© 2005 by nelson, a division of thomson canada limited. 1 the stakeholder approach to business,...
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© 2005 by Nelson, a division of Thomson Canada Limited. 1
The The Stakeholder Stakeholder Approach to Approach to Business, Business, Society, and Society, and EthicsEthics 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
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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. 3
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
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Introduction to Chapter ThreeStakeholders
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
Ownership (legal/moral)
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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
Community
Consumers
Owners
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Who Are Business Stakeholders?
Evolution and Development of the Stakeholder Concept
Production Managerial Stakeholder
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Who Are Business Stakeholders?
Production and Managerial Views
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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. 11
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
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The Business Stakeholders
• 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
Legitimacy, Power, Urgency
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Who Are Business Stakeholders?
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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. 15
Three Values of the Stakeholder Model
•Descriptive•Instrumental•Normative
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Key Questions In Stakeholder Management1. 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?
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Key Questions In Stakeholder ManagementWho are our stakeholders?
Management must identify generic stakeholder groups and specific subgroups
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Key Questions In Stakeholder ManagementWhat 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
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Key Questions In Stakeholder ManagementWhat opportunities and challenges do stakeholders present?
•Productive working relationships with stakeholders
•Challenges and action on how the firm handles stakeholders
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Key Questions In Stakeholder Management
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Key Questions In Stakeholder Management• What economic, legal, ethical, and philanthropic
responsibilities does our firm have to its stakeholders?
Philanthropic Philanthropic ResponsibilitiesResponsibilities
Be a good corporate citizen.
Ethical ResponsibilitiesEthical ResponsibilitiesBe ethical.
Legal ResponsibilitiesLegal ResponsibilitiesObey the law.
Economic Economic ResponsibilitiesResponsibilitiesBe profitable.
© 2005 by Nelson, a division of Thomson Canada Limited. 22
Key Questions In Stakeholder Management
Stakeholders
Economic
Legal
Ethical
Philanthropic
Owners
Customers
Employees
Community
Public at large
Social Activists
Other
Stakeholder/Responsibility Matrix
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Key Questions In Stakeholder ManagementWhat 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?
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Key Questions In Stakeholder Management
Stakeholder Type 4Mixed Blessing
Strategy:Collaborate
Stakeholder Type 3Nonsupportive
Strategy:Defend
Stakeholder Type 1Supportive
Strategy:Involve
Stakeholder Type 2Marginal
Strategy:Monitor
High
Low
Stakeholder’sPotential forCooperationWith Organization
High LowStakeholder’s Potential for Threat to Organization
?
Types of Stakeholders
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Effective Stakeholder Management
Levels of Stakeholder Management Capability
• Rational level• Process level• Transaction level
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Effective Stakeholder ManagementStakeholder Corporation
Consists of:• Stakeholder inclusiveness• Stakeholder symbiosis
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Stakeholder Power:Four Gates of Engagement•Awareness•Knowledge•Admiration•Action
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Principles of Stakeholder Management• Acknowledge• Monitor• Listen• Communicate• Adopt
• Recognize• Work• Avoid• Acknowled
ge conflict
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• Core Stakeholders• Environmental
Stakeholders• Legitimacy• Managerial view • Power• Principles of
stakeholder management
• Process level• Production view
• Rational level• Stake• Stakeholder• Stakeholder
inclusiveness• Stakeholder
management capability • Stakeholder symbiosis• Stakeholder view• Strategic stakeholder• Transactional level• Urgency
Selected Key Terms