Download Chapter 3

The Stakeholder Approach to
Business, Society, and Ethics
Chapter
3
Prepared by Deborah Baker
Texas Christian University
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
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Chapter 3 Learning Outcomes
1. Define stake and stakeholder and describe the
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origins of these concepts.
Differentiate among production, managerial, and
stakeholder views of the firm.
Differentiate among the three values of the
stakeholder model.
Explain the concept of stakeholder management.
Identify and discuss the five major questions that
capture the essence of stakeholder management.
Identify the three levels of stakeholder management
capability (SMC).
Describe the key principles of stakeholder
management.
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Chapter 3 Outline
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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
The Stakeholder Corporation
Principles of Stakeholder Management
Strategic Steps Toward
Successful Stakeholder Management
 Summary
 Key Terms
 Discussion Questions
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Introduction to Chapter 3
Stakeholders
Individuals and groups with a
multitude of interests, expectations,
and demands as to what business
should provide to accommodate
people’s lives and lifestyles
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Origins of the Stakeholder Concept
Stake
An Interest
An interest or a share in an
undertaking and can be
categorized as:
A Right
Ownership
Legal Right
Moral Right
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Origins of the Stakeholder Concept
Stakeholder
An individual or a group that has
one or more of the various kinds of
stakes in the organization
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Who Are Business Stakeholders?
Stockholders
Customers
Employees
Community
Competitors
Business Stakeholder Groups
Suppliers
Special-Interest
Groups
Society
General
Public
Media
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DuPont’s Stakeholder Groups
 Shareholders
 Customers
 Employees
 Society
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Evolution of the Business Enterprise
Production
View
Managerial
View
Stakeholder
View
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Production and Managerial
Views of the Firm
Figure 3-2
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The Stakeholder View of the Firm
Figure 3-3
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Social Stakeholders
Primary social stakeholders
Secondary social stakeholders
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Shareholders and investors
Employees and managers
Customers
Local communities
Suppliers and other
business partners
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Government and regulators
Civic institutions
Social pressure groups
Media and academic
commentators
Trade bodies
Competitors
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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
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Nonsocial Stakeholders
Primary nonsocial stakeholders
Secondary nonsocial stakeholders
 Natural environment
 Environmental interest groups
 Future generations
 Animal welfare organizations
 Nonhuman species
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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
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Stakeholder Typology
Figure 3-4
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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
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Strategic, Multifiduciary,
and Synthesis Views
Strategic
Approach
Multifiduciary
Approach
views stakeholders primarily as
factors managers should manage
in pursuit of shareholder profits
views stakeholders as a group
to which management has a
fiduciary responsibility
considers stakeholders as a group
Stakeholder Synthesis to whom management owes an
Approach
ethical, but not a fiduciary
obligation
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Three Values of the Stakeholder Model
Descriptive Value
Instrumental Value
Normative Value
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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?
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Who Are Our Stakeholders?
Figure 3-6
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What Are Our Stakeholders’ Stakes?
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Identify the nature/legitimacy of a group’s stakes
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Identify the power of a group’s stakes
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Identify specific groups within a generic group
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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
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Factors Affecting Potential
for Threat & Cooperation
Figure 3-7
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Stakeholder/Responsibility Matrix
Stakeholders
Economic
Legal
Ethical
Philanthropic
Owners
Customers
Employees
Community
Public at large
Social Activists
Other
Figure 3-8
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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?
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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
Figure 3-9
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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.
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Levels of Stakeholder Commitment
1. Basic Value Proposition
2. Sustained Stakeholder Cooperation
3. Understanding Broader Societal Issues
4. Ethical Leadership
@
http://www.corporate-ethics.org/
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Effective Stakeholder Management
Stakeholder culture
Stakeholder management capability
Stakeholder corporation model
Principles of stakeholder management
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Developing a Stakeholder Culture
Agency
Corporate egoist
Little concern
for stakeholders
Instrumentalist
Moralist
Altruist
Great concern
for stakeholders
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Stakeholder Management Capability
Transactional level
Process Level
Rational Level
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Stakeholder Engagement
Stakeholder
Engagement
An approach by which companies
implement the transactional level
of strategic management capability
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The Stakeholder Corporation
Stakeholder inclusiveness
Stakeholder symbiosis
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Principles of Stakeholder Management
Key Words
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Acknowledge
Monitor
Listen
Communicate
Adopt
Recognize
Work
Avoid
Acknowledge conflicts
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Principles of Stakeholder Management
Figure 3-10
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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.
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Key Indicators of
Successful Stakeholder Management
Survival
Avoided costs
Continued acceptance and use
Expanded recognition and adoption
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Selected Key Terms
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Stake
Stakeholder
Production view of the firm
Managerial view of the firm
Stakeholder view of the firm
Primary social stakeholders
Secondary social
stakeholders
Core stakeholders
Strategic stakeholders
Environmental stakeholders
Legitimacy
Power
Urgency
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Proximity
Stakeholder thinking
Stakeholder culture
Stakeholder management
capability
Rational level
Process level
Transactional level
Stakeholder engagement
Stakeholder corporation
Stakeholder inclusiveness
Stakeholder symbiosis
Principles of stakeholder
management
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