© 2015 Cengage Learning
1
Chapter 3
The Stakeholder
Approach to
Business, Society,
and Ethics
© 2015 Cengage Learning
2
Learning Outcomes
1. Define stake and stakeholder, and describe the
origins of these concepts.
2. Differentiate among the production, managerial, and
stakeholder views of the firm.
3. Differentiate among the three values of the
stakeholder model.
4. Expound upon the concept of stakeholder management.
5. Identify and describe the five major questions that
capture the essence of stakeholder management.
6. Identify the three levels of stakeholder management
capability (SMC).
7. Describe the key principles of stakeholder management.
© 2015 Cengage Learning
3
Chapter Outline (1 of 2)
•
•
•
•
•
•
•
•
•
Origins of the Stakeholder Concept
Who Are Business’s Stakeholders?
Stakeholder Approaches
Three Values of the Stakeholder Model
Key Questions in Stakeholder Management
Effective Stakeholder Management
Developing a Stakeholder Culture
Stakeholder Management Capability
The Stakeholder Corporation
© 2015 Cengage Learning
4
Chapter Outline (2 of 2)
•
•
•
•
•
Principles of Stakeholder Management
Strategic Steps Toward Global Stakeholder Management
Summary
Key Terms
Discussion Questions
© 2015 Cengage Learning
5
Origins of the Stakeholder Concept
Stake • An interest or a share in an undertaking.
Can be categorized as:
An Interest
A Right
Ownership
Legal Right
Moral Right
© 2015 Cengage Learning
66
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.
© 2015 Cengage Learning
7
Who are Business’s Stakeholders?
Stockholders
Customers
Employees
Community
Competitors
Business Stakeholder Groups
Special-Interest
Groups
Suppliers
Society
Media
General
Public
© 2015 Cengage Learning
88
Three Views of the Firm
Production
View
Managerial
View
© 2015 Cengage Learning
Stakeholder
View
9
Production and Managerial Views
of the Firm (fig 3-2 slightly different)
© 2015 Cengage Learning
10
Stakeholder View of the Firm
© 2015 Cengage Learning
11
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.
© 2015 Cengage Learning
12
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
© 2015 Cengage Learning
13
Nonsocial Stakeholders
Primary nonsocial
stakeholders
Secondary nonsocial
stakeholders
Natural environment
Environmental interest
groups
Future generations
Animal welfare
organizations
Nonhuman species
© 2015 Cengage Learning
14
A Typology of Stakeholder Attributes
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.
© 2015 Cengage Learning
15
Stakeholder Typology
© 2015 Cengage Learning
16
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.
© 2015 Cengage Learning
17
Three Values
of the Stakeholder Model
Descriptive Value
Instrumental Value
Normative Value
© 2015 Cengage Learning
18
Key Questions in
Stakeholder Management
1. Who are our organization’s stakeholders?
2. What are our stakeholders’ stakes?
3. What opportunities and challenges do our
stakeholders present to the firm?
4. What responsibilities (economic, legal,
ethical, and philanthropic) does the firm
have to its stakeholders?
5. What strategies or actions should the firm
take to best address stakeholder
challenges and opportunities?
© 2015 Cengage Learning
19
© 2015 Cengage Learning
20
Who Are Our Stakeholders?
© 2015 Cengage Learning
21
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.
•
Sub-groups within a generic group.
© 2015 Cengage Learning
22
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
© 2015 Cengage Learning
23
What Responsibilities Does a
Firm Have to its Stakeholders?
Apply Corporate Social Responsibility • Responsibilities are
•
Economic
•
Legal
•
Ethical
•
Philanthropic
© 2015 Cengage Learning
24
The Stakeholder Responsibility Matrix
Stakeholders
Economic
Legal
Ethical
Philanthropic
Owners
Customers
Employees
Community
Public at large
Social Activists
Other
© 2015 Cengage Learning
25
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?
© 2015 Cengage Learning
26
Four Stakeholder Types 1. The Supportive Stakeholder
•
High potential for cooperation, low for threat
2. The Marginal Stakeholder
•
Low potential for cooperation and threat
3. The Nonsupportive Stakeholder
•
High potential for threat, low for cooperation
4. The Mixed-Blessing Stakeholder
•
High on potential for threat & cooperation
© 2015 Cengage Learning
27
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
© 2015 Cengage Learning
28
Developing a Stakeholder Culture
Stakeholder Culture embraces the believes, values and
practices that organizations have developed for addressing
stakeholder issues and relationships.
Agency
Corporate egoist
Instrumentalist
Little concern
for stakeholders
Moralist
Altruist
Great concern
for stakeholders
© 2015 Cengage Learning
29
Stakeholder Management Capability
3-Transactional level
2-Process Level
1-Rational Level
© 2015 Cengage Learning
30
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 decisionmaking in the organization.
A ladder of stakeholder engagement depicts
a continuum from low engagement to high
engagement.
Transparency: working toward the open
corporation.
Sustainability is the latest emphasis on
engaging stakeholders.
© 2015 Cengage Learning
31
The Stakeholder Corporation
The central element:
Stakeholder inclusiveness
In the future, development of loyal relationships
with customers, employees, shareholders, and
other stakeholders will become one of the
most important determinants of success.
© 2015 Cengage Learning
32
The “Clarkson Principles” of
Stakeholder Management
© 2015 Cengage Learning
33
Strategic Steps Toward Global
Stakeholder Management
1. Governing Philosophy
Integrate stakeholder management into the firm’s
governing philosophy.
2. Values Statement
Create a stakeholder-inclusive “values statement.”
3. Measurement System
Implement a stakeholder performance measurement system.
© 2015 Cengage Learning
34
Implementation
Indicators of successful stakeholder management
include:
Survival
Avoided costs
Continued acceptance and use
Expanded recognition and adoption
© 2015 Cengage Learning
35
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
© 2015 Cengage Learning
36
Key Terms (2 of 2)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
rational level
secondary social stakeholders
stake
stakeholder
stakeholder corporation
stakeholder culture
stakeholder dialogue
stakeholder engagement
stakeholder inclusiveness
stakeholder management capability
stakeholder map
stakeholder responsibility matrix
stakeholder symbiosis
stakeholder thinking
stakeholder view of the firm
strategic approach (to stakeholders)
synthesis approach (to stakeholders)
transactional level
urgency
© 2015 Cengage Learning
37