Business Ethics Copyright2018 Taylor Francis Group, an informa business Chapter 4 Stakeholders Preview Business Ethics Insight Read Preview Business Ethics Insight Describe briefly the BP oil spill in the Gulf of Mexico Which groups were
Preview Business Ethics Insight Read Preview Business Ethics Insight
Describe briefly the BP oil spill in the Gulf of Mexico
Which groups were affected by the oil spill?
Which groups were most affected?
What lessons does the oil spill provide regarding who is affected by a company’s actions?<br>
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What Are Stakeholders? Stakeholder: any group or individual that “can affect or is affected by the achievement of an organization’s objectives”
Exhibit 4.1 Typical Stakeholders and Their Needs<br>
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Exhibit 4.1 (cont.) Typical Stakeholders and Their Needs<br>
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Stakeholder Categorization and Attributes Primary stakeholders: typically directly linked to a company’s survival and are either impacted or impact companies directly
E.g., customers, suppliers, employees, and shareholders
Secondary stakeholders: tend to be less directly linked to the company’s survival
E.g., media, trade associations, and special-interest groups
Which stakeholder group do you believe is most important? Why?<br>
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Exhibit 4.2 Primary and Secondary Stakeholders<br>
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Shareholder Attributes: Power, Legitimacy, and Urgency Stakeholder power: refers to the ability of a stakeholder to exert pressures to force a company to make changes to accommodate such pressures
Coercive power: involves the use of force, violence or other restraint to force a company to accommodate or respond to their needs
E.g., militant groups in the Niger Delta to force oil companies to stop their abusive practices<br>
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Forms of Stakeholder Power Utilitarian power: refers to the use of financial or other monetary means to force a company to accommodate a particular stakeholder need
Government lawsuit against tobacco companies
Normative power: refers to the use of symbolic and other resources to force a company to accommodate stakeholder needs
Use of the Internet to launch campaigns against companies<br>
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Shareholder Attributes: Power, Legitimacy, and Urgency Legitimacy: a company behaves legitimately if it conducts itself in such a way that is consistent with widely held values and beliefs
When a company behaves legitimately, it is more likely to be supported by society<br>
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Shareholder Attributes: Power, Legitimacy, and Urgency Urgency: refers to the degree to which a company needs to respond to stakeholder demands
The more urgent the needs, the more quickly a company needs to respond<br>
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Discussion Questions Read Strategic Ethics Insight on Uber
Which group is most affected by Uber?
What forms of stakeholder attributes do they possess?
Power?
Legitimacy?
Urgency?<br>
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Stakeholder Management Stakeholder management: refers to the deliberate and purposeful process a company has devised to work with its stakeholders
There are five steps of the stakeholder management process<br>
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Steps of the Stakeholder Management Process Step 1: Stakeholder Identification
Step 2: Stakeholder Prioritization
Step 3: Stakeholder Visualization/Mapping
Step 4: Stakeholder Engagement
Step 5: Stakeholder Monitoring<br>
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Step 1: Stakeholder Identification Stakeholder identification: where the main focus is to properly identify stakeholders
Primary vs. secondary classification may not always work
Need to carefully identify stakeholders<br>
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Exhibit 4.5 Stakeholder Categorization for Construction Industry<br>
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Step 2: Stakeholder Prioritization Salience: provides information on the degree to which managers need to give priority to competing stakeholder demands and claims.
The more salient a stakeholder is, the more likely the stakeholder has potential to affect the company and the more priority the stakeholder needs
How can you determine salience?
Look at attributes and combination of attributes discussed earlier<br>
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Exhibit 4.7 Combination of Attributes<br>
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Stakeholder Attributes Latent stakeholders: those that possess only one of the three attributes and thus represent low salience
Dormant stakeholders: those that possess power but have no legitimate claims or urgency
Discretionary stakeholders: those that have legitimacy but no power or urgency
Demanding stakeholders: have urgency but do not have power or legitimacy<br>
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Stakeholder Management Expectant stakeholders: those that possess two of the attributes
Such stakeholders are considered to have moderate salience
Dominant stakeholders: represents stakeholders that are both powerful and legitimate
Dependent stakeholders: those stakeholders that have urgency and legitimacy
Dangerous stakeholders: have power and urgency but no legitimacy<br>
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Stakeholder Management Definitive stakeholders: have power, urgency, and are legitimate
Most salient for any company<br>
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Step 3: Stakeholder Visualization and Mapping To determine the extent of claims, rights, and expectations stakeholders have and the appropriate response to these needs
Company can use a variety of techniques
Can combine power and urgency
Can construct ethical responsibility matrix<br>
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Step 4: Stakeholder Engagement Refers to the deliberate attempt of a company to actively seek its stakeholders’ inputs to better deal with their needs and also improve their operations
Involves actively engaging with shareholders
Need to tailor system to develop dialogue and ongoing communication with stakeholders
Stakeholder engagement brings many advantages<br>
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Exhibit 4.9 Stakeholder Management Advantages<br>
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Step 5: Stakeholder Monitoring Company is interested in finding out how stakeholders are responding to stakeholder management issues and if further actions are necessary
Need to hold regular meetings with affected stakeholders
Focus is on whether needs are being satisfied
Need for corrective action<br>
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Conclusion Stakeholders are key entities that can impact or be impacted by a company
Ethical companies are the ones that can appropriately manage their stakeholders
Strong need to follow the appropriate stakeholder management practices<br>
