Donaldson and Preston’s Triad: Content and Logical Relations - Corporate Governance and Business Ethics

The important questions about Donaldson and Preston’s three theses are two:

  1. Do the three theses capture conceptually the normative, instrumental, and descriptive strains of stakeholder thinking?
  2. Are the three theses mutually supporting in a manner that evidences an omnibus stakeholder theory with normative, instrumental, and descriptive aspects and with the normative aspect at its core?

Trivial Normative Thesis

Donaldson and Preston’s normative thesis is peculiar. Indeed, normative is something of a misnomer, not because their normative thesis is non-normative, but because it is not uniquely normative among the three theses.

To say that P is normative is to say that P gives reasons for action (Raz 1990). Like their “normative” thesis, Donaldson and Preston’s instrumental thesis is also normative; it too gives reasons for action. The normative thesis expresses the view that stakeholder-theoretic prescriptions are normative in one way: morally normative, giving moral reasons for action. The instrumental thesis expresses the view that stakeholder-theoretic prescriptions are normative in another way: prudentially normative, giving prudent reasons for action.

Donaldson and Preston employ the concept of normatively narrowly, denoting moral reasons for action only. For them, normative claims are all and only those expressing the “right (wrong) thing to do” (Donaldson and Preston 1995); what philosophers generally call moral claims. This is unproblematic, provided that Donaldson and Preston employ the concept that way consistently. However, no sooner does the reader accommodate herself to this narrow sense of the normative than does she recognize at least one aspect of the normative thesis that is not, in this narrow sense, normative.

Included in Donaldson and Preston’s normative thesis is the claim that stakeholders are identified by their interests. Whether true or false, this is not, in Donaldson and Preston’s sense, a normative claim a claim about what is the “right (wrong) thing to do”. It is instead an epistemic claim a claim about how one knows or recognizes stakeholders. Lest this be thought a mere slip of the pen, Donaldson and Preston later insist that their epistemic claim is a normative proposition. Addressing strategies for grounding or justifying the normative thesis, they write, epistemic claims are normative in the broadest sense employed by philosophers (e.g., Korsgaard 1996). However, so too are prudential (instrumental) claims, to which Donaldson and Preston expressly deny the normative mantle.

Because the claim stakeholders are identified by their interests says nothing about what is the “right (wrong) thing to do”, it is not, in their sense, a normative claim.

The more pressing problem attending Donaldson and Preston’s normative thesis, however, is that its content is neither unique to nor distinctive of stakeholder theory, even within the limited confines of the corporate governance debate. Their normative thesis advances no proposition or cluster of propositions emblematic of stakeholder theory.

The claim that one ought to afford consideration to the legitimate interests of all stakeholders borders on the tautological. It expresses a moral truism rather than a substantive thesis over which rival theorists contend. Who denies that if Q has a legitimate interest, then Q’s (legitimate) interest ought to be considered? That an interest is legitimate entails that it ought to be considered.

Moral theorists break ranks and cross swords not over whether legitimate interests ought to be considered, but rather

  • over which interests are legitimate and
  • over what kind of consideration legitimate interests warrant. Within the corporate governance debate, the normative stakeholder theorist’s claims are not disputed on the grounds that there is no reason to consider stakeholders’ legitimate interests. Instead, they are disputed on the grounds that the interests appealed to are either

(a) not legitimate or (b) not due the kind of consideration for which the normative stakeholder theorist calls. In other words, everyone in the normative corporate governance debate holds that legitimate interests ought to be considered including those unmoved by stakeholder theory. The debate is over which interests are legitimate and what kind of consideration they warrant.

Therefore, if the normative stakeholder theorist has a substantive position, it resides in a particular account of legitimacy in interests or in a particular account of the kind of consideration legitimate interests warrant. What is stakeholder theory’s particular account of legitimacy in interests or of the kind of consideration legitimate interests warrant? For the answer to this question, the careful reader searches Donaldson and Preston’s landmark paper in vain.

To express a distinctive and consequential normative position, as many claims that it does, stakeholder theory’s normative thesis has to be more substantial than the trivial and virtually universally-held view that legitimate interests ought to be considered. Far from standing as its gravitational center, Donaldson and Preston’s normative thesis is the omnibus theory’s emptiest vessel. It is neither interestingly nor substantively normative.

