The Stakeholder
Approach to
Business, Society,
and Ethics
Search the Web
Information on stakeholder theory can be
found at the Clarkson Centre for Business
Ethics at the University of Toronto:
www.mgmt.utoronto.ca/~stake
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter Three Objectives
• Define stake and stakeholder
• Differentiate between production, managerial,
and stakeholder views of the firm
• Discuss three values of the stakeholder model
• Study the concept of stakeholder management
• Identify the essence of stakeholder management
• Explain stakeholder management capability
(SMC)
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter Three Outline
• Origins of the
Stakeholder Concept
• Who Are Business’s
Stakeholders?
• Strategic, Multifiduciary,
and Synthesis Views
• Three Values of the
Stakeholder Model
• Key Questions of
Stakeholder Management
• Effective Stakeholder
Management
• Stakeholder Management
Capability
• The Stakeholder
Corporation
• Stakeholder Power: Four
Gates of Engagement
• Principles of Stakeholder
Management
• Summary
© 2005 by Nelson, a division of Thomson Canada Limited.
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Introduction to Chapter Three
Stakeholders
Individuals and groups with a multitude
of interests, expectations, and demands
as to what business should provide to
society
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Origins of the Stakeholder
Concept
What is a stake?
An interest or a share can be categorized as:
Interest
Right
(legal/moral)
© 2005 by Nelson, a division of Thomson Canada Limited.
Ownership
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Origins of the Stakeholder
Concept
What is a stakeholder?
An individual who possesses a
corporate interest, either financially or
ethically
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Who Are Business Stakeholders?
Government
Employees
Business
Owners
Community
Consumers
© 2005 by Nelson, a division of Thomson Canada Limited.
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Who Are Business Stakeholders?
Evolution and Development of the
Stakeholder Concept
Production
Managerial
© 2005 by Nelson, a division of Thomson Canada Limited.
Stakeholder
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Who Are Business Stakeholders?
Production and Managerial Views
© 2005 by Nelson, a division of Thomson Canada Limited.
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Who Are Business Stakeholders?
Primary and Secondary Stakeholders
• Primary stakeholders are those that have
a direct interest in the organization and its
success
• Secondary stakeholders are those that
have a public or special interest in the
organization
© 2005 by Nelson, a division of Thomson Canada Limited.
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Who Are Business Stakeholders?
Core, Strategic, and Environmental
Stakeholders
• Core stakeholders are essential to the firm’s
survival
• Strategic stakeholders are directly affected by
threats and opportunities the organization faces
• Environmental stakeholders are all others in
the organization's environment
© 2005 by Nelson, a division of Thomson Canada Limited.
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The Business Stakeholders
Legitimacy, Power, Urgency
• Legitimacy is the perceived validity of the
stakeholder’s claim to a stake
• Power is the ability of a stakeholder to
produce an effect
• Urgency is the degree a stakeholder’s claim
demands immediate attention
© 2005 by Nelson, a division of Thomson Canada Limited.
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Who Are Business Stakeholders?
© 2005 by Nelson, a division of Thomson Canada Limited.
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Strategic, Multifiduciary, and
Synthesis Views of
Stakeholders
• Strategic approach considers stakeholders
as managers in pursuit of profits
• Multifiduciary approach considers
stakeholders, a group, that management has a
fiduciary responsibility
• Synthesis approach considers stakeholders
as a group to whom management owes an
ethical but not fiduciary responsibility
© 2005 by Nelson, a division of Thomson Canada Limited.
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Three Values of the
Stakeholder Model
• Descriptive
• Instrumental
• Normative
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
1. Who are stakeholders?
2. What are stakeholders’ stakes?
3. What opportunities and challenges do
stakeholders represent?
4. What economic, legal, ethical, and philanthropic
responsibilities does a firm have?
5. What strategies or actions should firms take to
manage stakeholders’ opportunities and
challenges?
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
Who are our stakeholders?
Management must identify generic
stakeholder groups and specific
subgroups
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
What are our stakeholders’ stakes?
• The nature/legitimacy of a group’s
stakes
• The power of a group’s stakes
• The specific groups within generic
groups
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
What opportunities and challenges
do stakeholders present?
• Productive working relationships with
stakeholders
• Challenges and action on how the firm
handles stakeholders
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
• What economic, legal, ethical, and philanthropic
responsibilities does our firm have to its
stakeholders?
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
Stakeholder/Responsibility Matrix
Stakeholders
Economic
Legal Ethical
Philanthropic
Owners
Customers
Employees
Community
Public at large
Social Activists
Other
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management
What strategies or actions to take?
• Deal directly or indirectly with stakeholders?
• Take the offence or the defence in dealing with
stakeholders?
• Accommodate, negotiate, manipulate, or resist
stakeholder overtures?
• Employ a combination of the above or singular
strategies?
© 2005 by Nelson, a division of Thomson Canada Limited.
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Key Questions In Stakeholder
Management Types of Stakeholders
Stakeholder’s Potential for Threat to Organization
High
Low
High
Stakeholder’s
Potential for
Cooperation
With Organization
Low
Stakeholder Type 4
Mixed Blessing
Stakeholder Type 1
Supportive
Strategy:
Collaborate
Strategy:
Involve
?
Stakeholder Type 3
Nonsupportive
Stakeholder Type 2
Marginal
Strategy:
Defend
Strategy:
Monitor
© 2005 by Nelson, a division of Thomson Canada Limited.
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Effective Stakeholder
Management
Levels of Stakeholder
Management Capability
• Rational level
• Process level
• Transaction level
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Effective Stakeholder
Management
Stakeholder Corporation
Consists of:
• Stakeholder inclusiveness
• Stakeholder symbiosis
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Stakeholder Power:
Four Gates of Engagement
•
•
•
•
Awareness
Knowledge
Admiration
Action
© 2005 by Nelson, a division of Thomson Canada Limited.
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Principles of Stakeholder
Management
•
•
•
•
•
Acknowledge
Monitor
Listen
Communicate
Adopt
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•
•
•
•
Recognize
Work
Avoid
Acknowledge
conflict
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Selected Key Terms
• Core Stakeholders
• Environmental
Stakeholders
• Legitimacy
• Managerial view
• Power
• Principles of stakeholder
management
• Process level
• Production view
•
•
•
•
•
•
•
•
•
•
© 2005 by Nelson, a division of Thomson Canada Limited.
Rational level
Stake
Stakeholder
Stakeholder inclusiveness
Stakeholder management
capability
Stakeholder symbiosis
Stakeholder view
Strategic stakeholder
Transactional level
Urgency
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