McDonald's is one of the largest fast-food restaurant chains in the world, with a presence in over 119

countries. In fact, it is among the top ten most valuable US brands, according to Statista. In the late
1990s, an animal rights activist group called PETA (People for the Ethical Treatment of Animals) claimed
that according to their survey, 700,000 people were dissatisfied with McDonald's practices regarding the
improper treatment of food animals. Peter felt that McDonald's was responsible for cruel practices in its
food animal supply chain, including genetics, unhealthy feed and squalid living in transport conditions,
and slaughter practices. PETA launched its McCruelty campaign after two years of failed negotiations
with McDonald's with slogans like the animals deserve a break today and McDonald's cruelty to go.
PETA's ongoing and escalating pressure tactics and the resulting media coverage forced McDonald's to
address its animal husbandry practices, working with its suppliers to improve the living conditions of
farm animals. So there are key questions from this case. Based on this case study, why was PETA
interested to criticize and change the business practices of McDonald's?

Why did McDonald's choose to change its practices in response to PETA's campaign. As a business entity,
are they forced to do it? And does PETA have any right to force McDonald's to change its business
practices? A simple answer to all these questions is that PETA is a significant stakeholder for McDonald's
and a representative of society's criticism of McDonald's businesses. But what is a stakeholder exactly?
Let's define stake first and then understand what a stakeholder is. What is a stake? A stake is an interest
in or a share in an undertaking. Broadly, the stake can be classified into three segments. A stake can be
an interest if a person or group will be affected by a business decision or practice it has an interest in that
matter. The interest can vary in a broad range of involvement or seriousness. For example, you may be
affected by the harmful environmental practices of a nearby mining company, or you are interested in
the products and offerings of a company because of a new advertisement on your social media feed. A
stake can also be a right. It's the right that can be bucketed into one of two groups. A legal right is a
stake. A person or group has a legal claim to be treated in a certain way or to have a particular right
protected. For example, a listed company on stock exchanges is bound to share its annual business
performance, and any interested individual has a legal claim to demand the report. A Moral Right as a
stake, a person or a group thinks it has a moral or ethical right to be treated in a particular way or to
have a certain right protected. For example, a customer would expect the company to be honest and
transparent in their advertising and marketing and to refrain from wrongdoing against the customer. In
the McDonald's case, PETA represented customers' interests in the humane treatment of the animals
that the company processed into its products for sale. Or a stake as ownership, a person's or a group's
legal entitlement to an asset or property. For example, a shareholder of a company has partial ownership
of that firm and is entitled to benefit from the financial earnings and growth of the firm. If the firm goes
into liquidation, the shareholder has a right to get a share from the diluted assets. Now that we can
understand what a stake is and what a stakeholder has in a business, let's define exactly who a
stakeholder is. A stakeholder is an individual or a group that has one or more of various kinds of stakes in
an organization. A stakeholder may be thought of as any individual or group who can affect or is affected
by the actions, decisions, policies, practices or goals of the organization. An example of business
stakeholders business has many individuals and groups that have a legitimate direct interest or claim in
the operation of the business. Bringing it back to the PETA context. PETA is an animal welfare
organization and they advocate for the rights of animals in the case against McDonald’s. Thus, PETA has
an interest in McDonald's operations.

