and services. Corporations have proliferated and grown because they meet the needs of various members of society: customers, workers and communities, as well as investors. The worldwide spread of corporate activity has produced an increasingly integrated and interdependent global economy.

The success of the corporation, however, inevitably gives rise to questions and criticisms. Corporations are spontaneous and voluntary associations in which diverse individuals and interests collaborate for the creation and distribution of wealth. Some critics question whether organizations with the vast scale and scope of contemporary multinationals can be effectively controlled and directed toward these purposes. Others are concerned about the limited range of interests directly represented in corporate governance, and the lack of openness in corporate decision-making. And, as multinational corporations expand their activities and linkages, both corporate managers and their critics search for principles for action that transcend national borders and cultural values, and modes of operation that will achieve the broad purposes of the corporation on a long-term and sustainable basis, without undue conflict with diverse human and social norms.