The Corporation And Its Stakeholders

The Corporation and Its Stakeholders The Corporation and Its Stakeholders Professor Hector R Rodriguez School of Business Mount Ida College Business, Society & Environment

Society
The Corporation and Its Stakeholders
People for the Ethical Treatment of Animals
Corporate Citizenship
The Social Responsibility of Business
The Shareholder Primacy Norm
CSR, Citizenship and Sustainability Reporting
Responsible Investing
The Community and the Corporation
Taxation and Corporate Citizenship
Corporate Philanthropy Programs
Employees and the Corporation
Managing a Diverse Workforce
Environment
A Balanced Look at Climate Change
Non-anthropogenic Causes of Climate Change
Sulfates, Urban Warming and Permafrost
Conventional Energy
The Kyoto Protocol
Green Building
Green Information Technology
Transportation, Electric Vehicles and the Environment
Geo-Engineering
Carbon Capture and Storage
Renewable Energy
Solid, Toxic and Hazardous Waste
Forests, Paper and Carbon Sinks
Life Cycle Analysis
Water Use and Management
Water Pollution
Course Map – Topics Covered in Course

First a quick refresher… Business, Society & Environment Economic Capital Social Capital Environmental Capital Bearable Equitable Viable Sustainable Concept of Sustainable Development

Sustainability
Corporate Social Responsibility (CSR)
Corporate Citizenship (CC)
These terms mean different things to different people, sometimes they mean the same thing.
For purposes of this course Sustainability encompasses all elements linking business, society and the environment, while CSR / CC the more narrow societal aspects, without addressing environmental concerns.
A Quick Word on Terminology

Sustainability Management – Where to Begin? One of the first steps - Find out what’s important to those with an interest in your business (stakeholders)

A stakeholder refers to persons or groups that affect, or are affected by, an organization’s decisions, policies, and operations
Note: Term stakeholder is NOT the same as stockholder
What is a Stakeholder?

Business – an organization that is engaged in making a product or providing a service for a profit
Society – Human beings and the social structures they collectively create
Society Business Why Talk About Stakeholders? Business & Society are Highly Interdependent

Two critical questions:
What is the purpose of the modern corporation?
To whom, or what, should the firm be responsible?
Firm Theory Ownership Theory of a Firm Two Contrasting Views Stakeholder Theory of a Firm

Ownership theory of the firm
Firm is the property of its owners
Purpose is to maximize returns to shareholders
Shareholders interests are paramount and take precedence over all others
Stakeholder theory of the firm
Argues the corporation serves a broader purpose, to create value for society
Must make profit for owners to survive, however, creates other sources of value too
Corporations have multiple obligations, all “stakeholder groups” must be taken into account
Current Views

Descriptive - More realistic description of how companies really work
Instrumental - More effective corporate strategy
Normative - Stakeholder management is the right thing to do
Core Arguments for Stakeholder Theory of the Firm

Stakeholder groups can be divided into two categories:
Market stakeholders
Nonmarket stakeholders
Drawing “Maps” of stakeholder systems, with the business firm in the center, is one way to visualize the relationships between the firm and its stakeholders
Market and Nonmarket Stakeholders

Market stakeholders are those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services
Sometimes referred to as primary stakeholders
Market Stakeholder Employees Suppliers Customers Creditors Stockholders Distributors Firm

Nonmarket stakeholders are people or groups who, although they do not engage in direct economic exchange with the firm, are affected by or can affect its actions.
Sometimes called secondary stakeholders
Nonmarket Stakeholders Communities Media Public Activists Government NGO’s Firm

Process to identify relevant stakeholders and to analyze their interest, influence and power
Asks 4 questions:
Who are the relevant stakeholders?
What are the interests of each stakeholder?
What is the power of each stakeholder? (voting, political, legal, economic)
How are coalitions likely to form and what would they be?
Stakeholder Analysis

Mapping Stakeholder Landscapes, Boston College’s Center for Corporate Citizenship (Relevant)

The action component following stakeholder analysis
Once you know who your stakeholders are, their interests, power, and any coalitions, do you take action to engage with these groups?
Companies tend to follow a progression of stages in stakeholder engagement (next slide)
Stakeholder Engagement

Inactive
Companies ignore stakeholder concerns
Reactive
Companies act only when forced to do so
Proactive
Companies try to anticipate stakeholder concerns
Interactive
Companies actively engage with stakeholders in an ongoing relationship of mutual respect, openness, and trust
Stakeholder Engagement

Helps companies learn about societal expectations
Generates creative solutions to problems
Helps win stakeholder support for implementing solutions
Can neutralize critics
Can improve corporate reputation for taking constructive action
Stakeholder Engagement and Dialogue Benefits

Stakeholder data is complex and dynamic
Need to develop and keep current
Stakeholders are disappearing into the web
X and Y generations have different attitudes, alliances and loyalties
Finding the ‘real’ stakeholders for your activities becoming more difficult
Challenges in 2010

Find out what’s important to your stakeholders
Stakeholders should be considered because business and society are interdependent
We should evaluate market and non-market stakeholders
Formal process should identify relevant stakeholders
Stakeholders should be then engaged in order to identify expectations, create solutions and win support
Summary - Stakeholders

In December 1996, in Humboldt County, California, Julia Hill climbed a redwood tree (which she dubbed Luna) to prevent Pacific Lumber from cutting down sequoias.
The company played into her hands by threatening to cut down Luna with Hill in it, even sending helicopters to threaten her perch.
By playing Goliath, the company transformed Hill into a heroic, media-beloved David.
She lived in Luna on a platform 150 feet above the ground for two years until Pacific Lumber agreed to preserve the tree and surrounding forest.
Side Note: The Case of Julia Hill

The Corporation And Its Stakeholders

by Hector Rodriguez on Jan 31, 2010

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The Corporation And Its Stakeholders — Presentation Transcript