Description
This is a presentation describes who is the stakeholder in the business using braod definition and narrow definition.
STAKEHOLDER IDENTIFICATION & SALIENCE
FREEMAN - WHO OR WHAT REALLY COUNTS
WHO/WHAT ARE THE STAKEHOLDERS OF THE FIRM
LEGAL PRINCIPALS
TO WHOM/WHAT DO MANAGERS PAY ATTENTION
THEORY OF Normative theory of STAKEHOLDER stakeholder IDENTIFICATION identification Reliably separate Why consider certain RIGHT HOLDERS Stakeholders from entity classes as NonStakeholders stakeholders
CONTRACTORS OF THEORY Descriptive theory of STAKEHOLDER SALIENCE stakeholder salience
Explain to whom or to MORAL what managers pay Conditions under which CLAIMANTS attention managers consider certain entity classes as stakeholders
AGENDA
Review of stakeholder literature Key Identifiers of Stakeholder Classes
• Power • Legitimacy • Urgency
Managerial Implications of existence & salience of stakeholder classes Theory’s inherent dynamism
STAKEHOLDER – WHO ???
BROAD DEFINITION
Freeman ? Any group or individual who can affect or is affected by the achievement of the organization’s objectives Basis of stake is bi-directional
NARROW DEFINITION
Clarkson ? Voluntary (Bear Risk) & Involuntary (Placed at risk) Stakeholders
• No risk = No Stake
Legitimacy regardless of power/claim/relationship is sufficient for stake Based on practical reality of
• Limited resources • Limited time & attention • Limited patience
Excluded
•No Power •No Claim •No Relationship
Based on empirical reality
•Companies vitally affected/can vitally affect almost anyone
Attempt to define groups who have direct relevance to firm’s economic interests Focus on normative core of legitimacy
• Managers advised to focus on claims of few legitimate stakeholders
Extremely complex for managers to recognize & respond effectively to disparate entity sets
STAKEHOLDER – WHO ??? (Contd.)
PUBLIC AFFAIRS APPROACH
SOCIAL RESPONSIBILITY APPROACH
Managers want to know about all stakeholders for firm centered purposes
• Survival, Social Well Being, Damage Control
Managers want exhaustive list of all stakeholders to balance claims & interests within firm’s social system
Both require broad knowledge of
• Actual/Potential Actors • Claimants
in firm’s environment
STAKEHOLDER – WHO ??? (Contd.)
CLAIMANTS v/s INFLUENCERS
CLAIMANTS ?Groups having legal, moral or presumed claim on firm Claims (Legitimate / Illegitimate) irrespective of Power
ACTUAL v/s POTENTIAL RELATIONSHIP
Account for latent stakeholders
INFLUENCERS ?Groups having ability to influence firm’s
•Behaviour •Direction •Process / Outcomes
Entity can be a stakeholder without being in actual relationship with firm
Potential relationship as relevant as actual
Power irrespective of Claims Power & Legitimacy can exist w/o each other Different & at times overlapping dimensions
SORTING OF RATIONALES FOR STAKEHOLDER IDENTIFICATION
POWER DEPENDENCE – STAKEHOLDER DOMINANT
POWER DEPENDENCE – FIRM DOMINANT
Firm is dependent on the stakeholder
• Without whose support organization will cease to exist • On which org. is dependent for survival
Stakeholder is dependent on firm
• Firm significantly responsible for their well-being • Hold moral/legal claim on firm
Stakeholder has power over the firm
• Can affect achievement of org. objectives • Ability to influence / impact the firm/organization
Firm has power over stakeholder
• Who is affected by achievement of organization’s objectives • Influenced by / Impacted by the firm/organization
MUTUAL POWER DEPENDENCE Firm and stakeholder are mutually dependent
BASIS FOR LEGITIMACY OF RELATIONSHIP
Firm & Stakeholder in contractual relationship
• Claimants who have contracts • Constituents who have a legitimate claim on the firm
Stakeholder has claim on firm
• To whom the corporation is responsible • Have a stake in or claim on the firm
Stakeholder has something at risk
• Bear some form of risk • Placed at risk
Stakeholder has moral claim on firm
• Benefit from or harmed by corporate actions • Asserts to have one or more kind of states (Interest to right / Ownership)
STAKEHOLDER INTERESTS – LEGITIMACY NOT IMPLIED
Stakeholder has interest in firm
•Have interest in actions of organization •Asserts to have one or more kinds of stakes in business
INFERENCES FROM SORTING
Broad View sorting – Overwhelming
Narrowing range of stakeholders requires sorting criteria that are
• Acceptable • Justifiable
POWER & LEGITIMACY ? Core attributes for comprehensive stakeholder identification Need to be evaluated in light of compelling demands of URGENCY
WHAT ADDED VALUE DOES THEORY OF STAKEHOLDER IDENTIFICATION OFFER?