But why should McDonald's respond to PETA when PETA does not have an ownership of the business
and is not directly aligned with the performance outcomes of McDonald's? To understand this, let us
now understand a brief history of business governance and their changing views of business. In the
1950s and 60s, CEOs are seen as the heads of conglomerates balancing financial bottom lines as well as
numerous other interests. But there were concerns with that model that were first identified by Adam
Smith in the 1700s. He called it the agency problem. Stated as that the managers of other people's
money as agents for that money would not be as careful with it as if it was their own. The outlook had
the following related drawbacks distraction of management, dilution of effort. To the extent that
managers are attending to non financial interests, they are not maximizing the shareholders financial
interests. Secondly, misaligned incentives. The CEOs were compensated as bureaucrats based on factors
unrelated to the shareholders direct financial interests and finally, poor governance. CEO's practices
were not disciplined by the market and gave them broad discretion to pursue pet projects and interests,
some of which would not maximize the corporations or the shareholders well being. In the 1970s and
80s, the Chicago school's shareholder as King approach, espoused by Mr. Friedman, gained broad
traction. McDonald's got listed in 1965 and as a company were focused on making wealth for their
shareholders. The business of business is business, according to this view, The interests of shareholders
should be the primary focus of the company's activities. Accordingly, senior management's
compensation was aligned with shareholders by emphasizing stock options as a major fraction of their
compensation. The social dimensions of business performance suffered and CEOs learned how to game
the incentives system to enrich themselves. Specifically, shareholder myopia led to emphasis on short
term earnings at the expense of long term value. Starting in the 1990s and going through the 2010s,
academics and later asset managers rebelled against the excesses of the shareholder King model. They
wanted to require consideration of broader interests beyond immediate financial performance. In this
new formulation, the stakeholder model emphasizes effective long term corporate management where
the firm must respond to numerous interests, including the current bottom line. The growth of global
reach and scale of business, and the recognition of serious societal problems that could be addressed by
business beyond mere legal compliance. In 2010 to the present, influential trade groups such as the
Business Round Table or the BRT and other asset managers like BlackRock have endorsed the stakeholder
model. It focuses on creating long term value for the company and society. It aligns the interests of the
company with the interests of its stakeholders and societies and therefore keeps the iron law at bay. And
it promotes social responsibility and sustainability in business practices. It improves corporate
governance by encouraging stakeholders consideration in decision making. This stakeholder concept has
become key to understanding business and society relationships for the present and the future. As
always not everyone agrees.

