Is a business for human beings, or just for a few?

Health · Published 18 October 2026 Swipe more like this →

In short: For decades, the prevailing wisdom held that a corporation's only reason to exist was to generate profit for its shareholders. But a shift in management theory suggests that companies function best when they serve a broader web of interests, treating every participant as a vital partner in value creation.

In 1983, university researcher Ed Freeman published "Strategic Management: A Stakeholder Approach," challenging the idea that businesses should prioritize shareholders alone. Freeman argued that companies are "better off" when they run for all stakeholders—including employees, suppliers, and the community. He framed this not as a charitable act, but as a functional reality: a business is a network of interdependencies. If a company ignores the people it depends on to achieve its objectives, it risks its own long-term viability.

The theory moved from academic circles to corporate giants over forty years. In 2019, more than 200 CEOs of the Business Roundtable officially abandoned the shareholder-first narrative, declaring that companies must deliver long-term value to customers, employees, and communities alike. This shift is reflected in the practices of major corporations like Costco, Walmart, and Whole Foods. For example, Whole Foods co-founder John Mackey realized early on that a business cannot flourish with a single objective; his company survived early disasters only because suppliers and employees showed a level of generosity that a profit-only model could not account for.

While stakeholder theory is now a cornerstone of ethical leadership, it remains a complex field of study. Scholars note that it resists a single, universal definition, often focusing on how managers shape cooperative relationships to create value in an increasingly complex global economy of outsourcing and gig work. By putting the needs of diverse constituencies at the beginning of any action, the theory seeks to move business away from being a "soulless and bowelless thing" toward a model that recognizes its role in the broader social contract.

General information, not professional advice. Spotted an error? Flag the card or see corrections and complaints.

Intellect Plus is a visual educational discovery platform for exploring fascinating facts and ideas. Brain Food, Not Brain Rot. What is Intellect Plus?

Related

• Can companies deliver superior profits by prioritizing purpose over short-term gains?
• Can companies move beyond serving only their shareholders?
• Can we redefine corporate success by prioritizing people over profits?
• Purpose and profit are not enemies: how great companies grow the total pie
• Is your sense of morality just a modern form of religious possession?
• The 1929 mission to democratize the Oxford education
• How one discovery helped dismantle the medical promises of Theranos
• The moral weight of anatomy: balancing student learning with human remains
• Can a business be successful if it only makes a profit?
• The high price of double morality in global politics
• Why Ghana rejected a regional university to build its own
• The spiritual technology of erasing the self through service

More in Ethics · More in Health · Latest · A–Z · All topics