Stakeholder power and legitimacy are considered as competing explanations of stakeholder status These two combined with urgency create different types of stakeholders with different behavioral patterns
Major theories of the firm
• • • • • • Agency theory Behavioral Institutional Population Resource dependence Transaction cost
POWER
”A relationship among social actors in which one social actor A, can get another social actor B, to do something that B would not otherwise have done” Different types of power
• Coercive-force/threat • Utilitarian-material/incentives • Normative-symbolic influences
Agency theory
• How principal can control the behavior of their agent to achieve their ,rather than the agents interest. • Agents power can be restricted with the use of monitoring or incentives
Resource dependence theory
• Power accrues to those who control resources needed by the organization
Transaction cost theory
• Stakeholders outside the firm boundary who participate in small competitive set can increase transaction costs.
LEGITIMACY
A generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values and beliefs Legitimate stakeholders are necessarily powerful is a wrong assumption or vice versa
Bases
• Individual • Organizational • Societal
Institutional theory
• Illegitimacy results in isomorphic pressures on organizations that operate outside the accepted norms
Population ecology theory
• Lack of legitimacy results in organizational mortality
URGENCY
The degree to which stakeholder claims call for immediate attention Bases
• Time sensitivity-the degree to which managerial delay in attending of the claim or relationship is unacceptable to the stakeholder • Criticality-the importance of the claim or relationship to the stakeholder
Behavioral theory
• Consequence of unmet aspirations
Institutional theory
• Outside pressures on the firm
ADDITIONAL FEATURES OF STAKEHOLDER ATTRIBUTES
Stakeholder attributes are variable, not steady state Stakeholder attributes are socially constructed, not objective, reality. Consciousness and willful exercise may or may not be present
Power gains authority through legitimacy and it gains exercise through urgency
Legitimacy gains rights through power and voice through urgency
MANAGER’S ROLE IN THEORY
Managers are unique in their respect because of their position at centre of the nexus Managers are the only group of stakeholders who enter into contractual relationship with all other stakeholders Mangers are also the only group of stakeholders with direct control over the decision making apparatus of the firm
Although groups can be identified reliably as stakeholders based on the variables it is the firm’s managers who determine which ones are salient.
PROPOSITIONS
1a
• Stakeholder salience will be low where only one of the stakeholder attributes is perceived by managers to be present
1b
1c
• Stakeholder salience will be moderate where two of the stakeholder attributes are perceived by managers to be present
• Stakeholder salience will be high where all three of the stakeholder attributes are perceived by managers to be present
1a
Latent Stakeholders
Dormant (Power)
Discretionary (Legitimacy)
Demanding (Urgency)
Little or no interaction with the firm Ex. Multiple shooting at postal facilities by ex-US mail employees
Likely recipients of discretionary CSR Ex. NGO who receive donations
Irksome but not dangerous
1b
Expectant Stakeholders
Dominant
Dependent
Dangerous
Power
Legitimacy
Legitimacy
Urgency
Urgency
Power
1c Definitive Stakeholders
Have all the three attributes
High Salience
Any Expectant Stakeholder can become a definitive stakeholder by acquiring the missing attribute
Stakeholder Typology: One Two or Three Attributes Present
Implications
Adds the vital dimensions of urgency and legitimacy Assist managers in dealing with multiple stakeholders’ interests
Raises consciousness about ‘Who or What Really Counts’
Stakeholders change in salience requiring different degrees and type of attention
Thanks
doc_277086976.pptx
This is a presentation describes who is the stakeholder in the business using braod definition and narrow definition.
