The Stakeholder Management and Materiality Analysis

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 Origins of the Stakeholder Concept
• Stake -
• An interest or a share in an undertaking.

• Can be categorized as:

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 Stakeholders
Stakeholder -
• Any individual or group who can affect or
is affected by the actions, decisions,
policies, practices, or goals of the
organization.
• Stakeholder is a variant of the concept of
stockholder—an investor/owner of
businesses.

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Who are Business’s Stakeholders?

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Three Views of the Firm

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Production and Managerial Views
of the Firm

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Stakeholder View of the Firm

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 Primary & Secondary 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 that is more
indirect.

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 Social Stakeholders
Primary social Secondary social
stakeholders stakeholders
Shareholders and investors Government regulators
Employees and managers Civic institutions
Customers Social pressure groups
Local communities Media and academic
commentators
Suppliers and other Trade bodies
business partners
Competitors

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 Nonsocial Stakeholders
Primary nonsocial Secondary nonsocial
stakeholders stakeholders
Natural environment Environmental interest
groups
Future generations Animal welfare
organizations
Nonhuman species

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 Important Stakeholder Attributes:
Legitimacy, Power, Urgency
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 or response.
Proximity -
• The spatial distance between the organization and
its stakeholders.
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Stakeholder Typology

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 Stakeholder Approaches
Strategic approach -
• Views stakeholders primarily as factors
managers should manage in pursuit of
shareholder profits.
Multifiduciary approach -
• Views stakeholders as a group to which
management has a fiduciary responsibility.
Stakeholder synthesis approach -
• Considers stakeholders as a group to whom
management owes an ethical, but not a
fiduciary, obligation.
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 Three Values
of the Stakeholder Model

Descriptive Value

Instrumental Value

Normative Value

© 2018 Cengage 15
Stakeholder Management: Five
Key Questions
1. Who are our organization’s stakeholders?
2. What are our stakeholders’ stakes?
3. What opportunities and challenges do our
stakeholders present to the firm?
4. What responsibilities (economic, legal,
ethical, and philanthropic) 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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Figure 3-5

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Who Are Our Stakeholders?

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 What Are
Our Stakeholders’ Stakes?
To identify them, consider -
• the nature and legitimacy of a group’s
stakes.
• the power of a group’s stakes.
• subgroups 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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 What Responsibilities Does a
Firm Have to its Stakeholders?
Apply Corporate Social Responsibility -
• Responsibilities are
• Economic
• Legal
• Ethical
• Philanthropic

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The Stakeholder Responsibility Matrix
Stakeholders Economic Legal Ethical Philanthropic

Owners

Customers

Employees

Community

Public at large

Social Activists

Other

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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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 Four Stakeholder Types -

1. The Supportive Stakeholder

• High potential for cooperation, low for threat
2. The Marginal Stakeholder
• Low potential for cooperation and threat
3. The Nonsupportive Stakeholder
• High potential for threat, low for cooperation
4. The Mixed-Blessing Stakeholder
• High on potential for threat & cooperation

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 Effective
Stakeholder Management
Stakeholder thinking -
• The process of always reasoning in
stakeholder terms throughout the
management process.
• Increases the complexity of decision-making,
but most consistent with today’s business
environment.
• Is facilitated by
• Stakeholder culture
• Stakeholder management capability
• Stakeholder corporation model
• Principles of stakeholder management
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 Developing a Stakeholder Culture
Stakeholder Culture embraces the beliefs, values, and
practices that organizations have developed for
addressing stakeholder issues and relationships.

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Stakeholder Management Capability

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 Stakeholder Engagement -
• An approach by which companies successfully
implement the transactional level of strategic
management capability.
• Interaction with stakeholders must be
integrated into every level of decision-making in
the organization.
• A ladder of stakeholder engagement depicts a
continuum from low engagement to high
engagement.
• Transparency means working toward the open
corporation.
• Sustainability is the latest emphasis on engaging
stakeholders.
• Dialogue is primarily focused on exchanging
communications with stakeholder groups.
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The Stakeholder Corporation

The central element: Stakeholder

inclusiveness

In the future, development of loyal

relationships with customers, employees,
shareholders, and other stakeholders will
become one of the most important
determinants of success.

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The “Clarkson Principles” of
Stakeholder Management

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 Strategic Steps Toward Global
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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 Implementation
Indicators of successful stakeholder management
include:

Survival

Avoided costs

Continued acceptance and use

Expanded recognition and adoption

© 2018 Cengage 34