TO WHOM ARE THE BUSINESS ORGANIZATIONS
RESPONSIBLE?
Aura Brişcaru
Petre Andrei University, Iasi, Romania
aurabriscaru@yahoo.com
Abstract
Globalization has restructured the rapport of power between businesses and government, in
favor of corporations. Unfortunately, corporations that focus exclusively on profit, often
prejudice society and implicitly people. On the other hand, the government’s ability to create
the legal and normative infrastructure that balances the interests of both business and society
has become doubtful. Consequently, its capability to protect the parts affected by the business
is challenged both by society and business. The actual intensifying of the macroeconomic
medium entropy, retroactively stimulates growth of individual social responsibility. Alone or
allied in the different social control groups, the individual is formally recognized as “business
interested part” or “stakeholder”. They are perceived as an antivirus of business toxicity over
society. It is a social control mechanism that helps ensure that institutions function effectively,
and that common areas are preserved for the benefit of all. This article strengthens and adds
another point of view on the stakeholder theory. It emphasizes some particularities that modify
the accepted stakeholders’ typology and their positioning with the actual organization.
Keywords: globalisation, stakeholder, corporate social responsibility, society.
I.
GLOBALIZATION – MAIN MOTIVATOR FOR
INDIVIDUAL SOCIAL RESPONSIBILITY
Globalization is associated with tares that subjugated fundaments,
paradigms and social ideals illo tempore. Multinational companies gained supremacy
from the economic point of view and became uncontrollable, international
institutions govern the world politically, and society is set on consuming. Daily, no
matter the meridian where we are situated, we are aware of the effects of the inability
of the government to manage the context of multiple challenges raised by
multinational companies, by population ageing, by e/immigration, by all types of
crises and other phenomena specific only to our century. Between the state, as
inadequate to actual times, (Phillips, 2006, Akerlof, 2007) and the multinational
companies, viewed as immoral, and as stimulators of the social Darwinism (Sen,
1997; Wood, Logsdon, Lewellyn & Davenport, 2006), the individual felt the need to
socially protest when thinking that his interests are broken. We are viewers and
actors of a normalization, integration and moralization process of social life, as a
manifestation of the responsible individualism. One can figure out that the
fundamental problem of postmodernism is the conflict between the de-organizing
logic of entropic individualism and the organizing logic of responsible individualism.
Lipovetsky [1] explains the success of ethics in an era where ideology, history, spirit
dialects, ideals (people, nation, humanity, and freedom) lost their credibility by a
retroaction process of responsible individualism. One of the forms of growing and
mature assuming of individual autonomy is his preoccupation, more or less viewable,
for the company. And the best support for movements of social protesting in a
globalization proved to be... globalization itself.
1.1. Stakeholder formalisation
“Only a brave leader explores what troops think for real…But to be a real leader in
the new economy, we have to gain the trust of our stakeholders, learning to cultivate
trust in people, and balancing their needs and opinions in our business-related
decisions”. S.F. Walker, J.W. Marr, Stakeholder Power
Among some inconvenients and advantages, globalization generated
technology,
democratization
of
technology
(computerisation
and
telecommunications) and created a cyberspace with ”ubiquitous connectivity, new
relationships between business affairs, clients, employees and partners. People now
have access to an enormous amount of information and opinions about products and
practices of companies. Consequently, sustainability for society and for companies,
requires mutual understanding, a more collaborative relation, which has in view that
every party should reach a consensus regarding prosperity ”[2]. The TIME industry,
abbreviated form for Telecomunication – Information – Media - Entertainment,
re\balances constantly the asymmetry of information and the advantages of business
in relation with society in general and with interested parties in particular. New
media are creators not only of a new concept, stakeholder, but also a new formal
statute for it, with an undeniable role: the protest against unknowing and
disrespecting general human values. The normative role of stakeholders states that
the globalization process offers not only opportunities for business but also new types
of pressures and risks for affairs.
1.2. Where are the interested parties and towards whom is the business
responsible?
By stakeholders or interested parties or we understand groups and/or
persons affected by the operationalization of an affair: shareholders, employees,
customers, suppliers, retails, creditors, governments, international institutions and
society in general. From a review of missions, values, philosophies etc., which
appeared on the website of the first 100 companies listed by Fortune 500 results that
22 have in view “respecting the legal and ethical limits” of the business, 64 are
concerned with “maximizing welfare of all stakeholders”, 2 are aimed at solving
"social problems while making a fair profit" [3] and only 10 declare clearly the aim
of maximizing the value for shareholding.