STAKEHOLDER IDENTIFICATION & SALIENCE
FREEMAN - WHO OR WHAT REALLY COUNTS
WHO/WHAT ARE THE STAKEHOLDERS OF THE FIRM
LEGAL PRINCIPALS
TO WHOM/WHAT DO MANAGERS PAY ATTENTION
THEORY OF Normative theory of STAKEHOLDER stakeholder IDENTIFICATION identification Reliably separate Why consider certain RIGHT HOLDERS Stakeholders from entity classes as NonStakeholders stakeholders
CONTRACTORS OF THEORY Descriptive theory of STAKEHOLDER SALIENCE stakeholder salience
Explain to whom or to MORAL what managers pay Conditions under which CLAIMANTS attention managers consider certain entity classes as stakeholders
AGENDA
Review of stakeholder literature Key Identifiers of Stakeholder Classes
• Power • Legitimacy • Urgency
Managerial Implications of existence & salience of stakeholder classes Theory’s inherent dynamism
STAKEHOLDER – WHO ???
BROAD DEFINITION
Freeman ? Any group or individual who can affect or is affected by the achievement of the organization’s objectives Basis of stake is bi-directional
NARROW DEFINITION
Clarkson ? Voluntary (Bear Risk) & Involuntary (Placed at risk) Stakeholders
• No risk = No Stake
Legitimacy regardless of power/claim/relationship is sufficient for stake Based on practical reality of
• Limited resources • Limited time & attention • Limited patience
Excluded
•No Power •No Claim •No Relationship
Based on empirical reality
•Companies vitally affected/can vitally affect almost anyone
Attempt to define groups who have direct relevance to firm’s economic interests Focus on normative core of legitimacy
• Managers advised to focus on claims of few legitimate stakeholders
Extremely complex for managers to recognize & respond effectively to disparate entity sets
STAKEHOLDER – WHO ??? (Contd.)
PUBLIC AFFAIRS APPROACH
SOCIAL RESPONSIBILITY APPROACH
Managers want to know about all stakeholders for firm centered purposes
• Survival, Social Well Being, Damage Control
Managers want exhaustive list of all stakeholders to balance claims & interests within firm’s social system
Both require broad knowledge of
• Actual/Potential Actors • Claimants
in firm’s environment
STAKEHOLDER – WHO ??? (Contd.)
CLAIMANTS v/s INFLUENCERS
CLAIMANTS ?Groups having legal, moral or presumed claim on firm Claims (Legitimate / Illegitimate) irrespective of Power
ACTUAL v/s POTENTIAL RELATIONSHIP
Account for latent stakeholders
INFLUENCERS ?Groups having ability to influence firm’s
•Behaviour •Direction •Process / Outcomes
Entity can be a stakeholder without being in actual relationship with firm
Potential relationship as relevant as actual
Power irrespective of Claims Power & Legitimacy can exist w/o each other Different & at times overlapping dimensions
SORTING OF RATIONALES FOR STAKEHOLDER IDENTIFICATION
POWER DEPENDENCE – STAKEHOLDER DOMINANT
POWER DEPENDENCE – FIRM DOMINANT
Firm is dependent on the stakeholder
• Without whose support organization will cease to exist • On which org. is dependent for survival
Stakeholder is dependent on firm
• Firm significantly responsible for their well-being • Hold moral/legal claim on firm
Stakeholder has power over the firm
• Can affect achievement of org. objectives • Ability to influence / impact the firm/organization
Firm has power over stakeholder
• Who is affected by achievement of organization’s objectives • Influenced by / Impacted by the firm/organization
MUTUAL POWER DEPENDENCE Firm and stakeholder are mutually dependent
BASIS FOR LEGITIMACY OF RELATIONSHIP
Firm & Stakeholder in contractual relationship
• Claimants who have contracts • Constituents who have a legitimate claim on the firm
Stakeholder has claim on firm
• To whom the corporation is responsible • Have a stake in or claim on the firm
Stakeholder has something at risk
• Bear some form of risk • Placed at risk
Stakeholder has moral claim on firm
• Benefit from or harmed by corporate actions • Asserts to have one or more kind of states (Interest to right / Ownership)
STAKEHOLDER INTERESTS – LEGITIMACY NOT IMPLIED
Stakeholder has interest in firm
•Have interest in actions of organization •Asserts to have one or more kinds of stakes in business
INFERENCES FROM SORTING
Broad View sorting – Overwhelming
Narrowing range of stakeholders requires sorting criteria that are
• Acceptable • Justifiable
POWER & LEGITIMACY ? Core attributes for comprehensive stakeholder identification Need to be evaluated in light of compelling demands of URGENCY
WHAT ADDED VALUE DOES THEORY OF STAKEHOLDER IDENTIFICATION OFFER?