But this model has gained broad acceptance in time of rising complexity and rapid pace of change.
Let's now try to fit the stakeholder model into the McDonald's context and see how they can align their
business with the expected outcomes. Creating Long Term Value. If McDonald's acknowledges the
interests of its workforce, customers and the communities in which it works, it should be able to develop
deeper connections with these people. People who feel good about a company's practices will be more
loyal customers of a stronger brand. Aligning the Interests. If McDonald's aligns with the needs of the
employees they can create a good working conditions and fair compensation which leads to increased
job satisfaction, retention, and productivity. This will also benefit the company by improving its
reputation and attracting top talent to the firm. Promotes social responsibility and sustainability. If
McDonald's considers the needs of the communities in which it operates, they can support local
economic development and reduce environmental impact. This in turn will benefit society by creating
jobs, improving infrastructure, and protecting the environment. While McDonald's can build strong
relationships and a positive reputation which drives customer loyalty and sales improvement. Improves
corporate governance. If McDonald's acts in the interests of its stakeholders and makes transparent,
accountable and fair decisions, it can better anticipate issues, prevent crises, and keep faith with
society's overall expectations the social contract thereby avoiding costs and improving the bottom line.
On top of it, fair and transparent decision making helps the company build trust and credibility in society
value that helps create a more sustainable and successful business. So far, we have seen how the
evolution of demands from the society have encouraged businesses to broaden their focus to the
stakeholder model. This is in response to greater complexity in business relationships and the need for
agility in responding to new challenges. Owners of businesses have seen the business environment
evolve over time. That evolution favors adoption of the stakeholder model as a management approach.
The evolution and progress of the stakeholder concept parallels the growth and complexity of the
business enterprise. Originally, there was a production view. In a simpler time, only the individuals and
groups that supplied resources or bought products or services were perceived as stakeholders. This
evolved into a managerial view of the firm, where business firms began to see their responsibilities
towards successfully managing other major constituent groups such as employees with changing times
and growth. And finally, the stakeholder view of the firm Major internal and external changes in business
and its environment drove managers conceptual shift in how they perceived the firm and its multilateral
relationships with many constituent or stakeholder groups. In the stakeholder view, management must
perceive its stakeholders not only as those groups that management thinks have some stake in the firm,
they should also consider those groups that themselves think or perceive that they have a stake in the
firm. For example, the business may not have considered environmental or employee rights activists or
even animal rights activists like PETA from a managerial point of view, but they must be perceived as
stakeholders from the stakeholder view. The stakeholder view is therefore much more comprehensive as
it takes into account many disparate individuals and groups whose stakes can impact the company. Now,
let's try to broadly map the stakeholders for McDonald's under different views of the firm. If we look at
the production view of the firm, the stakeholders will be the inputs vendors, which are resource
suppliers for the business. For McDonald's they can be the meat and fish suppliers, potato farmers, as
well as dairy suppliers. The output is customers, which are the users of the product or service of the
business. Essentially the people who consume the food supplied by McDonald's. Now, if we change the
view from the production view to the managerial view, we'll also see that the following are stakeholders
of the business the employers, for example, the investors or the sponsors of the business. It includes the
corporation owners, the institutional investors, as well as retail shareholders of the firm. The employees,
the core working force of the business. It includes more than 2 million people who work at McDonald's
franchises worldwide. If we change this to the stakeholder view, the list of stakeholders will also have the
government, which is interested in the jurisdictions applied on the business, as well as the taxes that can
be used to fund public services and programs. The community, as McDonald's actions can have direct
and indirect impacts on the people and environment of that community. Media as they are responsible
for informing the public about the activities and practices of companies. Competitors, as they may have
an interest in ensuring that businesses operate in a fair and competitive manner. In the stakeholder view,
you also have to consider those groups who think of themselves as stakeholders of the business. So you
should also consider groups such as the families of employees, the stockholders and special interest
groups in the community. We should also consider that each stakeholder group can be composed of
multiple subgroups. For example, in this slide we look at the environmental movement, which is not a
monolith, but contains various different interests within it. There are conservationists who want to get
out in nature. There are those who are concerned with the health effects of pollution. There are others
who actually worship the environment as a deity. There are others called true believers who simply want
businesses to do what's right. Even others simply want to throw rocks. They would be known as
anarchists in other contexts and are interested in doing damage to the status quo. There are also
opportunists who want to lead a movement and it's less important exactly what that movement is. So
each stakeholder can be divided into constituent groups and we should not assume that they should all
be related to exactly the same by the business.
With so many stakeholders in consideration, it becomes a critical step to categorize them into buckets to
avoid missing their consideration. Let's consider the categorization with regard to the McDonald's case
previously discussed. Based on the stake and social orientation. Primary stakeholders have a direct stake
in the organization and its success. For example, the shareholders and investors of McDonald's who will
financially benefit from McDonald's performance. The workers of McDonald's and their families who are
responsible for its operations and benefit in bonuses, pay raises and promotions if the business performs
well. The customers of McDonald's who will receive better prices and promotions with the company's
good performance in keeping with their values. Resource suppliers, which will receive bigger orders from
McDonald's if it performs well. There are also secondary social stakeholders. They have a public or
special interest stake in the organization that is more indirect. For example, government and regulators
who will be interested if McDonald's is operating in conformance with the law and are paying their due
taxes. Social pressure groups who want for McDonald's to engage in practices that are aligned to the
goals and values of that group witness PETA. Media and academic commentators are interested as they
report and analyze McDonald's activities and practices which help them inform and educate the public
about the company. Competitors are interested in McDonald's to understand their business outcomes
and strategically tackle the challenges offered by McDonald's, maybe in terms of market share or brand
reputation. Primary non-social stakeholders. These could include the natural environment, nonhuman
species and future generations. Secondary non-social stakeholders. Environmental interest groups or
animal welfare organizations such as PETA. Agle and Wood in 1997 developed a typology of stakeholders
to structure the thought and analysis of the stakeholders' interests. Typology is based on these
attributes. First, legitimacy. This is the perceived validity and appropriateness of a stakeholder's claim to
the stake. For example, the owner's, employees and customers have explicit, formal, financial and direct
relationships with a company and hence they represent a high degree of legitimacy. There's also the
question of power. Power is the ability or capacity to produce an effect. For example, social institutions
like PETA and the media can force a business to change their practices or decisions and hence have
extraordinary power in regard to the business. Urgency, the degree to which the stakeholders claim
demands immediate attention or response. For example, employee strikes or a change in government
business practice policies will demand immediate attention and hence can create urgent situations.
Another attribute not included above is proximity. That's the spatial distance between the organization
and its stakeholders. For tragic example, the physical proximity to an industrial facility like Bhopal
demands special attention from the business
located there. Also, in this digital age, proximity can be a broader concept that can also include Internet
closeness factors. Based on the first three attributes, a typology Venn diagram can be created as the
following. Now applying the stakeholder model to the McDonald's PETA case. We can see that PETA was
a secondary social or non social stakeholder with significant legitimacy among customers. Its power and
urgency were also high as it was threatening the company with a highly visible and potentially
destructive campaign. The considered set of stakeholders for McDonald's grew significantly from its
traditional stakeholders to include powerful special interest groups such as PETA. Also, the PETA
campaign led to the following changes in McDonald's business operations. Through its supply chain and
stakeholders and directly, McDonald's agreed to require positive changes for farm animals, making it an
anti-cruelty milestone in the treatment of food animals, a menu of food animal welfare improvements
that were not mandated by any government. McDonald's announced that its egg suppliers must now
improve the living conditions of their chickens by improving caging, allocating space for each hen, and
banning the forced breeding practices that were currently in effect.

