Identifying Stakeholders and Issues

Chapter 3: Identifying Stakeholders and Issues

The Stakeholder Concept and Business

• Definition: A stakeholder is any individual or group that is affected by or affects an organization’s operations.
• Expectations: Stakeholders have varying expectations that need to be addressed to some extent by the organization.
• Relationship Dynamics: The connection between stakeholders and businesses is multifaceted and evolves constantly.
• Pluralistic Society: In such societies, influence is shared across multiple institutions rather than being centralized.
  • Complete autonomy is rare; some decision-making occurs independently.

Identifying Stakeholders

Owners and Directors

• Owners: Individuals or groups who invest in the organization via equity or shares.
• Directors: Elected representatives of shareholders.
  • Typical board size is 10-20 members; they meet regularly to discuss corporate matters.
  • Responsibilities include setting strategic direction, performance monitoring, and executive hiring/firing.

Employees and Customers

• Employees: Individuals working within the corporation, with various levels of management.
  • Workforce Types:
  • White-collar workers: Office employees.
  • Blue-collar workers: Those involved in production or service tasks.
• Customers: These include consumers and other corporations, as well as governmental entities.

Lenders/Creditors, Suppliers, Service Professionals

• Lenders/Creditors: Entities providing capital, either on a long-term basis (bonds/debentures) or short-term (trade credit).
  • Their influence on the organization is significant.
• Suppliers: Other corporations that provide necessary materials or finished goods, influencing operations variably.
• Service Professionals: External advisors who offer services in exchange for fees, impacting decisions through their expert advice.

Dealers/Distributors and Franchisees, Business Organizations, Competitors, Joint Venture Participants

• Dealers/Distributors/Franchisees: Act as middlemen in the product supply chain; their influence is complex and can be reciprocal.
• Business Organizations: Corporations can band together for collective representation. They can be self-regulating entities as well.
• Competitors: Firms offering similar products may influence market dynamics and strategies.
• Joint Venture Participants: Partners collaborating on specific enterprises or projects, sharing influence and outcomes.

NGO’s, Society, Educational Institutions, Religious Groups, Charities

• NGOs: Groups with shared values addressing societal issues, operating outside of public and private sectors.
• Society: General public opinions shape business practices, often ambiguous and difficult to gauge.
• Educational Institutions: Schools and universities influence workforce preparation and public policy.
• Religious Groups: Act as influential lobbyists and can shape individual business practices through their beliefs.
• Charities: Companies may provide funding, leading to influence in organizational practices; some charities run commercial operations.

Media and Government

• Media: Coverage of corporate events can drive public perception, thereby influencing a company’s profit and strategies.
• Government: Comprised of local, provincial, and federal tiers, impacting businesses through laws and regulations.

Dynamics of Stakeholder Influence

• Categorization of Stakeholders:
  • Primary vs. Secondary: Essential versus peripheral stakeholders.
  • External vs. Internal: Those outside the organization versus those within.
  • Normative vs. Derivative: Stakeholders with direct interests versus entities influenced by others' actions.
• Varying Goals: Different groups have distinct objectives and levels of influence, requiring managers to identify key stakeholders strategically.

The Manager as a Special Stakeholder

• Dual Role: Managers may also hold shares, balancing stakeholder demands.
• Identifying Influence: It's crucial for managers to analyze stakeholder impacts and devise appropriate strategies.
• Compensation Impact: Executive pay can influence shareholder satisfaction and employee morale.

Arguing the Stakeholder Concept

• Support for the Shareholder Concept: Highlights profitability and the importance of shareholder responsiveness.
• Critiques:
  • Difficulty in categorizing stakeholders.
  • Challenges in meeting diverse expectations.
  • Risk of diluting focus for top management entities.
  • Issues around shared governance practicality.

Ethics, Responsibility, and Sustainability

• Expectation Gap: Disparities between stakeholder expectations and business reality.
• Issue Management: A systematic approach to address potential problems proactively to sustain competitive advantage and operational continuity.

Issue Life Cycles

• Stages:
  • Awareness: Poorly defined debate terms; issues evolve from conflicting interests.
  • Matters of Conflict: Stakeholder input can redefine issues; value-laden terms complicate resolution.
  • Time Concepts: Evolution through increasing prominence to eventual decline.

Crisis Management

• Types of Crises: Can include industrial accidents, product recalls, technology failures, and more.
• Phases of Crisis:
  • Prodromal: Warning signs appear.
  • Acute: Crisis impact is felt, leading to damage.
  • Chronic: Ongoing issues arise during resolution efforts.
  • Resolution: Recovery from the crisis takes place.

Considerations

• Satisfaction of Stakeholders: Challenges in meeting diverse expectations.
• Levels of Influence: Understanding varying stakeholder power.
• Environmental and Ethical Factors: Questions about the role of ecology and animal welfare in stakeholder discussions.