Stakeholder power and legitimacy are considered as competing explanations of stakeholder status These two combined with urgency create different types of stakeholders with different behavioral patterns
Major theories of the firm
• • • • • • Agency theory Behavioral Institutional Population Resource dependence Transaction cost
POWER
”A relationship among social actors in which one social actor A, can get another social actor B, to do something that B would not otherwise have done” Different types of power
• Coercive-force/threat • Utilitarian-material/incentives • Normative-symbolic influences
Agency theory
• How principal can control the behavior of their agent to achieve their ,rather than the agents interest. • Agents power can be restricted with the use of monitoring or incentives
Resource dependence theory
• Power accrues to those who control resources needed by the organization
Transaction cost theory
• Stakeholders outside the firm boundary who participate in small competitive set can increase transaction costs.
LEGITIMACY
A generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values and beliefs Legitimate stakeholders are necessarily powerful is a wrong assumption or vice versa
Bases
• Individual • Organizational • Societal
Institutional theory
• Illegitimacy results in isomorphic pressures on organizations that operate outside the accepted norms
Population ecology theory
• Lack of legitimacy results in organizational mortality
URGENCY
The degree to which stakeholder claims call for immediate attention Bases
• Time sensitivity-the degree to which managerial delay in attending of the claim or relationship is unacceptable to the stakeholder • Criticality-the importance of the claim or relationship to the stakeholder
Behavioral theory
• Consequence of unmet aspirations
Institutional theory
• Outside pressures on the firm
ADDITIONAL FEATURES OF STAKEHOLDER ATTRIBUTES
Stakeholder attributes are variable, not steady state Stakeholder attributes are socially constructed, not objective, reality. Consciousness and willful exercise may or may not be present
Power gains authority through legitimacy and it gains exercise through urgency
Legitimacy gains rights through power and voice through urgency
MANAGER’S ROLE IN THEORY
Managers are unique in their respect because of their position at centre of the nexus Managers are the only group of stakeholders who enter into contractual relationship with all other stakeholders Mangers are also the only group of stakeholders with direct control over the decision making apparatus of the firm
Although groups can be identified reliably as stakeholders based on the variables it is the firm’s managers who determine which ones are salient.
PROPOSITIONS
1a
• Stakeholder salience will be low where only one of the stakeholder attributes is perceived by managers to be present
1b
1c
• Stakeholder salience will be moderate where two of the stakeholder attributes are perceived by managers to be present
• Stakeholder salience will be high where all three of the stakeholder attributes are perceived by managers to be present
1a
Latent Stakeholders
Dormant (Power)
Discretionary (Legitimacy)
Demanding (Urgency)
Little or no interaction with the firm Ex. Multiple shooting at postal facilities by ex-US mail employees
Likely recipients of discretionary CSR Ex. NGO who receive donations
Irksome but not dangerous
1b
Expectant Stakeholders
Dominant
Dependent
Dangerous
Power
Legitimacy
Legitimacy
Urgency
Urgency
Power
1c Definitive Stakeholders
Have all the three attributes
High Salience
Any Expectant Stakeholder can become a definitive stakeholder by acquiring the missing attribute
Stakeholder Typology: One Two or Three Attributes Present
Implications
Adds the vital dimensions of urgency and legitimacy Assist managers in dealing with multiple stakeholders’ interests
Raises consciousness about ‘Who or What Really Counts’
Stakeholders change in salience requiring different degrees and type of attention
Thanks
doc_277086976.pptx