Consistent efforts and pressure against chicken slaughtering practices from PETA also led to McDonald's
agreement to practice less cruel slaughter methods by 2024.

The stakeholder approach faces a dilemma that should the business function as a way to better manage
the shareholders or as a way to treat stakeholders more ethically. For example, should the firm reinvest
their generated profits to generate more wealth for the shareholders? Or should they deploy some
profits in enabling sustainable and environmentally friendly infrastructure? This is addressed by
distinguishing among the strategic approach, the multifiduciary approach and the stakeholder's synthesis
approach. In the strategic approach, it sees stakeholders as instruments that may facilitate or impede the
firm's pursuit of its strategic business objectives. The multifiduciary approach views stakeholders as a
group to which management has a fiduciary responsibility the same as that it has to its shareholders. A
fiduciary is a person or organization with an obligation to uphold good faith and trust for clients or
groups placing their clients interests ahead of their own or the stakeholder synthesis approach. This
considers stakeholders as groups to whom management owes an ethical but not a fiduciary obligation.
Management's basic fiduciary responsibility to shareholders is kept intact, but it is also expected to be
implemented within the context of ethical responsibility to other stakeholders. Let's consider these three
approaches with the example of Shell Plc. It is a mammoth multinational oil and gas company
headquartered in London, England. The primary stakeholders for Shell will be their shareholders and
employees, the customers and the communities in which it operates who do not hold any ownership
interest in the company but are affected by the company's decisions. Strategic Approach for Shell. In this
approach, Shell sees its other stakeholders such as customers or employees, as an instrumental factor or
a means only to maximize the profits for Shell's shareholders. This approach is aligned with the
company's fiduciary responsibility to its shareholders to maximize their profits. Under this approach,
Shell will leverage the information from its other stakeholders, such as customers or communities, and
structure their decision making processes to maximize the wealth of the shareholders. In the
multifudiciary approach, on the other hand, Shell will value the information provided by all stakeholders
with the same importance. This approach is incompatible because fundamentally Shell should have a
stronger fiduciary obligation to the shareholders as compared to its other stakeholders, like customers.
Proceeding with this approach will keep the shareholders unsatisfied, as their welfare is not the primary
concern of the business. Now, the ideal approach that Shell takes is the stakeholder synthesis approach.
In this approach, Shell believes that balancing the needs of stakeholder groups is essential for the
company to exist and grow. Shell optimizes three criteria to make such decisions. First, the economic
impact of the decision should yield profits for the shareholders. The social impact of the decision should
be aligned with the needs of societies in which it operates and the long term impact of decisions should
not harm the environment or the interests of other stakeholders. To measure these impacts, Shell
recognizes five spheres of duty in order to achieve their stakeholder balance shareholders, customers,
employees, suppliers and society. Shareholders shall provide the profits it generates in the year as
dividends to its shareholders. The shareholders also choose the board of Directors to represent them
and provide a direction to the company. Employees shall provide good and safe working conditions and
competitive terms of employment to its staff to keep them safe and motivated. As to customers, Shell
invests heavily in market and product research and development to provide their customers with high
quality products at competitive prices. Shell also understands the needs of a changing environment and
provides cleaner and more efficient biofuels to help its customers use less fossil fuel energy and emit less
CO2. With regard to suppliers, Shell provides stable long-term contracts and commitments to purchase
goods and services, which helps the suppliers to plan and invest in their own futures with constant
income. However, Shell only works with suppliers who can align and demonstrate that Shell's core values
of honesty and integrity and respect to ensure welfare of their shareholders and customers. Society shell
envisions their society stakeholders in two major segments local communities and interest groups. For
local communities, they undertake four initiatives that contribute to their welfare they invest in the
community to set a good example of business practices. They develop facilities such as health and well
being, education for the local community with welfare. They use local contractors and they create jobs
for local people. With regard to interest groups including academics, government, media, non
governmental organizations also known as NGOs, business leaders and the financial community. With
regard to governments, Shell provides