Viewed as a system, society is more or less influenced by the business enterprise. By "society" we understand the community which holds the business and
that is interested directly in the manner in which the affair is created (how is the
environment preserved, the degree of labouring available on the market, local taxes
payment, etc) and also the region or country or the crossborder neighbors. In its turn,
as an open system, the organization is subject to permanent change, of the status quo,
due to actions of all social actors. All the more in the "interconnected world",
"organization society", "postmodernist society" or other terms used by
macroeconomists for the globalization process. But not all social actors are interested
parties. It’s the same relation that exists between Adam and us: we are all
descendents of Adam, but in reality only three were his real children. Interested
parties, conventionally accepted, for an organization, are only those whose
actions have or can have effect on the objectives, strategies and progress of the
organization. These are under the proximal influence of the organization.
"A firm has three types of stakeholders: organizational stakeholders (from
inside), social and economic stakeholders (from outside) "[4]. Stakeholders, from
the point of view of many authors, including the ones already quoted, are represented
concentrically: a circle - the organization - surrounded by other circles representing
the economic stakeholders, social stakeholders and then, the phenomena associated
with globalization (TIME industry). Maybe because at the beginning of the century
(when the first stakeholder classification was made) we haven’t yet experimented
world crises, pandemics, the Chinese economic boom, global warming and other
globalization-dependent phenomena, between the external stakeholders and internal
ones, the space seemed larger, more secure and the organization less vulnerable to
external influences. Meanwhile, organizations found out that the migrations have
great impact on the business’ performance, the financial crisis in the US diminished
opportunities of crediting, governs are almost insolvent, goods coming from Asia
exceeds the limits accepted by the economy and more individuals become “efluentials”.
Stakeholder models and organizational proximity are in a permanent
change due to the external integration and interdependence of organizations. From
our point of view, the most relevant changes are:
(i)
reducing the buffer zone between organization and groups or
individuals interested by its functioning;
(ii)
external stakeholders have approximately similar influence on
organizational processes;
(iii)
small groups and singular individuals can socially control the
organization, which isn't in a direct causal relation with their dimension,
but with their capacity to influence the decisions taken inside it;
(iv)
the stakeholders' action became more dynamic and synergic following
the varied potential offered by world digitalization;
(v)
"globalization" doesn’t represent another type of stakeholder but
another aspect, a dimension of each constituent from every interested
party in the functioning of the organization.
2. WHO ARE THE CONSTITUENTS OF "THE INTERESTED
PARTIES"?
Ronald P. Mitchell [5], proposes an analysis and diagnosis of interested parties from
the point of view of three attributes: power, legitimacy and emergency. Owning these
attributes justifies the « participation » or « concerted action », because it allows
interested parties to be distributed in decisional roles and in actions of projects that
regard community. He defines the three dimensions as follows:
Power is the capacity of an actor, expressed or potential, to exert his will over
another. Legitimacy is appreciating the action of the first actor, emitted by other
actors, according to which the action is desirable, convenient or in accordance with
norms, values, beliefs and other social regulations. Emergency is the responsibility of
the actor himself regarding duty, viewed as important and pressing.
The fact that stakeholders have totally or partially the three attributes allows
systematizing them into eight categories of social « participation » or « concerted
action », as follows:
 « DEFINITIVE STAKEHOLDERS », with power, legitimacy and
emergency, totally keen on « concerting ».
 « EXPECTANT STAKEHOLDERS », owning two attributes and
classified as:


- « dependent stakeholders » (emergency and legitimacy);
- « dangerous stakeholders » (power and emergency);
- « dominant stakeholders » (power and legitimacy);
STAKEHOLDERS WITH A SINGLE ATTRIBUTE:
- « dormant stakeholders » (power);
- « discretionary stakeholders » (legitimacy);
- « demanding stakeholders » (emergency).
NON-STAKEHOLDERS (no attribute and no participation in social
concerting).
We appreciate that from the point of view of intensity and frequency of reactive
potential of stakeholders this classification is useful. But, from the point of view of
organization positioning, we find useful the wide accepted classification that splits
interested parties in interiors and exteriors of the organization (see also the graphic
representation 1) with a special mention: all these parties are “viruses” by the
globalizations phenomena.
I.
INTERNAL STAKEHOLDERS: employees, managers, shareholders,
trade unions.
II. EXTERNAL STAKEHOLDERS:
Economic stakeholders: customers, suppliers, distributors, lenders,
partners, national and international competitors from the economic field;
(ii)
Social stakeholders: community, public administration, governmental,
national, regional and international agencies, non -governmental
associations and organizations
representation 1) with a special mention: all these parties are “viruses” by
the globalizations phenomena.
