Stakeholder Theory in Business: Just an Extension of For-Purpose Organization Values

Stakeholder theory has gained prominence as a guiding philosophy in the for-profit business world. It challenges the traditional notion that the sole responsibility of a company is to maximize shareholder profit, advocating instead that organizations should consider the needs and interests of all stakeholders—employees, customers, suppliers, communities, and the environment. While this idea represents a significant shift for many for-profit enterprises, it is, in fact, a framework that closely mirrors how for-purpose organizations have been operating for decades.
At its core, stakeholder theory is about creating value for a broad array of groups connected to an organization. The approach is holistic, recognizing that the long-term success of any institution depends on maintaining and enhancing relationships with everyone who is impacted by its actions. For-purpose organizations, by their very nature, are designed to function within this framework. They are mission-driven entities, often with a charter to benefit not just one group, but entire communities. In many ways, for-purpose organizations are the living embodiment of stakeholder theory.
The Mission-Driven Nature of For-Purpose Organizations
For-purpose organizations exist to serve a mission, and that mission is typically centered on improving the well-being of a broad group of people or tackling a specific social issue. Whether a for-purpose organization’s focus is health care, education, environmental conservation, or social services, its success is measured not by profits but by its impact on stakeholders.
For example, a community mental health center (CMHC) doesn’t prioritize financial gain for shareholders, because it has none. Instead, it measures its success based on how well it serves patients, collaborates with community partners, and addresses public health issues. The same can be said for organizations that provide early childhood education or services for individuals with disabilities. Every strategic decision is made with stakeholders in mind—the people who rely on the services, the employees who carry out the work, the communities that benefit from the mission, and even donors who fund the organization.
This stakeholder-centric approach is already embedded in how for-purpose organizations are structured and operate, making stakeholder theory a natural extension of their governance model.
Accountability Beyond the Bottom Line
One of the most striking ways for-purpose organizations exemplify stakeholder theory is in their accountability. While for-profit companies traditionally focus on shareholder returns, for-purpose organizations are held accountable by their broader impact on society. Governing boards in the for-purpose sector are composed of individuals who are tasked with representing the interests of the community, service users, staff, and other key groups—not just a financial bottom line.
Consider the example of a for-purpose organization providing substance abuse treatment services. If its primary metric were simply maximizing revenue, it might focus on attracting clients who could afford expensive treatment plans. But the very essence of such an organization is to serve those most in need, often regardless of their ability to pay. In doing so, it inherently prioritizes the broader stakeholder group—clients, community partners, and the larger public health system—over any financial benefit.
Similarly, employee welfare and development are prioritized as key factors in the sustainability of for-purpose organizations. The idea that organizations should create value for their employees is integral to stakeholder theory, but it is already a common practice in for-purpose organizations. Many leaders instinctively operate with an understanding that the success of their mission depends heavily on the well-being and engagement of their staff, which often leads to a more people-centric management style. For-purpose organizations also routinely involve their communities in decision-making processes, ensuring transparency and fostering trust—another tenet of stakeholder theory.
Sustainability and Long-Term Impact
A core concept in stakeholder theory is sustainability. For-profit organizations that adopt this approach recognize that creating long-term value requires balancing financial objectives with the needs of other stakeholders. For-purpose organizations, however, have been taking this long-term view from the beginning. Because they are not driven by short-term profits, they tend to prioritize sustainable solutions to complex problems.
In the field of community health, for example, a for-purpose organization may invest in preventive services, understanding that while the financial payoff might not be immediate, the long-term impact on public health will ultimately lead to a healthier, more stable community. Similarly, for-purpose organizations engaged in environmental work often operate on decades-long timelines, recognizing that the true measure of their success will not be felt until well into the future. This long-term perspective is precisely what stakeholder theory advocates.
Moreover, for-purpose organizations are uniquely positioned to drive innovation in areas where traditional business models may falter. Since their primary responsibility is not to shareholders, they can take more risks in experimenting with new approaches to social problems, even when immediate returns are not guaranteed. This willingness to innovate for the broader good is another way in which for-purpose organizations are inherently aligned with stakeholder theory.
The Challenge for For-Purpose Organizations
While stakeholder theory aligns closely with how for-purpose organizations operate, that doesn’t mean the sector is without challenges. The increasing expectation for transparency, accountability, and measurable outcomes from donors, grantmakers, and government partners has intensified the focus on results-driven performance. For-purpose organizations must continue to strike a balance between meeting the demands of their various stakeholders while maintaining their commitment to their core mission.
Another challenge is the growing complexity of for-purpose governance. As organizations expand and their stakeholder groups diversify, the task of balancing competing interests becomes more complicated. For leaders in this sector, the skill to navigate these dynamics while maintaining a clear focus on the mission is critical.
Conclusion
For-profit companies embracing stakeholder theory are stepping into new territory—challenging the narrow focus on shareholder value and adopting a more inclusive and sustainable approach to business. For-purpose organizations, however, have been operating within this framework since their inception. Their very existence is a testament to the power of balancing the needs of diverse stakeholders for the greater good.
As businesses continue to evolve toward stakeholder-centric models, they would do well to look to the for-purpose sector as a model for how to integrate the needs of employees, communities, and other key groups into their strategic decision-making processes. For-purpose organizations may not have coined the term "stakeholder theory," but they have been living it out for decades, demonstrating that long-term success and social value go hand in hand.
In the end, stakeholder theory is not just an abstract framework; it’s a blueprint that for-purpose organizations have followed all along. And if the for-profit world takes note, perhaps the line between profit and purpose will continue to blur in meaningful and impactful ways.