1© 2015 cengage learning. chapter 3 the stakeholder approach to business, society, and ethics ©...

Chapter 3Chapter 3The Stakeholder The Stakeholder

Approach to Approach to Business, Society, Business, Society,

and Ethicsand Ethics

© 2015 Cengage Learning 2

Learning OutcomesLearning Outcomes1.1. Define Define stake stake and and stakeholder, stakeholder, and describe the and describe the

origins of these conceptsorigins of these concepts..2.2. Differentiate among the production, managerial, and Differentiate among the production, managerial, and

stakeholder views of the firm.stakeholder views of the firm.3.3. Differentiate among the three values of the Differentiate among the three values of the

stakeholder model.stakeholder model.4.4. Expound upon the concept of stakeholder management.Expound upon the concept of stakeholder management.5.5. Identify and describe the five major questions that Identify and describe the five major questions that

capture the essence of stakeholder management.capture the essence of stakeholder management.6.6. Identify the three levels of stakeholder management Identify the three levels of stakeholder management

capability (SMC).capability (SMC).7.7. Describe the key principles of stakeholder management. Describe the key principles of stakeholder management.


• Origins of the Stakeholder ConceptOrigins of the Stakeholder Concept• Who Are Business’s Stakeholders?Who Are Business’s Stakeholders?• Stakeholder ApproachesStakeholder Approaches• Three Values of the Stakeholder ModelThree Values of the Stakeholder Model• Key Questions in Stakeholder ManagementKey Questions in Stakeholder Management• Effective Stakeholder ManagementEffective Stakeholder Management• Developing a Stakeholder CultureDeveloping a Stakeholder Culture• Stakeholder Management CapabilityStakeholder Management Capability• The Stakeholder CorporationThe Stakeholder Corporation


Chapter Outline Chapter Outline (1 of 2) (1 of 2)

• Principles of Stakeholder ManagementPrinciples of Stakeholder Management• Strategic Steps Toward Global Stakeholder ManagementStrategic Steps Toward Global Stakeholder Management• SummarySummary• Key TermsKey Terms• Discussion QuestionsDiscussion Questions


Chapter Outline Chapter Outline (2 of 2) (2 of 2)

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

Stakeholders

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.


Who are Business’s Stakeholders?


Business Stakeholder Groups

MediaSuppliers Special-InterestGroups

Society GeneralPublic

CompetitorsCustomers Community

Stockholders Employees

Three Views of the Firm


Production and Managerial Views of the Firm (fig 3-2 slightly different)


Stakeholder View of the Firm


Primary & Secondary Stakeholders

Primary stakeholders -•Have a direct stake in the organization and its success.

Secondary stakeholders - •Have a public or special interest stake in the organization that is more indirect.


Social Stakeholders


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


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.


Stakeholder Typology


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.


Three Values of the Stakeholder Model


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?


Who Are Our Stakeholders?


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.


What Opportunities and Challenges do Stakeholders Present?


What Responsibilities Does a Firm Have to its Stakeholders?

Apply Corporate Social Responsibility - •Responsibilities are

• Economic

• Legal

• Ethical

• Philanthropic


The Stakeholder Responsibility Matrix


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?


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


Effective Stakeholder Management

Stakeholder thinking - •The process of always reasoning in stakeholder terms throughout the management process.•Increases the complexity of decision-making, but most consistent with today’s business environment.•Is facilitated by

• Stakeholder culture• Stakeholder management capability• Stakeholder corporation model• Principles of stakeholder management


Developing a Stakeholder Culture

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Moralist AltruistInstrumentalistCorporate egoistAgency

Little concernfor stakeholders

Great concernfor 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

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3-Transactional level3-Transactional level

2-Process Level2-Process Level

1-Rational Level1-Rational Level


Stakeholder Engagement - • An approach by which companies

successfully implement the transactional level of strategic management capability.

• Interaction with stakeholders must be integrated into every level of decision-making in the organization.

• A ladder of stakeholder engagement depicts a continuum from low engagement to high engagement.

• Transparency: working toward the open corporation.

• Sustainability is the latest emphasis on engaging stakeholders.


The Stakeholder Corporation


In the future, development of loyal relationshipswith customers, employees, shareholders, and

other stakeholders will become one of themost important determinants of success.

In the future, development of loyal relationshipswith customers, employees, shareholders, and

other stakeholders will become one of themost important determinants of success.

The central element:Stakeholder inclusiveness

The central element:Stakeholder inclusiveness

The “Clarkson Principles” of Stakeholder Management


Strategic Steps Toward Global Stakeholder Management


Implementation

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Indicators of successful stakeholder management include:



Key Terms Key Terms (1 of 2)(1 of 2)

• Clarkson principles• descriptive value (of stakeholder model)• instrumental value (of stakeholder model)• key questions (in stakeholder management)• legitimacy• managerial view of the firm• marginal stakeholder• mixed-blessing stakeholder• multifiduciary approach (to stakeholders)• nonsupportive stakeholder• normative value (of stakeholder model)• Power• primary social Stakeholders• principles of stakeholder Management• process level• production view of the firm• proximity


Key Terms Key Terms (2 of 2)(2 of 2)

• rational level• secondary social stakeholders• stake• stakeholder• stakeholder corporation• stakeholder culture• stakeholder dialogue• stakeholder engagement• stakeholder inclusiveness• stakeholder management capability • stakeholder map• stakeholder responsibility matrix• stakeholder symbiosis• stakeholder thinking• stakeholder view of the firm• strategic approach (to stakeholders)• synthesis approach (to stakeholders)• transactional level• urgency

1© 2015 cengage learning. chapter 3 the stakeholder approach to business, society, and ethics ©...

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