Chapter Two: Management of

Stakeholders
 Definition of Stakeholders

• In a business context, stakeholders are

individuals, groups, or entities that have a
vested interest in or are affected by an
organization's operations, decisions, and
performance.
• Freeman (1984), a pioneer in stakeholder
theory, defines stakeholders as "any group or
individual who can affect or is affected by
the achievement of the organization’s
objectives."
 Definition of Stakeholders.....
• A stakeholder can be both internal and external
parties, such as customers, employees, business
partners, team members, sponsors, investors,
suppliers, and even the government.
• Stakeholders are important because they can have a
positive or negative influence on the project with
their decisions.
• There are also critical or key stakeholders, whose
support is needed for the project to exist.
Who Are Business’s Stakeholders?

• In today’s competitive, global business

environment, there are many individuals and groups
who are business’s stakeholders.
• From the business point of view, there are certain
individuals and groups that have legitimacy in the
eyes of management.
• That is, they have a legitimate, direct interest in, or
claim on, the operations of the firm. The most
obvious of these groups are stockholders,
employees, and customers.
 Stakeholder vs. Shareholder
• Stakeholders are not the same thing as shareholders.
• A stakeholder can be a wide variety of people impacted or
invested in the project.
– For example, a stakeholder can be the owner or even the
shareholder. But stakeholders can also be employees,
bondholders, customers, suppliers and vendors (seller).
• A shareholder can be a stakeholder.
• A shareholder, though, is someone who has invested in a
corporation.
 Stakeholder vs. Shareholder....
• That corporation might initiate projects in that the
shareholder is also a stakeholder.
• Put simply, shareholders are also stakeholders,
but stakeholders are not always shareholders.
• That’s because a shareholder owns part of a public
company through the purchase of stocks.
• A stakeholder has an interest in the corporation’s
overall performance, not stock performance.
 Types of Stakeholders
• All stakeholders can be broken into two
groups: internal stakeholders and external
stakeholders.
 1. Internal Stakeholders
• Internal stakeholders are within the organization.
• The project directly impacts them as they serve
and are employed by the organization managing it.
• Internal stakeholders can include employees,
owners, the board of directors, project managers,
investors and more.
 External Stakeholders
• External stakeholders are outside of the
organization and are indirectly impacted by the
project.
• They’re influenced by the organization’s work
but are not employees of the organization.
• These people can be suppliers, customers,
creditors, clients, intermediaries, competitors,
society, government and more.
 Stakeholder Examples
• Investors: These are stakeholders looking for a financial
return and can be shareholders and debt holders. They
have invested capital in the business and want a return on
that investment.
• Employees: These stakeholders rely on their employment
and job security. They have a direct stake in the
organization as it supports them and provides them with
benefits.
• Customers: These stakeholders want the product or
service that the project delivers and they expect it to be of
quality and contain value.
 Stakeholder Examples........
• Suppliers and Vendors: These stakeholders have their
revenue tied up with the project as they sell goods and
services to the business managing the project. Project
success means more business for them.
• Communities: These stakeholders don’t want the project to
negatively impact their health, safety or economic
development. The organizations that are housed in their
communities or working on projects in their communities
can impact job creation, spending and more.
• Government: These stakeholders get taxes and gross
domestic product from a project. They are major
stakeholders as they collect taxes from both the company on
a corporate level and individually from those it employs.
PRIMARY AND SECONDARY STAKEHOLDERS

• A useful way to categorize stakeholders is to think

of them as primary and secondary and social and
nonsocial; thus, stakeholders may be thought of as
follows:
PRIMARY AND SECONDARY STAKEHOLDERS

