Toward a Stakeholder Theory of the Firm: The Case of the Saturn Partnership

Abstract

This paper seeks to engage the organization theory community in contemporary debates over the role of the corporation in American society by building a stakeholder theory of the firm. We develop a set of normative premises and positivist propositions derived from these debates, from a combination of organization and industrial relations theories, and by using data from the Saturn Corporation. Three questions are posed for a stakeholder theory: (1) Under what conditions is a stakeholder firm likely to emerge, (2) what are the critical determinants of performance in a stakeholder firm, and (3) what will determine the sustainability and diffusion of this organizational form in the American environment? The history, design features, and dynamics of the labormanagement partnership at Saturn are used to illustrate and interpret a specific case of employees as stakeholders. Saturn's governance structure, work organization, and internal processes fit the characteristics of a stakeholder firm. Employees establish themselves as critical stakeholders by using their knowledge to improve organizational performance. The local union likewise contributes to firm performance by organizing workers into a dense social network that contributes to problem solving, conflict resolution, and quality improvement. However, the legal and political environment in which the firm operates produces considerable uncertainty over the sustainability and diffusion of Saturn's features in particular, and the stakeholder organizational form in general. Additional hypotheses and research questions are proposed to continue theory building around the more general model of the stakeholder firm. Organization theorists are encouraged to take up the analysis of stakeholder models and thereby contribute to the contemporary and future debates over the role the corporation in American society.