The Stakeholder Approach to

Business, Society, and Ethics

Chapter 3
Prepared by Deborah Baker
Texas Christian University

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Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
 Chapter 3 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. Describe the key principles of stakeholder
management.
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 Chapter 3 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
 The Stakeholder Corporation
 Principles of Stakeholder Management
 Strategic Steps Toward
Successful Stakeholder Management
 Summary
 Key Terms
 Discussion Questions 3
 Introduction to Chapter 3

Individuals and groups with a

multitude of interests, expectations,
Stakeholders and demands as to what business
should provide to accommodate
people’s lives and lifestyles

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 Origins of the Stakeholder Concept

An interest or a share in an
Stake undertaking and can be
categorized as:

An Interest A Right Ownership

Legal Right

Moral Right
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 Origins of the Stakeholder Concept

An individual or a group that has

Stakeholder one or more of the various kinds of
stakes in the organization

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 Who Are Business Stakeholders?

Stockholders Employees

Customers Community Competitors

Business Stakeholder Groups

Special-Interest
Suppliers Media
Groups

General
Society
Public
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 DuPont’s Stakeholder Groups

 Shareholders

 Customers

 Employees

 Society

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 Evolution of the Business Enterprise

Production Managerial Stakeholder

View View View

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 Production and Managerial
Views of the Firm

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Figure 3-2
 The Stakeholder View of the Firm

Figure 3-3 11

Primary social stakeholders
 Shareholders and investors
 Employees and managers
 Customers
 Local communities
 Suppliers and other
business partners
Social Stakeholders
Secondary social stakeholders
 Government and regulators
 Civic institutions
 Social pressure groups
 Media and academic
commentators
 Trade bodies
 Competitors
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 Who Are Business Stakeholders?

Primary Have a direct stake in the

Stakeholders organization and its success

Have a public or special

Secondary
interest stake in the
Stakeholders 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

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Figure 3-4
A Typology of Stakeholder Attributes

refers to the perceived validity

Legitimacy or appropriateness of the
stakeholder’s claim to a stake

refers to the ability or capacity

Power of a stakeholder to produce
an effect

refers to the degree to which

Urgency the stakeholder’s claim
demands immediate attention
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 Strategic, Multifiduciary,
and Synthesis Views
views stakeholders primarily as
Strategic
factors managers should manage
Approach
in pursuit of shareholder profits

views stakeholders as a group

Multifiduciary
to which management has a
Approach
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?

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Figure 3-6
 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

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 What Opportunities and Challenges
Do Stakeholders Present?

• Build productive working

relationships with stakeholders
Opportunities
• The potential for cooperation

• Representative of how the firm

handles its stakeholders
Challenges
• The potential for threat

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 Factors Affecting Potential
for Threat & Cooperation

Figure 3-7 24
 Stakeholder/Responsibility Matrix

Stakeholders Economic Legal Ethical Philanthropic

Owners

Customers

Employees

Community

Public at large

Social Activists

Other

Figure 3-8 25
 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  Stakeholder Type 

Mixed Blessing Supportive
High
Strategy: Strategy:
Stakeholder’s
Collaborate
? Involve
Potential for
Cooperation with
Organization Stakeholder Type  Stakeholder Type 
Nonsupportive Marginal
Low

Strategy: Strategy:
Defend Monitor
Figure 3-9 27
 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 Instrumentalist Moralist Altruist

Little concern Great concern

for stakeholders for stakeholders

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Stakeholder Management Capability

Transactional level

Process Level

Rational Level

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 Stakeholder Engagement

An approach by which companies

Stakeholder
implement the transactional level
Engagement 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

 Acknowledge
 Monitor
 Listen
 Communicate
 Adopt
 Recognize
 Work
 Avoid
 Acknowledge conflicts
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 Principles of Stakeholder Management

Figure 3-10 36
 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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 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
Selected Key Terms
 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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