jobs, pays taxes and provides important energy supplies from its operations that help government run
the nation.

The stakeholder approach faces a dilemma that should the business function as a way to better manage
the shareholders or as a way to treat stakeholders more ethically. For example, should the firm reinvest
their generated profits to generate more wealth for the shareholders? Or should they deploy some
profits in enabling sustainable and environmentally friendly infrastructure? This is addressed by
distinguishing among the strategic approach, the multifiduciary approach and the stakeholder's synthesis
approach. In the strategic approach, it sees stakeholders as instruments that may facilitate or impede the
firm's pursuit of its strategic business objectives. The multifiduciary approach views stakeholders as a
group to which management has a fiduciary responsibility the same as that it has to its shareholders. A
fiduciary is a person or organization with an obligation to uphold good faith and trust for clients or
groups placing their clients interests ahead of their own or the stakeholder synthesis approach. This
considers stakeholders as groups to whom management owes an ethical but not a fiduciary obligation.
Management's basic fiduciary responsibility to shareholders is kept intact, but it is also expected to be
implemented within the context of ethical responsibility to other stakeholders. Let's consider these three
approaches with the example of Shell Plc. It is a mammoth multinational oil and gas company
headquartered in London, England. The primary stakeholders for Shell will be their shareholders and
employees, the customers and the communities in which it operates who do not hold any ownership
interest in the company but are affected by the company's decisions. Strategic Approach for Shell. In this
approach, Shell sees its other stakeholders such as customers or employees, as an instrumental factor or
a means only to maximize the profits for Shell's shareholders. This approach is aligned with the
company's fiduciary responsibility to its shareholders to maximize their profits. Under this approach,
Shell will leverage the information from its other stakeholders, such as customers or communities, and
structure their decision making processes to maximize the wealth of the shareholders. In the
multifudiciary approach, on the other hand, Shell will value the information provided by all stakeholders
with the same importance. This approach is incompatible because fundamentally Shell should have a
stronger fiduciary obligation to the shareholders as compared to its other stakeholders, like customers.
Proceeding with this approach will keep the shareholders unsatisfied, as their welfare is not the primary
concern of the business. Now, the ideal approach that Shell takes is the stakeholder synthesis approach.
In this approach, Shell believes that balancing the needs of stakeholder groups is essential for the
company to exist and grow. Shell optimizes three criteria to make such decisions. First, the economic
impact of the decision should yield profits for the shareholders. The social impact of the decision should
be aligned with the needs of societies in which it operates and the long term impact of decisions should
not harm the environment or the interests of other stakeholders. To measure these impacts, Shell
recognizes five spheres of duty in order to achieve their stakeholder balance shareholders, customers,
employees, suppliers and society. Shareholders shall provide the profits it generates in the year as
dividends to its shareholders. The shareholders also choose the board of Directors to represent them
and provide a direction to the company. Employees shall provide good and safe working conditions and
competitive terms of employment to its staff to keep them safe and motivated. As to customers, Shell
invests heavily in market and product research and development to provide their customers with high
quality products at competitive prices. Shell also understands the needs of a changing environment and
provides cleaner and more efficient biofuels to help its customers use less fossil fuel energy and emit less
CO2. With regard to suppliers, Shell provides stable long-term contracts and commitments to purchase
goods and services, which helps the suppliers to plan and invest in their own futures with constant
income. However, Shell only works with suppliers who can align and demonstrate that Shell's core values
of honesty and integrity and respect to ensure welfare of their shareholders and customers. Society shell
envisions their society stakeholders in two major segments local communities and interest groups. For
local communities, they undertake four initiatives that contribute to their welfare they invest in the
community to set a good example of business practices. They develop facilities such as health and well
being, education for the local community with welfare. They use local contractors and they create jobs
for local people. With regard to interest groups including academics, government, media, non
governmental organizations also known as NGOs, business leaders and the financial community. With
regard to governments, Shell provides

