From an analysis of the role of companies in multi-stakeholder networks and a critical review of stakeholder theory, it is argued that companies practise two different types of stakeholder management: they focus on their organization’s welfare (organization- focussed stakeholder management) or on an issue that affects their relationship with other societal groups and organizations (issue-focussed stakeholder management). These two approaches supplement each other. It is demonstrated that issue-focussed stakeholder management dominates in multi-stakeholder networks, because it enables corporations to address complex (...) problems and challenges in cooperation with stakeholders. Since deliberation is the key to issue-focussed stakeholder management, it helps to cope with numerous and at times contradictory stakeholder demands and enhances the legitimacy of corporate activities. (shrink)

While stakeholder theory has traditionally considered organization’s interactions with stakeholders in terms of independent, dyadic relationships, recent scholarship has pointed to the fact that organizations exist within a complex network of intertwining relationships [e.g., Rowley, T. J.: 1997, The Academy of Management Review 22(4), 887–910]. However, further theoretical and empirical development of the interactions between stakeholders has been lacking. In this paper, we develop a framework for understanding and measuring the effects upon the organization of competing, complementary and cooperative stakeholder (...) interactions, which we refer to as stakeholder multiplicity. We draw upon three forms of fit (i.e. fit as matching, fit as moderation, and fit as gestalts; Venkatraman, N.: 1989) to develop a framework for understanding stakeholder multiplicity based upon the direction, strength, and synergies of the interacting claims. Additionally, we draw upon the theory of stakeholder identification and salience of Mitchell et al. (1997), which we argue provides a more relevant and significantly more illustrative explanation of the nature and effects of stakeholder interactions upon the organization than the network approach of Rowley (1997). Furthermore, we ground our framework through reference to three stakeholder groups (i.e. governments, customers, and employees) and the stakeholder issue of concern for the natural environment. We propose a hierarchy of the multiplicity strength of influence of these three stakeholder groups. Potential measurement and implications are discussed. (shrink)

Combining principles of individual rational choice with a sociological conception of collective action, James Coleman recasts social theory in a bold new way. The result is a landmark in sociological theory, capable of describing both stability and change in social systems. This book provides for the first time a sound theoretical foundation for linking the behavior of individuals to organizational behavior and then to society as a whole. The power of the theory is especially apparent when Coleman analyzes corporate actors, (...) such as large corporations and trade unions. He examines the creation of these institutions, collective decision making, and the processes through which authority is revoked in revolts and revolutions. Coleman discusses the problems of holding institutions responsible for their actions as well as their incompatibility with the family. He also provides a simple mathematical analysis corresponding to and carrying further the verbal formulations of the theory. Finally, he generates research techniques that will permit quantitative testing of the theory. From a simple, unified conceptual structure Coleman derives, through elegant chains of reasoning, an encompassing theory of society. It promises to be the most important contribution to social theory since the publication of Talcott Parsons' Structure of Social Action in 1936. (shrink)

Using Frooman’s typology of stakeholder influence strategies, this research examines the strategies that stakeholders select to exert influence on a firm. Using an experimental approach, the responses of actual environmental leaders to a series of hypothetical vignettes were examined. The results of the experiment suggest how both structural and demographic variables can act as determinants of strategy choice along with how these two types of variables may both complement and inhibit one another. Specifically, the results suggest that repertoires of strategies (...) play a critical role in stakeholder behavior. Demographic variables appear to define the repertoires of strategies the stakeholder will typically choose among, whereas structural variables further refine choice from within that repertoire. (shrink)

Stakeholder theory has become a central issue in the literature on business ethics / business and society. There are, however, a number of problems with stakeholder theory as currently understood. Among these are: 1) the lack of a coherent justificatory framework, 2) the problem of adjudicating between stakeholders, and 3) the problem of stakeholder identification. In this essay, I propose that a possible source of obligations to stakeholders is the principle of fairness (or fair play) as discussed in the political (...) philosophic literature of Rawls, Simmons, and Cullity among others. The principle of fairness states that, “Whenever persons or groups of persons voluntarily accept the benefits of a mutually beneficial scheme of co-operation requiring sacrifice or contribution on the parts of the participants and there exists the possibility of free-riding, there exist obligations of fairness on the part of these persons or groups to co-operate in proportion to the benefits accepted.” In this essay I discuss the gaps in the current stakeholder literature, elucidate and defend a principle of fairness that fills the gap, compare the fairness model to other similar models of business ethics, and draw some conclusions for the future of stakeholder theory. (shrink)

