Business & Society
Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
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Chapter 3
The Stakeholder
Approach to
Business,
Society, and
Ethics
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Learning Outcomes
1. Define stake and stakeholder and describe the
origins of these concepts.
2. Differentiate among production, managerial, and
stakeholder views of the firm.
3. Differentiate among the three values of the
stakeholder model.
4. Explain the concept of stakeholder management.
5. Identify and discuss the five major questions that capture
the essence of stakeholder management.
6. Identify the three levels of stakeholder management
capability (SMC).
7. What are the key principles of stakeholder management?
© 2012 South-Western, a part of Cengage Learning
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Chapter Outline
• Origins of the Stakeholder
Concept
• Who Are Business’s
Stakeholders?
• Strategic, Multifiduciary, and
Synthesis 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
• Principles of Stakeholder
Management
• Strategic Steps Toward
Successful Stakeholder
Management
• Summary
• Key Terms
• Discussion Questions
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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
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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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Who are Business Stakeholders?
Stockholders
Customers
Employees
Community
Competitors
Business Stakeholder Groups
Special-Interest
Groups
Suppliers
Society
Media
General
Public
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Three Views of the Firm
Production
View
Managerial
View
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Stakeholder
View
8
Production and Managerial Views of
the Firm
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Stakeholder View of the Firm
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Who are Business 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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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.
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Stakeholder Typology
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Strategic, Multifiduciary, and
Synthesis Views
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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Key Questions in Stakeholder
Management
1. Who are our stakeholders?
2. What are our stakeholders’ stakes?
3. What opportunities and challenges do our
stakeholders present to the firm?
4. What economic, legal, ethical, and
philanthropic responsibilities does the firm
have to its stakeholders?
5. What strategies or actions should the firm
take to best address stakeholder challenges
and opportunities?
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Who Are Our Stakeholders?
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What Are Our Stakeholders’
Stakes?
 Identify the nature/legitimacy of a group’s
stakes.
 Identify the power of a group’s stakes.
 Identify specific groups 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?
• What responsibilities does a firm have in
its relationships with all stakeholders?
• 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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Diagnostic Typology of Organizational
Stakeholders
Stakeholder’s Potential for Threat to Organization
High
Low
Stakeholder Type 
Mixed Blessing
Stakeholder Type 
Supportive
Strategy:
Collaborate
Strategy:
Involve
High
Stakeholder’s
Potential for
Cooperation with
Organization
?
Stakeholder Type 
Nonsupportive
Stakeholder Type 
Marginal
Strategy:
Defend
Strategy:
Monitor
Low
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Summary of Four Stakeholder
Types
Managers should attempt to satisfy minimally
the needs of marginal stakeholders and to
satisfy maximally the needs of supportive and
mixed blessing stakeholders, enhancing the
latter’s support for the organization.
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Stakeholder Management
Stakeholder thinking
• The process of always reasoning in
stakeholder terms throughout the
management process.
• Can be complex and time-consuming.
• 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 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
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Stakeholder Management Capability
Transactional level
Process Level
Rational Level
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Stakeholder Engagement
• An approach by which companies
implement the transactional level of
strategic management capability.
• A ladder of stakeholder engagement which
depicts a continuum from low engagement
to high engagement.
 Sustainability is the latest emphasis on
engaging stakeholders.
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The Stakeholder Corporation
Stakeholder inclusiveness
Stakeholder symbiosis
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Principles of Stakeholder
Management
• Also known as the “Clarkson Principles”
Key words









Acknowledge
Monitor
Listen
Communicate
Adopt
Recognize
Work
Avoid
Acknowledge conflicts
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The “Clarkson Principles” of
Stakeholder Management
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Strategic Steps Toward Successful
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.
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Implementation
Implementation is the key to successful stakeholder
management.
Survival
Avoided costs
Continued acceptance and use
Expanded recognition and adoption
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Key Terms
• Core stakeholders
• Environmental
stakeholders
• Legitimacy
• Managerial view of the
firm
• Power
• Primary social
Stakeholders
• Principles of
stakeholder
Management
• Process level
• Production view of the
firm
• Rational level
• Secondary social
stakeholders
• Stake
• Stakeholder
• Stakeholder
corporation
• Stakeholder
engagement
• Stakeholder
inclusiveness
• Stakeholder
management capability
• Stakeholder symbiosis
• Stakeholder thinking
• Stakeholder view of the
firm
• Strategic stakeholders
• Transactional level
• Urgency
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