jobs, pays taxes and provides important energy supplies from its operations that help government run
the nation.

Stakeholder management has become critical as managers of business organizations have to address the
needs of many groups as well as take actions for the firm to meet their objectives. There are five key
questions that capture the essential information that's needed for stakeholder management. They are:
Who are the organization's stakeholders? What are those stakeholders' stakes? What opportunities,
challenges and threats do our stakeholders present to the firm? What responsibilities, whether
economic, legal, ethical or philanthropic does the firm have towards each stakeholder? What strategies
or actions should the firm take to best address stakeholder challenges and opportunities? To help us
answer these questions, we'll consider these questions from the point of view of Hindustan Unilever
Limited (HUL) HUL is an Indian consumer goods company based in Mumbai, India. It is a subsidiary of
Unilever, a British Dutch multinational corporation. HUL is one of the top corporations in India's FMCG
market, with more than 50 FMCG subbrands under their brand. The company has been operating in the
Indian market for more than 90 years. 2022 revenue is about 9 billion in US dollars. According to their
annual reports, HUL believes that achieving superior performance in sustainable businesses is consistent
purpose that lies at the heart of their strategy. Their vision is to be a leader in sustainable business with
an aim to utilize their purpose-led future-fit business model to drive superior performance, delivering
consistent, competitive, profitable and responsible growth. Core values of HUL are integrity,
responsibility, respect, and pioneering. So who are the organization's stakeholders? We've analyzed and
done the stakeholder identification exercise where we are talking about the stakeholder view of the
business. HUL identifies their primary stakeholders in six groups critical to their future success. Those
groups include consumers, employees and their families, customers, suppliers and business partners, the
planet, society and shareholders. What are our stakeholders' stakes? Identification of the stakes of the
stakeholders can be derived from the typology of stakeholder attributes that we learned earlier. The
legitimacy, power, urgency and proximity of their interests. Consider the following stakeholders of the
firm the owners, its board of directors, institutional shareholders and smallscale retail shareholders.
With regard to nature and legitimacy of a group's stakes, all of these stakeholders have an ownership
claim over the business and hence have legitimacy in their claims. But with regard to power of a group's
stakes, the institutional owners and the board and management have power due to their dual roles in
both ownership and control of the business. The small scale retail shareholders do not have much power
on this scale. With regard to urgency of a group's stakes, the urgency decreases as well over the list of
stakeholders due to the magnitude of their impact on the business' decision making, with small scale
retail shareholders having no particular significant urgency. And finally. proximity. The institutional
shareholders may be geographically dispersed, but their market proximity is very high. They are closely
related to the company. Smaller shareholders may be more centered in HUL's Asia operating theaters,
but with less practical access to decision makers. Opportunities and challenges from stakeholders to the
firm. Opportunities: Stakeholder emphasizes opportunities to the business to build harmonious,
productive working relationships. Opportunities can be utilized by the business to build cooperation and
create value for the business. For example,