Abstract:This paper is a preliminary attempt to better understand the concept of legitimacy in stakeholder theory. The normative component of stakeholder theory plays a central role in the concept of legitimacy. Though the elaboration of legitimacy contained herein applies generally to all “normative cores” this paper relies on Phillips’s principle of stakeholder fairness and therefore begins with a brief description of this work. This is followed by a discussion of the importance of legitimacy to stakeholder theory as well as the (...) general ambiguity of the term. A distinction is then drawn between normative and derivative legitimacy. Reference to this distinction helps distinguish between a relationship with the organization based on direct moral obligation and one based on the power to help or harm the organization. It is concluded that stakeholders who retain the ability to affect the organization arelegitimate(derivatively), but that this legitimacy is derived from the moral obligation owed other (normative) stakeholders and that the two sorts of legitimacy are importantly different from one another. An example of the normative/derivative distinction at work in managerial decision making is elaborated upon and managerial and research implications are then suggested. (shrink)

Abstract:This article elaborates a normative Stakeholder Management Theory (SHMT) from a critical theory perspective. The paper argues that the normative theory elaborated by critical theorists such as Habermas exhibits important advantages over its rivals and that these advantages provide the basis for a theoretically more adequate version of SHMT. In the first section of the paper an account is given of normative theory from a critical theory perspective and its advantages over rival traditions. A key characteristic of the critical theory (...) approach is expressed as a distinction between three different normative realms, viz., legitimacy, morality, and ethics. In the second section, the outlines of a theory of stakeholder management are provided. First, three basic tasks of a theoretically adequate treatment of the normative analysis of stakeholder management are identified. This is followed by a discussion of how a critical theory approach to SHMT is able to fulfill these three tasks. (shrink)

"Social capital" can be considered to be the product of co-operationbetween various institutions, networks and business partners. It haspotential as a useful tool for business ethics. In this article weidentify categories pertinent to the measurement of social capital insmall and medium sized enterprises (SMEs). By drawing on three differentsectors, one business-to-business service, one business-to-customerservice, and one manufacturing, we have enabled the consideration ofsectoral differences. We find sector to play an important part inrelation to business practices and social capital. Our inclusion (...) of SMEsfrom Germany and the United Kingdom has called attention to cultural,institutional and economic aspects of two regions of Europe and how theycan influence SME social capital. Social capital is found to beinfluenced by context and, in particular, institutional arrangements. Inanalysing the data we note particular areas of interest from the pointof view of SMEs and social capital as being: formal engagement,networking within sectors, networking across sectors, volunteerism andgiving to charity, and finally a focus on why people engage. We concludethat there is a considerable amount of further research needed on socialcapital, SME''s and business ethics. (shrink)

The theory of the social responsibility of the firm oscillates between two extremes: one that reduces the firm's responsibility to the obtainment of (the greatest possible) profit for its shareholders, and another that extends the firm's responsibility to include a wide range of actors with an interest or "stake" in the firm. The stakeholder theory of the social responsibility of business is more appealing from an ethical point of view, and yet it lacks a solid foundation that would be acceptable (...) to a variety of schools of thought.In this paper I argue that the stakeholder theory could be founded on the concept of the common good. First, I explain the foundations of the theory of the common good, the concept itself, how it relates to the individual good, and its role in the firm. Following that, I explain how the theory of the common good could be applied to the stakeholder theory. Finally, I draw some conclusions. (shrink)

While Corporate Social Responsibility (CSR) has traditionally been the domain of the corporate sector, recognition of the growing significance of the Small and Medium Sized Enterprise (SME) sector has led to an emphasis on their social and environmental impact, illustrated by an increasing number of initiatives aimed at engaging SMEs in the CSR agenda. CSR has been well researched in large companies, but SMEs have received less attention in this area. This paper presents the findings from a U.K. wide study (...) of socially responsible SMEs. The 24 companies studied were chosen as “exemplars” of␣CSR in SMEs. The aim of this study therefore is to progress understanding of both the limitations on and opportunities for CSR in SMEs through the exploration of exemplary characteristics in the study companies. Key areas of investigation were CSR terminology, the influence of managerial values, the nature of SME CSR activities, motivation for and benefits from engaging in CSR, and the challenges faced. The results of this study demonstrate some of the exemplary goals and principles needed to achieve social responsibility in SMEs, and begin to provide knowledge that could be used to engender learning in other SMEs. In particular, there is evidence that stakeholder theory may provide a framework in which SMEs and CSR can be understood. SMEs prefer to learn through networking and from their peers, so this is a possible avenue for greater SME engagement in CSR. This would require strong leadership or “championing” from individuals such as highly motivated owner–managers and from exemplary companies as a whole. (shrink)