• Primary social stakeholders have a direct stake in

the organization and its success and, therefore, are
most influential.
• Secondary social stakeholders may be extremely
influential as well, especially in affecting reputation
and public standing, but their stake in the
organization is more indirect.
• Therefore, management’s level of accountability to a
secondary stakeholder may be lower, but these groups
may wield significant power and quite often represent
legitimate public concerns, so they cannot be ignored.
 Stakeholder Management
• Stakeholder management refers to the process of
identifying stakeholders, analyzing their needs and
expectations, and planning and implementing tasks
to engage with them throughout the product
development process.
• Basically, it is all about monitoring, managing, and
improving your relationships with your stakeholders,
as they play a significant role in your product’s life.
• A good stakeholder management process is a way for
you to coordinate your interactions and evaluate the
status and quality of your relationship with different
stakeholders.
Benefits of Effective Stakeholder Management:

• Enhanced trust and cooperation among

stakeholders.
• Improved organizational reputation and credibility.
• Increased employee and customer satisfaction.
• Mitigation of risks and conflicts.
• Strengthened competitive advantage through
collaboration.
 Implications for CSR
• Stakeholder management has profound implications for
Corporate Social Responsibility (CSR), as the interests of
stakeholders often guide an organization’s CSR agenda.
• By addressing stakeholder concerns, businesses can design
and implement CSR initiatives that create shared value for
both the organization and society.
 Implications for CSR……
1. Aligning CSR with Stakeholder Expectations:
 Organizations must align their CSR activities with the priorities of their
stakeholders. For example, communities may demand environmental
sustainability, while employees may seek fair wages and professional
development.
 Engaging stakeholders during the planning phase of CSR initiatives ensures
their relevance and effectiveness.
2. Enhancing Stakeholder Participation in CSR:
 Active stakeholder involvement in CSR initiatives fosters collaboration and
shared ownership. For instance, partnerships with NGOs can enhance the
reach and impact of community development projects.
 Employee volunteer programs and customer-driven campaigns are examples
of participatory CSR efforts.
Implications for CSR……
3. Managing Stakeholder Conflicts:

 CSR efforts may lead to conflicting stakeholder interests. For example, an initiative to
reduce carbon emissions might increase operational costs, affecting shareholder profits.

 Transparent communication and stakeholder dialogue are essential to balance

competing demands and ensure equitable outcomes.

4. Measuring and Reporting CSR Performance:

 Stakeholders increasingly demand transparency in CSR efforts. Organizations must

provide accurate and timely reports on their social and environmental performance.

 Global frameworks like the Global Reporting Initiative (GRI) and the UN’s Sustainable
Development Goals (SDGs) offer benchmarks for evaluating CSR activities.
Implications for CSR……
5. Building Long-term Value:
 CSR driven by stakeholder interests helps organizations
build long-term value.
 For example, environmentally conscious initiatives attract
customers who prioritize sustainability, while ethical labor
practices enhance employee retention.
 Proactively addressing stakeholder concerns reduces the
risk of reputational damage and enhances brand loyalty.
 Challenges in Integrating Stakeholder Management and CSR

 Complexity of Stakeholder Interests: Balancing diverse and often

conflicting interests requires significant effort and negotiation.

 Resource Constraints: Implementing stakeholder-driven CSR

initiatives can be resource-intensive, particularly for small and
medium-sized enterprises (SMEs).

 Evolving Expectations: Stakeholder expectations are dynamic,

requiring organizations to adapt their CSR strategies continually.
Chapter Three: Theory of Ethics
 Introduction to Ethics
• Ethics, derived from the Greek word “ethos”
meaning character, is the branch of philosophy
concerned with moral principles that govern
human behavior.
• It provides a framework for distinguishing between
right and wrong, guiding individuals and
organizations in decision-making processes.
• Ethics is essential for encouragement trust,
promoting fairness, and ensuring accountability
in both personal and professional contexts.
 Introduction to Ethics
• In place of systematically examined ethical
frameworks, most people instead carry around a
useful set of day-to-day ‘rules of thumb’ that
influence and govern their behaviour; commonly,
these include rules such as ‘it is wrong to steal’, ‘it
is right to help people in need’, and so on.
 Significance of Ethics:
• Personal Level: Ethics shapes an individual’s
character and moral values, influencing their
actions and choices.
• Organizational Level: Ethical principles guide
business practices, ensuring transparency,
integrity, and social responsibility.
• Societal Level: Ethics promotes justice and
equality, contributing to the well-being of society
as a whole.
Ethics can be broadly categorized into Four areas:

