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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)

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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

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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

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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

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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

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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.

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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