Humanities and Social Sciences II

Approaching Conflict Among Stakeholders

Who has more say?
• The Economist (1993: 52): In America, for instance,
shareholders have a comparatively big say in the running of
the enterprises they own; workers . . . have much less
influence.
• In many European countries, shareholders have less say and
workers more . . .
• In Japan . . . managers have been left alone to run their
companies as they see fit-namely for the benefit of employees
and of allied companies, as much as for shareholders.
Responsibility of a Corporation
• What do you think is the responsibility of a corporation?
• Friedman’s approach:
• Stockholder approach: The sole responsibility of a business
corporation is to invest in such areas so as to maximise profit for the
shareholders while conforming to the legal standards and ethical
traditions of a society.
• Freeman’s approach:
• Stakeholder approach: Managers have a duty towards all the
stakeholders (including shareholders), the agents contributing
towards the wealth creating capacity and activities of a company and
thus, are potential beneficiaries and/or risk bearers.
Shareholder V/S Stakeholder
approach

Shareholder Stakeholder
approach approach

Friedman V/S Freeman

Who are the stakeholders
• Carrol (1991): Those groups or persons who have a stake, a
claim, or an interest in the operations and decisions of the
firm
• Sometimes the stake might represent a legal claim, such as that
which might be held by an owner, an employee, or a customer who
has an explicit or implicit contract
• Other times it might be represented by a moral claim, such as when
these groups assert a right to be treated fairly or with due process, or
to have their opinions taken into consideration in an important
business decision
How different an input output model
will look, if we think through Marxist
perspective?
 Three
Models of Management Ethics

Immoral Moral Amoral

 Immoral Management
• Motives are Selfish and that he/she cares only or
principally about her/his own or (at most) his/her
company’s gain
• The decisions and actions are discordant with Ethical
Principles
Strategy:
• His/her strategy is focused on exploiting opportunities
for corporate or personal gain
• AIM FOR: “Can we make money with this action,
decision, or behavior, regardless of what it makes?”
 Amoral Management
 Neither intentional nor unintentional
 Not sensitive to the fact that their decisions may have
deleterious impact on others
Operating Strategy: (may/may not get) oriented not towards ethics and
integrity, but more towards a compliance with existing regulatory
standards, the letter of the law
Ethics is for personal life not for businesses
No awareness of ethical practices nor any deliberation on the
consequences of their actions on stakeholders
• Example
• Police department fixing heights (5’10’’) and weight 180 pounds
 Moral Management
Aspires to succeed being within the confines of ethical percepts –
Fairness, Justice, Respect for Rights, Due Process
Sensitivity to and responsiveness to ethical principles
Would not pursue profits at the expense of Sound Ethical Standards
Operating Strategy: [Integrity Strategy]
Ethical Values shape “Management's search for opportunities,”
“Design of Organizational Systems,” and “Decision-making Process”
WORRY FOR: “Will this action, decision, behaviour, or practice be
fair to all stakeholders involved as well as to the organization?”
Abandoning Skin cream project
Types of management (Moral, Amoral and
Immoral) and orientation towards
stakeholders
Five major stakeholders
• Shareholders/owners
• Employees
• Customers
• Community
• Society
Sources of Conflicts
Shareholders Employees Customers Community

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Kinds of stakeholders
• Key stakeholders
• Direct connection with company
• Significantly interfere with company’s current and expected cash flow
• Ex: most important suppliers, major clients, crucial employees, etc.
• Emerging stakeholders
• Do not have current direct connections to company’s cash flow but can have
in future
• Ex: Suppliers that might gain in future, NGOs dealing with sensitive issues,
Politicians with the power to change the institutional framework, etc.
• Minor stakeholders
• May not have significant impact in medium term
Implications
• Identifying and understanding the role of key stakeholders,
emerging stakeholders and minor stakeholders
• Identifying the clash of interests
• Formulating the integrative approach to moral management of
stakeholders
• Needs understanding of different perspectives to deal with the
conflict
• This course will discuss about Psychological, Sociological and
Legal perspectives to approach conflict among stakeholders
and sustainable wealth creation