The Stakeholder Approach to Business, Society, and Ethics

0 The Stakeholder Approach toBusiness, Society, and Ethics Chapter3 Professor Craig Diamond, BA 385 October 7, 2009

Origins of the Stakeholder Concept Who Are Business’s Stakeholders? Key Questions in Stakeholder Management Effective Stakeholder Management 0 Outline of Topics

Multiple parts of society – not just the owners of a corporation – have a legitimate stake in (or claim on) the company. Stakeholder View of the Corporation 0 Introduction What is definition of legitimate?

Introduction

An Interest A Right Ownership 0 Introduction Stake An interest or a share in an organization or other undertaking. Legal Right Moral Right

Any individual or group who can affect, or is affected by, the decisions, policies, goals, actions or practices of an organization. Stakeholder 0 Introduction

Business Stakeholder Groups Suppliers Customers Special-InterestGroups Community Media Competitors Society Stockholders GeneralPublic Employees 0 Who Are Business Stakeholders?

ProductionView ManagerialView StakeholderView 0 Evolution of the Business Enterprise

0 Production and Managerial Views of the Firm Figure 3-2

0 The Stakeholder View of the Firm Figure 3-3

Have a direct stake in the organization and its success PrimaryStakeholders Have a public or special interest stake in the organization SecondaryStakeholders 0 Who Are Business Stakeholders?

Primary social stakeholders Shareholders and investors Employees and managers Customers Local communities Suppliers and other business partners Secondary social stakeholders Government and regulators Civic institutions Social pressure groups Media and academic commentators Trade bodies Competitors 0 Social Stakeholders

Primary nonsocial stakeholders Natural environment Future generations Nonhuman species Secondary nonsocial stakeholders Environmental and sustainability interest groups Animal welfare organizations 0 Nonsocial Stakeholders Can’t speak for themselves

0 Core, Strategic, and Environmental Stakeholders • Core stakeholders are essential for the survival of the firm • Strategic stakeholders are vital to the organization’s success and the threats and opportunities the organization faces • Environmental stakeholders are all others in the organization's environment that are not core or strategic

the perceived validity or appropriateness of the stakeholder’s claim to a stake Legitimacy the ability or capacity of a stakeholder to produce an effect Power the degree to which the stakeholder’s claim demands immediate attention Urgency 0 A Typology of Stakeholder Attributes

0 Stakeholder Typology Figure 3-4

Stakeholder Typology – an example • McDonald’s stakeholders – what types are they? • PETA activists • Cattle • McDonald’s employees • McDonald’s customers • Eric Schlosser • Doctors and health advocates

views stakeholders primarily as factors managers should manage in pursuit of shareholder profits Strategic Approach views stakeholders as a group to which management has a fiduciary responsibility MultifiduciaryApproach considers stakeholders as a group to whom management owes anethical, but not a fiduciary obligation Stakeholder SynthesisApproach 0 Strategic, Multifiduciary, and Synthesis Views

0 Key Questions In Stakeholder Management • Who are our stakeholders? • What are our stakeholders’ stakes? • What opportunities and challenges do our stakeholders present to the firm? • What economic, legal, ethical, and philanthropic responsibilities does the firm have to its stakeholders? • What strategies or actions should the firm take to best address stakeholder challenges and opportunities?

0 1) Who Are Our Stakeholders? Figure 3-6

0 2) 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

Opportunities The potential for cooperation Challenges The potential for threat 0 3) What Opportunities and ChallengesDo Stakeholders Present?

0 Factors Affecting Potential for Threat & Cooperation Figure 3-7

0 4) What responsibilities does the firm have to its stakeholders? Figure 3-8

0 5) 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?

Potential for Threat High Low Stakeholder Type Mixed Blessing Strategy:Collaborate Stakeholder Type Supportive Strategy:Involve ? High Potential forCooperation Stakeholder Type  Nonsupportive Strategy:Defend Stakeholder Type Marginal Strategy:Monitor Low 0 Diagnostic Typology of Organizational Stakeholders Figure 3-9

0 Approach to Managing 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.

Stakeholder culture Stakeholder management capability Stakeholder corporation model Principles of stakeholder management 0 Effective Stakeholder Management “Stakeholder Thinking”

Transactional level Process Level Rational Level 0 Stakeholder Management Capability Stakeholder Engagement Levels

Stakeholder inclusiveness Stakeholder symbiosis 0 The Stakeholder Corporation

0 “Clarkson Principles” of Stakeholder Management Figure 3-10

1. Governing Philosophy.Integrate stakeholder management into the firm’sgoverning philosophy. • Values Statement. • Create a stakeholder-inclusive “values statement.” • Measurement System. • Implement a stakeholder performance measurement system. 0 Strategic Steps TowardSuccessful Stakeholder Management

The Stakeholder Approach to Business, Society, and Ethics