business conducts surveys for its customers to gather insights and build upon the feedback to overcome
product expectation gap.

Challenges represent how the business handles and manages their stakeholders in multiple aspects, such
as financial outcomes or brand reputation. Some of the popular challenges faced by big business
organizations are production and counterfeit. Due to HUL's brand recognition and market share, local
manufacturers are tempted to imitate its products, which results in the production of counterfeit goods,
especially in rural markets. This significantly impacts the brand equity of HUL. Geopolitical challenges.
According to HUL's annual report, the company is dealing with more challenging macroeconomic and
geopolitical conditions than it did during the previous fiscal year and the uncertainties lay in inflationary
pressures on the company. The firm's responsibility to its stakeholders. The responsibilities of the firm
are to be considered as the social responsibilities and can be broadly bucketed into four segments which
constitute the stakeholder responsibility matrix. There are economic, legal, ethical and philanthropic
interests of stakeholders with regard to HUL. The firm should map its responsibilities to the identified
stakeholders and base decisions on this stakeholder responsibility matrix. The economic responsibility of
the firm is aligned with its shareholders. The firm itself has an economic stake in the legal and ethical
issues it faces. Strategies and actions for stakeholder management. A business must contemplate
strategies and actions for addressing its stakeholders. The decision choices of management to deal with
the stakeholder issues can be based on, do we deal directly or indirectly with individual 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 just one singular course of action? The development of specific strategies can be based on a
classification of the stakeholder's potential for cooperation and threat. There are four stakeholder types.
The supportive stakeholder. The supportive stakeholder has high potential for cooperation and low for
threat. The strategy to be used is involvement of these stakeholders. For example, a business can involve
its employee stakeholders through participative management to make decisions of business welfare. The
marginal stakeholder has low potential for cooperation or threat. The strategy here is for the
organization to monitor them to avoid later problems, but they are not central to the concerns. The non
supportive stakeholder has high potential for threat and low for cooperation. Recommended strategy
here is to defend against the non supportive stakeholder. For example, the business should defend their
products and services against special interest activist groups by promoting clarifications on the issue that
concerns the stakeholder group in mixed blessing stakeholders, they are high on the potential for threat
or cooperation. Recommended strategy here would be to collaborate to enhance the likelihood that the
stakeholder will be supportive.

For example, a business could involve environmentalists in their sustainable development planning and
prioritization.