In multi-stakeholder networks, actors from civil society, business and governmental institutions come together in order to find a common solution to a problem that affects all of them. Problems approached by such networks often affect people across national boundaries, tend to be very complex and are not sufficiently understood. In multi-stakeholder networks, information concerning a problem is gathered from different sources, learning takes place, conflicts between participants are addressed and cooperation is sought. Corporations are key actors in many networks, because (...) the problems addressed are frequently related to business activities. The aim of this article is to conceptualise multi-stakeholder networks by proposing a problem-centred stakeholder definition. From an analysis of several case studies, a life cycle model is deduced that distinguishes seven phases: initiation, acquaintance, first and second agreement, implementation, consolidation and institutionalisation. (shrink)

I argue in this article that responsible leadership (Maak and Pless, 2006) contributes to building social capital and ultimately to both a sustainable business and the common good. I show, first, that responsible leadership in a global stakeholder society is a relational and inherently moral phenomenon that cannot be captured in traditional dyadic leader–follower relationships (e.g., to subordinates) or by simply focusing on questions of leadership effectiveness. Business leaders have to deal with moral complexity resulting from a multitude of stakeholder (...) claims and have to build enduring and mutually beneficial relationships with all relevant stakeholders. I contend, second, that in doing so leaders bundle the energy of␣different constituencies and enable social capital building. Social capital can be understood as actual or potential resources inherent to more or less institutionalized relationships of mutual recognition (Bourdieu 1980). By drawing on network analysis I suggest, third, that responsible leaders weave durable relational structures and ultimately networks of relationships which are rich in ties to otherwise unconnected individuals or groups. Against this background I argue, fourth, that responsible leadership may result in the creation of value networks (Lord and Brown, 2001) of multiple stakeholders, which enhance social capital and thereby contribute to both a sustainable business and the common good. (shrink)

Abstract:The term stakeholder is a powerful one. This is due, to a significant degree, to its conceptual breadth. The term means different things to different people and hence evokes praise or scorn from a wide variety of scholars and practitioners. Such breadth of interpretation, though one of stakeholder theory’s greatest strengths, is also one of its most prominent theoretical liabilities. The goal of the current paper is like that of a controlled burn that clears away some of the underbrush of (...) misinterpretation in the hope of denying easy fuel to the critical conflagration that would raze the theory. We aim to narrow its technical meaning for greater facility of use in management and organizational studies. By elaborating a number of common misinterpretations – critical and friendly – of the theory, we hope to render a stronger and more convincing theory as a starting place for future research. (shrink)

In this paper we report on empirical research which investigates social capital of Small and Medium Sized Enterprises (SMEs). Bringing an international perspective to the work, we make a comparison between 30 firms located in West London and Munich in the sectors of food manufacturing/production, marketing services and garages. Here we present 6 case studies, which we use to illustrate the early findings from this pilot project. We identify differences in approach to associational membership in Germany and the U.K., with (...) a greater propensity to "belong" to an official group in Germany. We distinguish clear sectoral similarities across the countries, and indications that certain personality types will seek out engagement and find time beyond busy work life schedules, often merging work/home/leisure life and friends. Some of our cases illustrate that formal institutions, networks and mutual relationships can develop social capital for the SME, although we should take care not to assume a universal win-win situation for those who are engaged and contribute to the common good. Some of the obstacles to cooperation and civic engagement are outlined. (shrink)

This work emerged from funded research examining collaboration among stake-holder organizations present at three U.S. nuclear weapons complex sites. The authors examine issues such as how and why stakeholder groups form collaborative alliances when dealing with the target organization, what leaders of stakeholder organizations actually think about when collaborating to deal with the target organization, and what outcomes result from the collaboration process. Drawing on stakeholder theory and research in interorganizational collaboration, the authors used an inductive, interview-based methodology to build (...) a model of collaboration among nonprofit stakeholder groups. The model contributes to the descriptive stream of stakeholder theory and, in turn, has implications for the instrumental stream. The model also offers implications for future researchers, leaders of stakeholder alliances, and leaders of target organizations. (shrink)