Stakeholder Theory

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Stakeholder Theory

• A very brief overview
• Dr. Randy Richards, Ph.D.
• St. Ambrose University

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Development

• Descriptive
• As a strategy
• As an ethical approach

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Who are the stakeholders?

• Shareholders/owners
• Employees
• Suppliers
• Customers
• Community

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In whose interest should a corporation be
managed?

• Traditional answer
• The stake holder alternative answer
• Who are the stakeholders?
• What are the stakes and expectations of each?

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In whose interestThe Traditional Answer

• The shareholders/owners
• Managers have a fiduciary relationship to the
  owners to look after their interests
• Legal constraints on this duty
• Problems with this understanding of single view
  of responsibility

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A shareholder mission statement

• From Coca-Cola
• We exist to create value for our share owners on
  a long term basis by building a business that
  enhances the Coca-Cola companys trademark. This
  is also our ultimate commitment.
• Discussion

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In whose interest the stake holder alternative

• Stockholders are one group among many.
• Stakeholders are those groups that have a stake
  in or claim on the resources / activities of the
  company.
• Each has a right to be treated as a end itself
  not just means for enrichment of the stockholders.

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A stakeholder mission statement

• Cadbury Schweppes
• Our task is to build upon our tradition of
  quality and value and to provide brands,
  products, financial results and management
  performance that meet the interest of our
  shareholders.
• Discussion

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Resource Base Stakeholders

• Investors
• Employees
• Customers

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Owners / Shareholders

• Their stake
• stocks, bonds, equity, etc.
• Their expectation
• some ROI

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Stakes and expectationsEmployees

• Their stake
• jobs, livelihood, career, human capital
  investments
• Their expectation
• decent wages, security, benefits and meaningful
  work

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Stakes and expectationsCustomers

• Their stake
• need for / purchases of products and services
• Their expectations
• honesty, quality goods, fair pricing

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Stakes and expectationsSuppliers

• Their stake
• income from goods and services
• Their expectation
• fairness, mutual prosperity, honesty

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Stakes and expectationsthe community

• Their stake
• the environment, taxes, payroll, infrastructure
  improvements
• Their expectations
• good citizenship, open partnership

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How to decide in cases of conflicting interests?

• The traditional answer
• simple
• The stakeholder model
• much more difficult

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The web of stakeholder relationships

• Can you serve the long term interests of the
  shareholders without paying attention to the
  others?
• The interconnectedness of wealth creation
• Long term relationships are source of wealth not
  individual transactions
• The key to organizational long term viability is
  manage the entire web of interconnected
  stakeholder relationships for everyones mutual
  benefit as much as possible.

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