Business & Society Archie B. Carroll Ann K. Buchholtz Ethics, Sustainability, and Stakeholder
Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western, a part of Cengage Learning 1 Chapter 3 The Stakeholder Approach to Business, Society, and Ethics © 2012 South-Western, a part of Cengage Learning 2 Learning Outcomes 1. Define stake and stakeholder and describe the origins of these concepts. 2. Differentiate among production, managerial, and stakeholder views of the firm. 3. Differentiate among the three values of the stakeholder model. 4. Explain the concept of stakeholder management. 5. Identify and discuss the five major questions that capture the essence of stakeholder management. 6. Identify the three levels of stakeholder management capability (SMC). 7. What are the key principles of stakeholder management? © 2012 South-Western, a part of Cengage Learning 3 Chapter Outline • Origins of the Stakeholder Concept • Who Are Business’s Stakeholders? • Strategic, Multifiduciary, and Synthesis 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 • Principles of Stakeholder Management • Strategic Steps Toward Successful Stakeholder Management • Summary • Key Terms • Discussion Questions © 2012 South-Western, a part of Cengage Learning 4 Origins of the Stakeholder Concept Stake • An interest or a share in an undertaking. Can be categorized as: An Interest A Right Ownership Legal Right Moral Right © 2012 South-Western, a part of Cengage Learning 55 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. © 2012 South-Western, a part of Cengage Learning 6 Who are Business Stakeholders? Stockholders Customers Employees Community Competitors Business Stakeholder Groups Special-Interest Groups Suppliers Society Media General Public © 2012 South-Western, a part of Cengage Learning 77 Three Views of the Firm Production View Managerial View © 2012 South-Western, a part of Cengage Learning Stakeholder View 8 Production and Managerial Views of the Firm © 2012 South-Western, a part of Cengage Learning 9 Stakeholder View of the Firm © 2012 South-Western, a part of Cengage Learning 10 Who are Business 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. © 2012 South-Western, a part of Cengage Learning 11 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 © 2012 South-Western, a part of Cengage Learning 12 Nonsocial Stakeholders Primary nonsocial stakeholders Secondary nonsocial stakeholders Natural environment Environmental interest groups Future generations Animal welfare organizations Nonhuman species © 2012 South-Western, a part of Cengage Learning 13 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. © 2012 South-Western, a part of Cengage Learning 14 Stakeholder Typology © 2012 South-Western, a part of Cengage Learning 15 Strategic, Multifiduciary, and Synthesis Views 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. © 2012 South-Western, a part of Cengage Learning 16 Three Values of the Stakeholder Model Descriptive Value Instrumental Value Normative Value © 2012 South-Western, a part of Cengage Learning 17 Key Questions in Stakeholder Management 1. Who are our stakeholders? 2. What are our stakeholders’ stakes? 3. What opportunities and challenges do our stakeholders present to the firm? 4. What economic, legal, ethical, and philanthropic responsibilities does the firm have to its stakeholders? 5. What strategies or actions should the firm take to best address stakeholder challenges and opportunities? © 2012 South-Western, a part of Cengage Learning 18 Who Are Our Stakeholders? © 2012 South-Western, a part of Cengage Learning 19 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. © 2012 South-Western, a part of Cengage Learning 20 What Opportunities and Challenges do Stakeholders Present? Opportunities • Build productive working relationships with stakeholders • The potential for cooperation Challenges • Representative of how the firm handles its stakeholders • The potential for threat © 2012 South-Western, a part of Cengage Learning 21 What Responsibilities Does a Firm Have to its Stakeholders? • What responsibilities does a firm have in its relationships with all stakeholders? • Responsibilities are Economic Legal Ethical Philanthropic © 2012 South-Western, a part of Cengage Learning 22 The Stakeholder/Responsibility Matrix Stakeholders Economic Legal Ethical Philanthropic Owners Customers Employees Community Public at large Social Activists Other © 2012 South-Western, a part of Cengage Learning 23 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? © 2012 South-Western, a part of Cengage Learning 24 Diagnostic Typology of Organizational Stakeholders Stakeholder’s Potential for Threat to Organization High Low Stakeholder Type Mixed Blessing Stakeholder Type Supportive Strategy: Collaborate Strategy: Involve High Stakeholder’s Potential for Cooperation with Organization ? Stakeholder Type Nonsupportive Stakeholder Type Marginal Strategy: Defend Strategy: Monitor Low © 2012 South-Western, a part of Cengage Learning 25 Summary of 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. © 2012 South-Western, a part of Cengage Learning 26 Stakeholder Management Stakeholder thinking • The process of always reasoning in stakeholder terms throughout the management process. • Can be complex and time-consuming. • Is facilitated by • • • • Stakeholder culture Stakeholder management capability Stakeholder corporation model Principles of stakeholder management © 2012 South-Western, a part of Cengage Learning 27 Developing a Stakeholder Culture Stakeholder Culture embraces the believes, values and practices that organizations have developed for addressing stakeholder issues and relationships. Agency Corporate egoist Instrumentalist Little concern for stakeholders Moralist Altruist Great concern for stakeholders © 2012 South-Western, a part of Cengage Learning 28 Stakeholder Management Capability Transactional level Process Level Rational Level © 2012 South-Western, a part of Cengage Learning 29 Stakeholder Engagement • An approach by which companies implement the transactional level of strategic management capability. • A ladder of stakeholder engagement which depicts a continuum from low engagement to high engagement. Sustainability is the latest emphasis on engaging stakeholders. © 2012 South-Western, a part of Cengage Learning 30 The Stakeholder Corporation Stakeholder inclusiveness Stakeholder symbiosis © 2012 South-Western, a part of Cengage Learning 31 Principles of Stakeholder Management • Also known as the “Clarkson Principles” Key words Acknowledge Monitor Listen Communicate Adopt Recognize Work Avoid Acknowledge conflicts © 2012 South-Western, a part of Cengage Learning 32 The “Clarkson Principles” of Stakeholder Management © 2012 South-Western, a part of Cengage Learning 33 Strategic Steps Toward Successful Stakeholder Management 1. Governing Philosophy Integrate stakeholder management into the firm’s governing philosophy. 2. Values Statement Create a stakeholder-inclusive “values statement.” 3. Measurement System Implement a stakeholder performance measurement system. © 2012 South-Western, a part of Cengage Learning 34 Implementation Implementation is the key to successful stakeholder management. Survival Avoided costs Continued acceptance and use Expanded recognition and adoption © 2012 South-Western, a part of Cengage Learning 35 Key Terms • Core stakeholders • Environmental stakeholders • Legitimacy • Managerial view of the firm • Power • Primary social Stakeholders • Principles of stakeholder Management • Process level • Production view of the firm • Rational level • Secondary social stakeholders • Stake • Stakeholder • Stakeholder corporation • Stakeholder engagement • Stakeholder inclusiveness • Stakeholder management capability • Stakeholder symbiosis • Stakeholder thinking • Stakeholder view of the firm • Strategic stakeholders • Transactional level • Urgency © 2012 South-Western, a part of Cengage Learning 36
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