1.Normative Ethics: Focuses on establishing moral standards

and principles to determine what individuals ought to do.
2.Meta-Ethics: Explores the nature, scope, and meaning of
moral judgments and ethical terms.
3.Applied Ethics: Examines specific controversial issues,
such as environmental ethics, bioethics, and business ethics.
4.Descriptive Ethics- the study of peoples beliefs about
morality.
• Understanding ethical theories is crucial for addressing
moral dilemmas and fostering ethical decision-making.
Fundamental ethics theories, are explored in the following
sections.
 Ethical Egoism and Subjectivism
• Ethical egoism is a normative ethical theory that
asserts individuals should act in their self-interest.
• According to this view, actions are morally right if
they promote one’s own well-being and happiness.
• Unlike selfishness, which disregards the welfare of
others, ethical egoism does not necessarily oppose
the consideration of others’ interests; rather, it
prioritizes the individual’s self-interest above all
else.
 Ethical egoism......
Key Features of Ethical Egoism:
• Self-Interest as a Moral Guideline: Ethical
egoism holds that individuals have a moral
obligation to pursue their own interests.
• Compatibility with Altruism: While self-interest
is central, ethical egoism does not prevent acts of
altruism if they ultimately benefit the individual.
• Rational Basis for Decisions: Advocates argue
that rational self-interest leads to the best
outcomes for individuals and, indirectly, society.
 Types of Ethical Egoism:

1. Personal Ethical Egoism: Individuals act in their

self-interest without advocating that others do the
same.
2. Individual Ethical Egoism: Individuals believe
others should act in ways that benefit them
personally.
3. Universal Ethical Egoism: The principle that
everyone should act in their self-interest.
 Criticism of Ethical Egoism:

• It may lead to conflicts when individuals’

interests clash.
• Critics argue it undermines cooperation and
communal values.
• Ethical egoism is often viewed as inconsistent
with the principle of impartiality.
 Subjectivism
• Subjectivism is an ethical theory that emphasizes
individual perspectives and personal feelings as
the basis for moral judgments.
• It posits that moral truths are not objective or
universal but are determined by individual beliefs,
emotions, or attitudes.
 Subjectivism
• Therefore, ethics becomes less a matter of what is
objectively true and more a matter of individual
perception.
• If Person A believes it is morally right to keep
$10,000 instead of donating it to charity then for
Person A that is the ethical thing to do.
• However, if Person B believes donating the money
to others would be ethically correct then for Person
B that is the correct ethical decision.
 Key Features of Subjectivism:
• Relativity of Morality: According to subjectivism,
moral statements reflect personal opinions rather
than objective facts.
• Freedom of Judgment: Individuals are free to
determine what they consider morally right or
wrong.
• Emphasis on Emotions: Subjectivism often
associates moral judgments with emotional
responses, such as approval or disapproval.
 Types of Subjectivism:

1. Simple Subjectivism: Moral statements express the

speaker’s personal beliefs (e.g., "Lying is wrong"
means "I disapprove of lying").
2. Emotivism: Moral statements are expressions of
emotions or attitudes rather than factual (honest)
claims (e.g., "Lying is wrong" expresses disapproval
of lying but does not state a fact).
 Criticism of Subjectivism:
• It leads to moral relativism, where no action can be
universally deemed right or wrong.
• Subjectivism makes resolving moral disputes
challenging, as individuals’ views may differ
significantly.
• Critics argue that it undermines the concept of
moral progress by denying objective moral
standards.
Comparison of Ethical Egoism and Subjectivism:

• While ethical egoism focuses on actions that serve

self-interest, subjectivism emphasizes individual
perspectives and emotions as the basis for
morality.
• Both theories reject the notion of universal moral
principles but differ in their approaches to ethical
decision-making.
 Types of Moral Theories
• Have you ever wondered how humans
determine right from wrong?
• The question of how best to lead a moral life,
and how the word "morality" can be best
defined, is one of the foundational questions of
philosophy.
• Moral philosophy (or ethics) has, over the
years, dictated numerous theories designed to
help people make the best moral decisions.
Utilitarianism: A Theory of Consequences