Parochial Instrumental Thesis

Donaldson and Preston’s instrumental thesis avoids the pitfalls of their normative thesis. Whereas their normative thesis commits its adherent to no distinctive normative position, their instrumental thesis is tied to peculiarly stakeholder-theoretic concerns.

For Donaldson and Preston, the instrumental thesis is a predictive claim about the likely consequences of practicing stakeholder management. Because legitimate interests are the object of simultaneous managerial attention in stakeholder management (Donaldson and Preston 1995), it follows that Donaldson and Preston’s stakeholder management is the adoption and practice of what normative stakeholder theory (that branch which concerns itself with moral notions like legitimacy) calls for.

Donaldson and Preston’s instrumental thesis is problematic, not because it is no instrumental, but instead because arbitrarily it confines instrumental stakeholder theory to the generation and testing of hypotheses about the consequences of practicing what normative stakeholder theory commends. There is at least one other project theorists could pursue that is not covered by Donaldson and Preston’s instrumental thesis and yet appears to be as much about the instrumental aspects of stakeholder thinking as their preferred project.

Instrumental stakeholder theorists may be interested in exploring the usefulness of stakeholder analysis as a discovery procedure for mapping and interpreting a firm’s strategic terrain. That is, rather than studying the instrumental merits of a substantive view about what managers ought to do (normative stakeholder theory), they may be interested in pursuing the instrumental merits of a stakeholder-oriented procedure for managerial decision making (stakeholder analysis). Goodpaster (1991) adverts to this kind of instrumental stakeholder thinking when he writes, Decision makers can engage in stakeholder analysis without affording priority, or even attention, to the prescriptions of normative stakeholder theory. Indeed, they can engage in stakeholder analysis in complete ignorance of normative stakeholder theory, viewing stakeholder analysis as a useful procedure only. By the same token, an instrumental stakeholder theorist may be interested in the comparative usefulness of this stakeholder-oriented interpretive framework as against alternative ways of conceiving the firm’s strategic terrain again, without reference to normative stakeholder theory or its prescriptions.

It is unreasonable to suppose that this kind of research is insufficiently stakeholder-oriented and therefore rightly excluded from the very concept of instrumental stakeholder theory, as Donaldson and Preston’s account suggests. Consequently, their instrumental thesis is parochial. It confines arbitrarily the instrumental stakeholder theorist’s attention to normatively generated prescriptions.

Conceptually Suspect Descriptive Thesis

Whereas their normative thesis lacks distinctive, substantive content and their instrumental thesis is parochial in outlook, Donaldson and Preston’s descriptive thesis fails in other ways. Although they advance a straightforward statement of their descriptive thesis, that thesis is not, in fact, descriptive.

Donaldson and Preston’s descriptive thesis is the claim that the corporation is “a constellation of co-operative and competitive interests possessing intrinsic value” (Donaldson and Preston 1995,). This is an aggregation of two more basic claims. The first is descriptive: the corporation is a constellation of co-operative and competing interests. The second is normative: the interests adverted to have intrinsic value. Establishing the truth of this second claim requires appeal to normative arguments, not to empirical observation. Consequently, the aggregation of the two more basic claims is not (or is not merely) descriptive.

Moreover, Donaldson and Preston’s descriptive thesis is at odds with the most intuitive understanding of descriptive stakeholder-theoretic claims. Presumably, descriptive stakeholder theorists may advance and seek to verify a number of descriptive claims. One claim, related to Donaldson and Preston’s descriptive thesis but distinct from it, is that firms are managed as if (or, people in firms believe that) the firm is a constellation of co-operative and competing interests possessing intrinsic value. Another claim, unrelated to Donaldson and Preston’s descriptive thesis, is that firms employ stakeholder analysis as part of their managerial decision procedures. Still others could be formulated, all under the rubric of descriptive stakeholder theory. Donaldson and Preston’s descriptive thesis is instead a second (and unacknowledged) normative claim.