A set of principles of stakeholder management, also known as the Clarkson Principles, has been
developed by managers and organizations to provide managers with guiding precepts regarding how
stakeholders should be treated. Principle One of the Clarkson Principles is that managers should
acknowledge and actively monitor the concerns of all legitimate stakeholders and should take their
interests appropriately into account in decision making and operations. For example, a business can
conduct product feedback surveys and customer satisfaction surveys to monitor the concerns of those
stakeholders. For example, in 2010, Domino's Pizza launched a campaign called The Pizza Turnaround, in
which they acknowledged quality and service problems regarding the ingredients and the flavors of their
pizzas, as well as upgrading their technology to respond to new customers' habits online and even Apple
Watch ordering of their pizzas. They also upgraded their delivery system to take account of fossil fuel
consumption. In short, they reinvented their business, and as a result, Domino's reported a jump of
14.3% in same store sales, one of the largest increases ever recorded by a major fast food chain.
Principle two: Managers should listen to and openly communicate with stakeholders about their
respective concerns and contributions and about the risks they assume because of their involvement
with the company. For example, suppliers will be affected by the mix of products that a customer is
intending to resell. By informing in a timely way to the supply chain above you, those suppliers
themselves can expand or contract their associated businesses and thereby promote their own internal
interests and well being. Principle Three: Managers should adopt processes and modes of behavior that
are sensitive to the concerns and capabilities of each constituency of stakeholders. For example,
McDonald's does not sell beef burgers in the Indian market. Instead, to cater to the market needs,
McDonald's has a vegetarian menu in India, and on top of it, they run campaigns to inform consumers
that their vegetarian and non vegetarian meals are prepared in separate kitchens. Principle Four

Managers should recognize the interdependence of efforts and rewards among stakeholders and should
attempt to achieve a fair distribution of the benefits and burdens of corporate activities, among them
taking into account respective risks and vulnerabilities. For example, employees of many companies get
their compensation based on their performance. According to F. W Cooks' 2019 Annual Incentive Plan
Report, 83% of the 250 largest Fortune 500 firms use a formulaic annual incentive plan, or one that
includes predefined, metrics and weightings. Principle Five Managers should work cooperatively with
other entities, both public and private, to ensure that risks and harms arising from corporate activities
are minimized and, where they cannot be avoided, appropriately compensated. Here we can contrast
the Bhopal tragedy and the inadequate compensation that was paid to victims by Union Carbide with a
more recent example where DuPont paid almost $700 million to residents around Parkersburg, West
Virginia, with regard to the health effects of DuPont's PFAS products. In contrast, Union Carbide never
adequately acknowledged its culpability at Bhopal. Indeed, when you read the statements of Union
Carbide and its senior management. There is rationalization and deflection at work there, where they
claim that every tragedy, every crisis is unique and that there were many outside factors that contributed
to their failure that cost so many people their lives. Union Carbide never adequately came to grips with
its primary responsibility for those victims and their injuries, and eventually Union Carbide lost its
corporate existence not unrelated to its inability to properly manage those stakeholder interests. In
principle six, managers should avoid altogether activities that might jeopardize inalienable human rights,
like the right to life, or give rise to risks that, if clearly understood, would be patently unacceptable to
relevant stakeholders. For example, in 2018, more than 20,000 Google employees across the company
staged a walkout in protest of its handling or mishandling of sexual harassment and discrimination
allegations. This is one instance of workers standing up against unethical practices. In principle Seven,
managers should acknowledge the potential conflicts between their own role as corporate stakeholders
and their legal and moral responsibilities to the interests of stakeholders should address those conflicts
through open communication and appropriate reporting incentive systems, and, where necessary, third
party review. For example, in 2008, the United Nations conducted a review on Rio Tinto, which is an
Anglo Australian multinational mining company that was prompted by concerns about the company's
impact on the environment generally and local communities where the company operated. The review
found that Rio Tinto's policies and practices did not adequately address these concerns, and it made
several recommendations for improvement, such as greater transparency and engagement with
stakeholders. A 2019 report on progress was optimistic that progress was in fact being made on these
interests. But in 2020, the company, in expanding a mine, destroyed a sacred aboriginal site in Australia
that had been

inhabited by humans for 45,000 years. Now, Rio Tinto responded by resigning several senior executives,
but frankly, they were well compensated upon their exit. The bad press for Rio Tinto in light of its failures
in this regard continues in the Financial Times and elsewhere that have claimed that Rio Tinto is
consistently deaf when it comes to its social responsibilities

relative to its economic responsibilities. This stuff matters.