• Utilitarianism, first popularized by British

philosophers Jeremy Bentham and John Stuart
Mill in the 19th century, is a theory that holds that
the best way to make a moral decision is to look at
the potential consequences of each available choice;
then, one should pick the option that either does the
most to increase happiness or does the least to
increase suffering.
 Utilitarianism: A Theory of
Consequences
• Utilitarianism, also known as
consequentialism, is often summed up as a
philosophy of "The greatest good for the
greatest number.“
• How it works
1. Identify the consequences
2. Determine the value
3. Choose the best action
Deontology: A Duty-Based Moral Philosophy

• Deontology is a duty-based moral theory.

• Deontology states that society needs rules in
order to function and a person can only be
called moral to the extent that he accepts by
those rules.
• The most famous and powerful advocate of
deontology is generally agreed to be Immanuel
Kant.
 Deontology: A Duty-Based Moral Philosophy

• Kant coined the following maxim, known as the

Categorical Imperative, to help people decide which
actions should be governed by rules: "Act only
according to that maxim by which you can also will
that it would become a universal law."
• In other words, people should only do things that
they would be happy to see everyone do.
• For example, people shouldn't lie because if
everyone lied all the time then society would
collapse.
Relativism: A Theory Based on Experiences

• Moral relativism is a theory which states that no one

person's morals are better or worse than any other.
• Relativists argue that a person's moral code is
shaped by the society in which he is raised as well
as their culture, and it states that no society is
inherently better or worse than any other.
• Relativism is a moral philosophy that could,
therefore, be different depending on where you
grow up, and what may be right in your society,
could be very wrong in another person's society.
Divine Command Theory: A Higher Power
• Divine command theory states that God is the ultimate
arbiter of what constitutes morality, and that without God
we have no clear way of telling right from wrong.
• Divine command theorists, therefore, believe that the best
way to live a moral life is to act in accordance with
Scripture.
• It does not matter what's considered good or bad, but simply
what God commands.
• Those who believe in this theory generally look to the
Bible, a religious leader or someone they have considered to
be a prophet in order to make their judgments.
• This is one of the most controversial moral theories.
Virtue Ethics: Always Improve Yourself

• Virtue ethics states that only good people can make good
moral decisions. Therefore, the best way to be moral is to
constantly seek to improve oneself.
• Virtue ethicists list a number of qualities that they believe
are universal, and that all cultures appreciate.
• They include wisdom, carefulness, loyalty, honesty,
temperance, heroism, high-mindedness, and justice.
• Virtue ethicists argue that if a person tries his best to
embody these traits, then by definition he will always be in
a good position to make moral judgments.
 Egoism: A Theory Based on Self-Interest

• Egoism is a moral philosophy that holds that the best way

for one to be morally good is to act in accordance with one's
self-interest.
• Egoists hold that we are only really qualified to consider our
own well-being, and that attempts to "Be one's brother's
keeper" are doomed to fail because we can never really
know what our peers actually want.
• Egoists also believe that if everyone acts in their own self-
interest, then society is more likely to solve moral
dilemmas to the satisfaction of all parties, thereby
maximizing overall happiness
Natural Rights Theory: Human Rights

• Natural rights theorists, or human rights

theorists, believe that every person is gifted
with certain unchallengeable rights, such as
the right to life, the right to own property, and
the right to liberty.
• Natural rights theorists argue that these rights
are self-evident, and would exist even if
nobody believed in them.
 Natural Rights Theory: Human Rights

• The reason that natural rights theorists hold these

rights as self-evident is that they are essential to the
flourishing of human happiness and the foundation
of civil society.
• For example, they argue that without the right to
own property, there is no incentive to create
property and therefore society cannot advance.
• Based on this theory, human rights are vital to the
future of society.
 Chapter Four:
Ethics of Business: Management and Leadership
Statement of value