(i)
2.1. What determined globalization of stakeholders?
The fact that economic, cultural and technological globalization
interconnected socially and intricately the world became a cliché already. We
experience daily – individually, in formal or informal groups- globalized processes
and consequences. Initially, globalization was sensed as external referential, as
standard to which we refer fast changes which appeared in our existence as
juridical persons or physical persons. Nowadays, phenomena considered to
belong to globalization were internalized, becoming motivating factors for
actions in individuals, groups and organizations. They are not affected anymore,
but “viruses" by globalization. From exogenous the phenomenon became
endogenous, we ourselves are globalized: pro or contra we believe, propagate and
consolidate globally the principles of free economy, technology, research and
development, learning throughout life, democratization of societies and information,
permanent development of career etc. Shareholders and managers simulate
organizational plans still named strategic plans, or better said, global plans with the
same internationals methods and instruments, students choose their universities and
their career according to qualifications required by world market, syndicates establish
their position by association with international movements, suppliers sweep big
companies’ and SME’s websites, from the US to islands known only by viewing an
atlas, chefs combine tribes’ recipes from the Amazon with lasagnas, and in order to
be funny teenagers are "emo". Added to these the governments statements are subject
of international regulations of the worldwide organizations.
In this context, it’s fair that the dimension of the actions and external
behavior of economic entities produce reactions from actors, belonging to different
areas of the globe, which are considered affected parties. There are lots of examples:
individuals, autochthonous NGOs, Hungary’s government and other groups take
action daily (via internet, or Green Peace members bounded by fences) against the
Rosia Montana project. Jody Williams, (Nobel Peace Prize winner in 1997 for
contributing to field mining prohibition) was asked by journalists how could the
organization of 1000 activists in six continents fight concertedly for adopting a
legislation to control army and human rights? She explained that she had a secret
weapon that fought against governmental adversities and powerful interest groups:
"e-mail”. Locally and nationally, the internalization of global perspectives of decision
and action is stronger in governing processes. Governments and local administration
regionalized or internationalized by EU, UNESCO, UNO etc.) have to accept the
international regulations and to force the juridical and physical national entities to
respect them.
2.2. Why stakeholder’s point of view cannot be ignored?
Any economic transaction which relies on production and consumption has
besides directly implied parts, parts involuntarily affected by transactional processes.
In the economic register, collateral costs of transactions are known as "externalities".
They can create social benefits (acquisition of computer production licenses by China
stimulated a 10% growth in the degree of competence in computer use for the
population of the region where the firm is functioning)[6] or external costs (see Rosia
Montana Gold Corporation disputes). Negative externalities are problematic and
moreover, who carries out the costs for these? Economists call these persons that pay
the costs “third parties”, or more recently appeared in the managerial vocabulary,
"stakeholders". "The stakeholders are victims of externalities effects, created by
profiteer shareholders"[7]. All these - customers, providers, employees etc., as nonvoluntarily involved parties in commercial agreements, but participating to creating
profit for the involved voluntary parties, consider themselves qualified for: (i)
recognizing and respecting their interests; (ii) receiving compensations when rights
were broken. Media campaigns, boycotting, strikes, manifestations are actions
through which groups or individuals manifest their disapproval for the manner in
which business is handled by a certain economical entity.
As directly affected parties (ex., employees work conditions) or indirectly
(ex., deteriorating the ecosystem of a community), stakeholders have the moral right
to fight for moral conditions to be adopted by companies. The normative role of
interested parties, as "antidote to toxic effects of economic aims only in the interest of
business" is beneficial for society [8]. The social control exerted by interested parties
is a way of revising moral values - meaning humanizing economic society - and of
reiterating the implied contract between the company and the society.
As consequence for the company, the accurate identification of parts collateral
prejudiced/prejudicial by economic transactions represents a strategic objective.
Reputation, credibility and the good positioning of the affair according to its main
competitors depend on the correct identification of stakeholders. "Since it is logically
impossible to maximize in more than one dimension, purposeful behavior requires a
single valued objective function. Two hundred years of work in economics and
finance implies that in the absence of externalities and monopoly (and when all
goods are priced), social welfare is maximized when each firm in an economy
maximizes its total market value." [9].
Customers become loyal to businesses that provide products which have great value
for them; employees offer their capabilities and competences to famous companies;
investors and creditors finance the companies which are more responsible than
others; NGOs and public administration organizations choose their partnerships on
the basis of ethic performances. Those groups are added to syndicates, governmental
institutions, opinion leaders, other organizations or institutes with significant
normative influence on the organization.
In other words, the degree in which "the ones that matter" are identified
gives the degree in which there can be anticipated and defused the negative
influences of these on the business. Understanding interests and motivations for
stakeholders, their behavioral tendencies, allows management to project internal
politics and instruments adequate to social problems provoked by business
functioning. In this sense, companies create complex maps of social context, focused
on problems like:
 What do employees know, what does public know about firm /product or
problem that a company has?
