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Business & Society Ethics, Sustainability & Stakeholder Management 10th Edition

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Chapter 3 The Stakeholder Approach to Business, Society, and Ethics

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Stakeholders

Stakeholder -

Any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization.

Stakeholder is a variant of the concept of stockholder—an investor/owner of businesses.

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Learning Outcomes

Identify origins of the stakeholder concept by explaining what a stake is and what a stakeholder is.

Explain who business’s stakeholders are in primary and secondary terms.

Differentiate among the three stakeholder approaches—strategic, multifiduciary, and synthesis.

Identify and explain the three values of the stakeholder model.

Name and describe the five key questions that capture the essence of stakeholder management.

Explain major concepts in effective stakeholder management to include stakeholder thinking, stakeholder culture, stakeholder management capability, and stakeholder engagement.

Describe the three strategic steps toward global stakeholder management.

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Chapter Outline

Origins of the Stakeholder Concept

Who Are Business’s Stakeholders?

Stakeholder Approaches

Three Values of the Stakeholder Model

Stakeholder Management Five Key Questions

Effective Stakeholder Management

Strategic Steps Toward Global Stakeholder Management

Summary

Key Terms

Discussion Questions

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Who are Business’s Stakeholders?

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Origins of the Stakeholder Concept

Stake -

An interest or a share in an undertaking.

Can be categorized as:

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Three Views of the Firm

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Production and Managerial Views of the Firm

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Stakeholder View of the Firm

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Missing Stakeholder

Media →

- Broadcast

- Print

-Social Media

- Independent

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Primary & Secondary Stakeholders

Primary stakeholders -

Have a direct stake in the organization and its success.

Secondary stakeholders -

Have a public or special interest stake in the organization that is more indirect.

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Social Stakeholders

Primary social stakeholders	Secondary social stakeholders
Shareholders and investors	Government regulators
Employees and managers	Civic institutions
Customers	Social pressure groups
Local communities	Media and academic commentators
Suppliers and other business partners	Trade bodies
	Competitors

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Nonsocial Stakeholders

Primary nonsocial stakeholders	Secondary nonsocial stakeholders
Natural environment	Environmental interest groups
Future generations	Animal welfare organizations
Nonhuman species

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Important Stakeholder Attributes: Legitimacy, Power, Urgency

Legitimacy -

Refers to the perceived validity or appropriateness of the stakeholder’s claim to a stake.

Power -

Refers to the ability or capacity of a stakeholder to produce an effect.

Urgency -

Refers to the degree to which the stakeholder’s claim demands immediate attention or response.

Proximity -

The spatial distance between the organization and its stakeholders.

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Stakeholder Typology

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Stakeholder Approaches

Strategic approach -

Views stakeholders primarily as factors managers should manage in pursuit of shareholder profits.

Multifiduciary approach -

Views stakeholders as a group to which management has a fiduciary responsibility.

Stakeholder synthesis approach -

Considers stakeholders as a group to whom management owes an ethical, but not a fiduciary, obligation.

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Three Values of the Stakeholder Model

Descriptive Value

Instrumental Value

Normative Value

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Stakeholder Management: Five Key Questions

Who are our organization’s stakeholders?

What are our stakeholders’ stakes?

What opportunities and challenges do our stakeholders present to the firm?

What responsibilities (economic, legal, ethical, and philanthropic) does the firm have to its stakeholders?

What strategies or actions should the firm take to best address stakeholder challenges and opportunities?

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Figure 3-5

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Who Are Our Stakeholders?

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What Are Our Stakeholders’ Stakes?

To identify them, consider -

the nature and legitimacy of a group’s stakes.

the power of a group’s stakes.

subgroups within a generic group.

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What Opportunities and Challenges do Stakeholders Present?

Opportunities

Build productive working relationships with stakeholders

The potential for cooperation

Challenges

Representative of how the firm handles its stakeholders

The potential for threat

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What Responsibilities Does a Firm Have to its Stakeholders?

Apply Corporate Social Responsibility -

Responsibilities are

Economic

Legal

Ethical

Philanthropic

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The Stakeholder Responsibility Matrix

Stakeholders	Economic	Legal	Ethical	Philanthropic
Owners
Customers
Employees
Community
Public at large
Social Activists
Other

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What Strategies or Actions Should Management Take?

Do we deal directly or indirectly with stakeholders?

Do we take the offense or the defense in dealing with stakeholders?

Do we accommodate, negotiate, manipulate, or resist stakeholder overtures?

Do we employ a combination of the above strategies or pursue a singular course of action?

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Four Stakeholder Types -

The Supportive Stakeholder

High potential for cooperation, low for threat

The Marginal Stakeholder

Low potential for cooperation and threat

The Nonsupportive Stakeholder

High potential for threat, low for cooperation

The Mixed-Blessing Stakeholder

High on potential for threat & cooperation

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Effective Stakeholder Management

Stakeholder thinking -

The process of always reasoning in stakeholder terms throughout the management process.

Increases the complexity of decision-making, but most consistent with today’s business environment.

Is facilitated by

Stakeholder culture

Stakeholder management capability

Stakeholder corporation model

Principles of stakeholder management

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Developing a Stakeholder Culture

Stakeholder Culture embraces the beliefs, values, and practices that organizations have developed for addressing stakeholder issues and relationships.

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Stakeholder Management Capability

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Stakeholder Engagement -

An approach by which companies successfully implement the transactional level of strategic management capability.

Interaction with stakeholders must be integrated into every level of decision-making in the organization.

A ladder of stakeholder engagement depicts a continuum from low engagement to high engagement.

Transparency means working toward the open corporation.

Sustainability is the latest emphasis on engaging stakeholders.

Dialogue is primarily focused on exchanging communications with stakeholder groups.

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The Stakeholder Corporation

In the future, development of loyal relationships with customers, employees, shareholders, and other stakeholders will become one of the most important determinants of success.

The central element: Stakeholder inclusiveness

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The “Clarkson Principles” of Stakeholder Management

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Strategic Steps Toward Global Stakeholder Management

Governing Philosophy Integrate stakeholder management into the firm’s governing philosophy.

Values Statement Create a stakeholder-inclusive “values statement.”

Measurement System Implement a stakeholder performance measurement system.

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Implementation

Indicators of successful stakeholder management include:

Survival

Avoided costs

Continued acceptance and use

Expanded recognition and adoption

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Key Terms (1 of 2)

Clarkson principles

descriptive value (of stakeholder model)

instrumental value (of stakeholder model)

key questions (in stakeholder management)

legitimacy

managerial view of the firm

marginal stakeholder

mixed-blessing stakeholder

multifiduciary approach (to stakeholders)

nonsupportive stakeholder

normative value (of stakeholder model)

power

primary social Stakeholders

principles of stakeholder management

process level

production view of the firm

proximity

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Key Terms (2 of 2)

rational level

secondary nonsocial stakeholders

secondary social stakeholders

stake

stakeholder

stakeholder corporation

stakeholder culture

stakeholder engagement

stakeholder inclusiveness

stakeholder management

stakeholder management capability

stakeholder map

stakeholder mindset

stakeholder responsibility matrix

stakeholder symbiosis

stakeholder thinking

stakeholder unity

stakeholder view of the firm

supportive stakeholder

synthesis approach to stakeholders

transactional level

urgency

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