Business and society ethics sustainability and stakeholder management 9e chapter 3

Who are Business’s Stakeholders?© 2015 Cengage Learning 8 Business Stakeholder Groups Media Suppliers Special-Interest Groups Society General Public Competitors Customers Community Stock

© 2015 Cengage Learning

Chapter 3

The Stakeholder

Approach to Business, Society,

and Ethics

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

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• 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

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Chapter Outline (1 of 2)

• Principles of Stakeholder Management

• Strategic Steps Toward Global Stakeholder Management

Origins of the Stakeholder Concept

Stake -

•An interest or a share in an undertaking

Can be categorized as:

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An Interest A Right Ownership

Legal Right

Moral Right

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’s Stakeholders?

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Business Stakeholder Groups

Media Suppliers Special-Interest

Groups

Society General

Public

Competitors Customers Community

Stockholders Employees

Three Views of the Firm

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Production and Managerial Views

of the Firm (fig 3-2 slightly different)

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Stakeholder View of the Firm

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Primary & Secondary Stakeholders

Social Stakeholders

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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

Nonsocial Stakeholders

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Primary nonsocial

stakeholders Secondary nonsocial stakeholders

Natural environment Environmental interest

groups

Future generations Animal welfare

organizations Nonhuman species

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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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

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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?

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Who Are Our Stakeholders?

21

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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

•Sub-groups within a generic group

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What Opportunities and Challenges

do Stakeholders Present?

23

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What Responsibilities Does a Firm Have to its Stakeholders?

Apply Corporate Social Responsibility -

The Stakeholder Responsibility Matrix

25

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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 -

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

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Effective Stakeholder Management

• Stakeholder management capability

• Stakeholder corporation model

• Principles of stakeholder management

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Developing a Stakeholder Culture

29

Moralist Altruist Instrumentalist

Corporate egoist Agency

Little concern

for stakeholders

Great concern for stakeholders

Stakeholder Culture embraces the believes, values and

practices that organizations have developed for addressing stakeholder issues and relationships

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Stakeholder Management Capability

Stakeholder Engagement -

• An approach by which companies

successfully implement the transactional

level of strategic management capability.

integrated into every level of

decision-making in the organization

a continuum from low engagement to high engagement.

corporation

engaging stakeholders.

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The Stakeholder Corporation

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In the future, development of loyal relationships with customers, employees, shareholders, and other stakeholders will become one of the

most important determinants of success

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 The central element:

Stakeholder inclusiveness

The “Clarkson Principles” of

Stakeholder Management

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Strategic Steps Toward Global

Stakeholder Management

34

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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)

• primary social Stakeholders

• principles of stakeholder Management

• process level

• production view of the firm

• proximity

• stakeholder view of the firm

• strategic approach (to stakeholders)

• synthesis approach (to stakeholders)

• transactional level

• urgency