The corporation and its stakeholders

1
The corporation and its stakeholders

• Clarkson (1995) argues that no business can
  survive in the long run unless it is creating
  wealth for stockholders, employees, and
  consumers. (As an example of what not to do in
  this regard, see the financial sector.)
  Similarly, Leana and Rousseau (2000) argue that
  relations with internal and external stakeholders
  create relational wealth.

2
Business, government, and society

• Business (any organization that makes a product
  or a service for a profit, and the institution of
  business) and society (human beings and the
  social structures that they create) together form
  an interactive social system. Businesses are
  embedded in a larger social system that
  influences them and that they in turn influence.

3
The stakeholder concept (1)

• Stakeholders (persons and groups who can affect
  or are affected by the organizations activities)
  can be differentiated in terms of
• market versus nonmarket stakeholders,
• various relationship attributes (power,
  legitimacy, and urgency Mitchell, Agle, and
  Wood, 1997),
• sources of power (voting, economic, or
  political), and
• the nature of their claims (what they want).

4
The stakeholder concept (2)

• The issue of who stakeholders are and what
  ethical difference the stakeholder designation
  makes is a matter of some debate. For example,
  are terrorists stakeholders? What about trees?
• There is also a vast difference between the
  ownership theory of the firm and the stakeholder
  theory of the firm, especially in terms of advice
  to managers.

5
The stakeholder concept (3)

• Stakeholder analysis asks four questions
• Who are the relevant stakeholders?
• What are the interests of each stakeholder?
• What is the power of each stakeholder?
• What coalitions are likely to form?

6
Stakeholder coalitions in action (1)

• Stakeholder coalitions try to bring together
  within a network various stakeholder groups to
  identify and solve a common problem, and in so
  doing gain more influence than acting alone.
• The environmental justice movement, for
  example, has brought together government bodies
  (like the EPA), local community groups,
  environmental activists, and churches to try to
  influence corporate behaviorcreating a
  stakeholder coalition.

7
Stakeholder coalitions in action (2)

• The environmental justice stakeholder coalition
  has sought to increase expectations of companies
  (for example, to consult with local communities
  regarding plant siting decisions) and to press
  the coalitions claims accordingly. We will do
  much more with stakeholder dialogue and
  engagement later in the semester.

8
The dynamic social context facing business (1)

• The interrelationships among business
  government, and societyalong with increasing
  expectations of individual businesses and the
  institution of businesscreate a dynamic social
  context. When businesses operate in more than
  one country, managing social issues becomes even
  more complex.

9
The dynamic social context facing business (2)

• In short, what was acceptable behavior in the
  past by corporations and their managers may not
  be now (like with regard to the environment), and
  what is acceptable now may not be in the future
  (for example, technology).
• Organizations are increasingly having to engage
  in stakeholder dialogue and engagement if they
  want to be successful (interactive rather than
  reactive).

10
And finally. . .

• If there is anything that we have learned in the
  last few years by watching various business
  scandals, it is that seeking short-term financial
  gain for its own sake is not likely to be a
  successful long-term strategy.