 What are the attitudes and beliefs towards them?
 What is their behavior towards these?
 How can stakeholder groups be segmented and how can they be special
interventions developed for the expectations/requests/needs of each
segment?
 What are the solutions for changing the attitude of stakeholders? What
behaviors are expected from them?
 What are the factors that can compete in changing the relation with the
stakeholder?
 What are the costs if the problem persists and what are the costs for fixing
it?
All these questions can be reduced to one: How can social welfare and profit be
maximized simultaneously? The operationalization of this question was materialized
in a special dimension of organization management, known as strategic management
of corporative social responsibility. And the incomplete answers, obtained
empirically or by scientific techniques, are remade, interpreted and summarized in
organizational applications (strategies, politics, tactics, programs, codes etc.) bound
to convince the constituents of the interested groups about good manners models and
ethic standards used by businessmen.
The reason to be and the efficiency of this new managerial preoccupation should
be evaluated according to the degree of realization of the integrative social contract
by the business - enterprise. Being aware of the necessity of adopting some new
measures in favor of this solution is proved by most investigations created by
independent organizations, by academic institutions and the companies themselves.
In addition, the conclusions of these studies point out the fact that the receptivity
towards stakeholders determines that stakeholders/shareholders do business better.
An example is a study realized on Canadian citizens and companies [10], which
shows that 68% of the citizens pay great attention to problems that regard social
corporative responsibility field, and ¾ of Canadian top firms are actively involved in
important projects, socially responsible. "What’s interesting, however, is that while
corporate Canada invests time and money in developing CSR policies and programs,
Canadian consumers, despite their claim to be paying attention to these issues, are
somewhat in the dark about the specific practices companies adopt ".
So, although it became a conceptual mechanism sufficiently oriented on
adopting a moral philosophy of doing business, as well as adequate behavior, and in
spite of investments, not at all negligible, strategic management of corporative social
responsibility still has some obscure areas, for companies as well as for stakeholders.
Here are some questions to which we have to provide decisional alternatives. "When
seeking to influence firm decision-making, what types of influence strategies do
stakeholders have available and what determines which type the stakeholders choose
to use?" [11]. What does a stakeholder value in affairs: a correct price of the product
or undiscriminatory politics in human resources? How efficient are participatory
development of stakeholder strategies? Which is the informational limit of
stakeholders? What’s the significance of "maximization" for a business, as long as
we know that maximization needs using resources which cannot be dissipated in
multiple directions without losing them?
An integrative point of view for the way in which we do business is IBM's: “To
be sustainable, businesses are now embracing a relatively new objective: optimizing
their operations to minimize environmental impact and improve social outcomes in a
manner that also maximizes performance.”[12]
Conclusion
„Digital
network type economy is not a purpose itself, but is designed to fulfill others
objectives such as high living standards, more individual possibilities for choosing,
more dignity and autonomy for individuals and a wide participation on public life
from citizens.“ George Metakides
The actual problem of the business seems to be the conflict between the
economic performance of the company (measured in income, costs and profit) and
social problems (concerning the obligations for the people from company and outside
company). In fact, it is a false dilemma generated by on side decoding of the
organizational status either closed system or open system. As members of
communities and under the condition of the interconnected world, companies are
connected to the welfare of society and planet health.
In focusing on maximizing value on the market, businesses prejudice
interests of third parties. Insufficiently protected by legal and normative
governmental infrastructure these parties adopt a new positioning of the stakeholders.
Current and major feature of that new stakeholders pattern are that "globalization"
doesn’t represent another independent type of stakeholder but another aspect, a
dimension of each constituent from every interested party in the functioning of the
organization.
In addition to this:
(i) the sphere of the external stakeholders is enlarged and diversified;
(ii) their power of influence, on the decisions taken inside organization, isn't still
in a direct causal relation with their dimension, but with their capacity to influence
(see small groups and singular individuals as influential).
In this context multi- stakeholders' action became more dynamic and synergic
following the varied potential offered by world digitalization.
The stakeholders are considered qualified: (i) to remind companies to whom
they are responsible and (ii) what are the risks of not involving voluntarily in
preserving environment, human rights, or not adopting ethic behaviors of doing
business. The fact that, lately, the value and welfare of organizations is created or
destroyed by the interaction with stakeholders, raised the sensitivity and receptivity
of companies towards stakeholders’ expectations. Although neither the actions of
stakeholders nor the management of corporative social responsibility are the pinnacle
of common interests between business and society, social control exerted by
stakeholders determines companies to do business better and faster
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