Mutual Support among the Theses

Determining whether Donaldson and Preston’s normative, instrumental, and descriptive theses are mutually supporting, in the way they understand them to be, is difficult. Although they repeatedly assert that the three theses are mutually supporting, they neither argue for the assertion nor indicate what, exactly, they mean to be asserting. The claim of mutual support among the three theses is most plausibly read as a claim that they are logically related. In particular, it is a claim that some theses stand as necessary premises in arguments showing that other theses are true. Because Donaldson and Preston claim that the normative thesis under girds the other two, they presumably understand it to stand as a necessary premise in arguments showing that the instrumental and descriptive theses are true. That is, they Understand the veracity of the instrumental and descriptive theses to depend upon the veracity of the normative thesis.

From the foregoing analysis of the three theses, three observations commend themselves readily:

  1. The normative thesis is at best trivially normative.
  2. The instrumental thesis speaks only to a part of instrumental stakeholder theory the part seeking to generate and test hypotheses about the probable effects of conformity with the normative thesis’s prescriptions.
  3. The descriptive thesis is not a descriptive thesis, but instead a second normative thesis.

Consequently, if there are any logical relations at all among Donaldson and Preston’s normative, instrumental, and descriptive theses, they are these:

Their normative thesis depends upon their descriptive thesis. If there is a logical relation between the normative and the descriptive theses, the descriptive thesis stands as a premise in an argument intended to show that the normative thesis is true. If “the corporation [i]s a constellation of cooperative and competitive interests possessing intrinsic value” (Donaldson and Preston 1995), then the intrinsic value of those interests can be appealed to as a premise in an argument for managing as the normative thesis prescribes

The converse, however, does not hold. If managers ought morally to manage as the normative thesis prescribes, that does not stand as a premise in an argument designed to show (and hence, some reason for believing) that the corporation is a constellation of cooperative and competitive interests possessing intrinsic value. The normative thesis is equally compatible with the view that the interests referred to in the descriptive thesis are not intrinsically valuable. In fact, Donaldson and Preston imply as much. They argue that normative stakeholder theory is justifiable by reference to utilitarianism, a moral theory holding that interests are valuable only contingently and instrumentally valuable insofar as they promote aggregate utility (whether construed in terms of happiness or satisfaction of informed preferences) and not valuable otherwise. If the normative thesis is compatible with utilitarianism, then the descriptive thesis (which asserts the intrinsic value stakeholder interests) cannot depend upon the normative thesis. Thus, if either thesis depends upon the other at all, the normative thesis depends upon the descriptive thesis. Put differently, if either thesis is “the critical underpinning” of stakeholder theory, it is the descriptive thesis.

Their instrumental thesis is an empirical hypothesis about the probable effects of adopting the prescriptions of the normative thesis, which, in turn, is premised upon their descriptive thesis. The instrumental thesis speaks to the effects of adopting the normative thesis’s prescriptions. Consequently, the logical content of the instrumental thesis depends upon the content of the normative thesis. Put differently, the normative thesis expresses some of the necessary content of the instrumental thesis. However, because the descriptive thesis under girds the normative (if either under girds the other at all), it follows that “the critical underpinning” of the instrumental thesis is the descriptive thesis. Again, what Donaldson and Preston advertise as a set of interrelated and mutually supporting theses based fundamentally upon the normative thesis is, if the set is interrelated and mutually supporting at all, based fundamentally upon the descriptive thesis.

These logical relations underwrite two significant conclusions:

C1. Donaldson and Preston’s normative, instrumental, and descriptive theses advance impoverished conceptions of normative, instrumental, and descriptive stakeholder thinking. In content, their instrumental and descriptive theses are, respectively, a conceptually thin manifestation of and an underlying claim about their conceptually thinner normative thesis.

C2. As their normative thesis may depend upon their descriptive thesis but not the converse, it follows that, contrary to the banner claim of their paper, their normative thesis is not the omnibus theory’s center, but instead derivative of and dependent on their descriptive thesis.

Donaldson and Preston neither argue for the existence of an omnibus stakeholder theory, encompassing genuinely normative, instrumental, and descriptive stakeholder theories, nor advance a morally substantial and conceptually central normative thesis. Prospects for establishing the existence of an omnibus stakeholder theory (whether or not grounded in its normative aspect) must lie elsewhere.


All rights reserved © 2020 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Corporate Governance and Business Ethics Topics