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Lesson 11

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43 views17 pages

Lesson 11

Uploaded by

Maricel Eran
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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STAKEHOLDER THEORY:

A COMPREHENSIVE APPROACH TO
CORPORATE SOCIAL
RESPONSIBILITY
Definition of stakeholder
• It should be clear by now that companies have
obligation toward society, people,and the system in
general, both inside and outside the organization. Thus,
company managers should exert effort in incorporating
social and environmental preoccupation into the
management of the firm.
• The stakeholder concept originated from the word stake( interest). It stems
from a deliberate will to indicate that other parties have an interest in the
enterprise. The development of the term stakeholder began in the 1960s with
the research carried out by Ansoff (1968), who considered that an enterprise
is obliged to adjust its objectives to balance out the satisfaction of
stakeholders.
• In 1963, the Stanford Research Institute introduced the original definition of
stakeholders by designating the groups that are indispensable to the
organization's survival. In this same train of thought, Rhenman and Stymne
(1965) insist on the variable of " dependence" for survival by qualifying
stakeholders as :
• (1) the groups that depend on the company to achieve their own goals; and
• (2) the company depends on its groups to guarantee its own existence.
• The stakeholder concept really gained a foothold in
management literature with the publication of freeman's
work Strategic Management: Stakeholder Approach in
1984, which marked the first stage in conceptual
construction by being anchored strategically in the
management of stakeholders.
• Following the transformation of the institutional environment and
the conditions for doing business, Freeman thought it is important
to modify the theory of enterprise. " In the same way as the
separating out of the jobs of owners/ managers/ employees
required a rethink of the concepts of control and private
ownership, as analyzed by Berle and Means (1932), the
emergence of numerous stakeholder groups and new strategic
issues creates a need to rethink our representation of the
company." By saying so, Freeman defined stakeholders as " any
group or individual who can influence or be affected by the
organization as it achieves its goals."
company stakeholder
• People engaged in value creation and trade are responsible precisely to
"those groups and individuals who can effect or be affected by their actions;"
that is, the Stakeholders . Literature on stakeholders usually distinguishes
between important and unimportant stakeholders.

• Sometimes, this ranking is refined further by distinguishing

• Primary stakeholders ( whose participation is required for the company's


survival )

• And Secondary stakeholders ( whose relationship is not considered as vital


for the company).
• Secondary stakeholders may have potential influence ( in the
event of boycotts for example)
• and may emerge rapidly as players capable of influencing the
company's performance. Other works also make a distinction
between Voluntary and involuntary stakeholders, which is based
primarily on the notion of risk.
• Voluntary stakeholders are taking a risk by investing a form of Capital in
the business and thereby contributing to the creation of value.

• Unlike Involuntary stakeholders, they expose themselves to the


consequences of the company's activities in seeking to reduce the negative
impact that its action may have on its well- being.

• Later in 1997, Carroll and Nasi put forward a classification that opposed
Internal stakeholder ( owners, directors, employees)
• external stakeholder ( competitors, consumers, government, pressure
groups, Media, and the natural environment) ( El Abboubi and Cornet, 2012).
challenges in CSR
• CSR is of pressing importance as it significantly influences the
sort of lives we will lead in the future. Furthermore, the distinctive
nature of entrepreneurial action leads to a distinctive set of ethical
challenges and ethical obligations.

It is widely accepted today that true sustainability includes valuing


ecosystem health, human needs, economic development, and
social justice. Ethics of care and concern for specific aspects of
the common good seem crucial in both large and small tp medium-
sized firms, as do personal values, character, and leadership of
the manager of the firm.
• Especially in the global market place, human rights have come to
be a crucial issues in the business.
In addition, business contributes to the common good in different
ways, such as creating wealth, providing goods and services in an
efficient and fair way, at the same time respecting the dignity and
the inalienable and foundamental rights of the individual.
Futhermore, it can contribute to social well-being and a harmonic
way of living together in just, peaceful, and friendly conditions both
in the present and in the future.
• A concrete example of disrespect of for the dignity and
rights of person is when an entrepreneur- while having a
magical way of building something out of nothing- engages
in behaviors that negatively impact business, not to
mention the people behind it: partners, employees, and
customers.
what is stakeholder Theory?
• Stakeholder theory is the foundamentally about how business
works at its best and how it could work. It is descriptive,
prescriptive, and instrumental at the same time, and as
Donaldson and Preston (1995) have argued, it is manageral.
Stakeholder theory is about value creation, trade, and
managing a business effectively. Effective can be seen as “
create as much value as possible. If stakeholder theory is to
solve the problem of value creation and trade, it must show how
business can in fact be described through stakeholder
relationships.
• Stakeholder theory does not mean that representatives of these groups
must sit on governing boards of the firms, nor does it mean that shareholders
( we prefer “financiers” as a more inclusive term) have no right.

It does imply that the interests of these group are joint and that to create value,
one must focus on how value gets created for each and every stakeholder.
How value gets created for stakeholders is just how each is affected by the
actions of the others as well as managers. For the most part, writers on
stakeholder theory have taken an approach that looks at reasonably large
existing businesses. They have tried to use the idea to address issues such as
“corporate social responsibility, “corporate legitimacy,” “theory of the
firm,” and even macro- societal issues such as “ building the good
society”.
Stakeholder Approach to Corporate Social
Responsibility (CSR)
• Following the stakeholder theory, a socially responsible firm requires
simultaneous attention to the legitimate interests of all appropriate
stakeholders and has to balance such a multiplicity of interests.

Supporters of normative stakeholder theory have attempted to justify it


through arguments taken from Kantian capitalism, moderm theories of
property and distributive justice and also Libertarian theories with its
notions of freedom, rights, and consist. A generic formulation of
stakeholder theory is not sufficient.
• There is the theories of justice expounded by John Rawl, for whom it is
necessary that each citizen be assured of an equal claim to a fully adequate
scheme of equal basic rights and liberties.

Freeman (1994) proposed the doctrine of fair contracts and phillips( 1997,
2003) suggested introducing the fairness principle based on six of Rawls’
characteristics of the principles of fair play: mutual benefit, justice,
coorperation, sacrifice, free- rider possibility, and voluntery acceptance of the
benefits of cooperative schemes.

Freeman explained that the idea behind the stakeholder theory is that an
organization’s success is dependent on how well it manages the relationship
with the key groups such as customers, employees, suppliers, communities,
financiers, and others that can affect the realization of its purpose.
• In order to make stakeholder theory more aligned with the ideas of justice,
fairness, and human freedom, Freeman and Phillips (2002) proposed Principle
of Stakeholder Responsibility, which states that parties to an agreement
must accept responsibility for the consequences of their action.

When third parties are harmed, they must be compensated, or a new


agreement must be negotiated with all of those parties who are affected.

Argandona (1998) suggested the common good notion which takes into
consideration the common good of society and therefore can be defined as the
“sum total of social conditions which allow people, either as groups or as
individuals, to reach their fulfilment more fully and more easily,’’ Overall, when a
company considers all stakeholder’s interests, it realizes more its social
responsibilities toward them, and is more likely to undertake CSR initiatives.

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