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CSR Presentation by Group 3 - Stakeholder theory


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CSR Presentation by Group 3 - Stakeholder theory

  2. 2. Stakeholder Theory Overview  This article of Stakeholder theory deals with two prominent concepts:    Identifying who the stakeholders are Salience of the various Stakeholder classes and their claims to the organization Who is a Stakeholder? “Any group or individual who can affect or is affected by the achievement of the organization‟s objectives” ~ Freeman
  3. 3. Stakeholders
  4. 4. Defining Stakeholders - Broad Vs Narrow View  Narrow view Concerned with only the risk factor and includes:   Voluntary Stakeholders & Involuntary Stakeholders Broad View Takes into account all those groups who can affect or are affected by the achievement of the organization‟s objectives.   who can affect the organization – Influencers who are affected by the organization – Claimants
  5. 5. Stakeholder Attributes 1. Power A relationship among social actors, in which A can get B to do something which B would not have otherwise done Categorization of power – Coercive, Utilitarian & Normative 2. Legitimacy Socially accepted and expected structures or behavior under a socially constructed system of norms, values, beliefs and LEGITIMACY definitions INDIVIDUAL ORGANIZATIONAL SOCEITAL
  6. 6. Stakeholder Attributes 3. Urgency Exists when 2 conditions are met –  When a relationship or claim is of a time-sensitive nature  When it is critical to the stakeholder
  7. 7. Stakeholder Classes Power Dormant Definitive Urgency Dependen t Demanding Discretionary Legitimac y
  8. 8. Stakeholder Classes  Class 1 - Latent Stakeholders • • •  Powe r One Attribute & Low Salience Dormant Managers may choose to do nothing Consists of – Dormant, Legitimacy Urgency Demanding and Deman Discreti onary Discretionary shareholders ding Dormant Stakeholders • Possess power to impose their will but little or no interaction as they lack legitimacy or urgency • Examples – Those who have a loaded gun, those who can spend a lot of money
  9. 9. Class 1 - Latent Stakeholders (Continued)  • • Discretionary Stakeholders Powe Likely to be recipients of corporate r philanthropy Dormant Examples – Beneficiaries of charity, Non-profit organizations Legitimacy such as schools & hospitals Deman Discreti ding onary Urgency  • • • Demanding Stakeholders Those with urgent claims but no legitimacy or power Irritants for management but not worth considering Examples – People with unjustified grudges, serial complainers
  10. 10. Class 2 - Expectant Stakeholders • • •  2 Attributes & Moderate Salience Active rather than Passive Consists of – Dominant, Dependent and Dangerous Stakeholders Dominant Stakeholders  Many theories position them as the only stakeholders of an organisation  Possess Power + Legitimacy  Examples – Board of Directors, Public relations
  11. 11. Class 2 - Expectant Stakeholders (Continued)  Dangerous • Stakeholders Those with powerful and urgent claims and can be coercive and possibly violent  Dependent • • Stakeholders Stakeholders who are dependent on other bodies to carry out their will, because they lack the power to enforce their stake Examples – Residents & animals impacted by incidents like Oil Spill, Mining etc.
  12. 12. Class 3 - Definitive Stakeholders • • • Often dominant stakeholders with an urgent issue Dependent groups with powerful legal support Examples – Democratic legitimacy achieved by a „Dangerous‟ nationalist party by winning national elections
  13. 13. DYNAMISM in RELATIONS  A stakeholder can increase/decrease their salience by acquiring or losing one of the attributes: power, legitimacy or urgency Nonstakeholder  Latent Expectant Definitive Example: When SEBI/IRDA receives a complaint, it moves from being a expectant to a definitive stakeholder
  14. 14. POWER-DYNAMISM MATRIX  Stakeholders in groups A & B: Are the easiest to deal with Dynamism  Stakeholders in group C: Are important because they are powerful. But low dynamism means their reaction is predictable and expectations can be managed Stakeholders in group D: Are important because thy are powerful. But low dynamism means their reaction is High Low  Power Low Fewer Problems (A) Unpredictabl e but Manageable (B) High Powerful but Predictable (C) Greatest Danger or Opportunitie s (D)
  15. 15. British Petroleum  Shareholder-driven company(bottom-line)  Attempted to gain higher stock values through higher profits at the expense of safety concerns
  16. 16. Deepwater Horizon Oil Spill Biggest hit for BP and its public relations that had a direct impact on its share prices • Killed 11 people and injured many others • Date: Environmental Disaster: ignited public antagonism • Most importantly, it was not the first disaster linked to the BP brand. • 20th April, 2010 Place: Gulf of Mexico
  17. 17. Stakeholders of BP Identified        Government(federal and state) Employees(current and the ones killed) Shareholders(majority and minority) Environmentalists Businesses along the coast(Tourism, Seafood) Coastal Residents Customers
  18. 18. Stakeholders and their Classes for BP Stakeholders Power Government Employees Shareholders Environmentalists Businesses along the coast Coastal Residents Customers * * * - Attributes Legitimacy Urgency * * * * * * * * * * * - Shareholder class Definitive Expectant (Dependent) Expectant (Dominant) Expectant (Dangerous) Expectant (Dependent) Expectant (Dependent) Latent (Discretionary)
  19. 19. What the company did?     Undermined the extent of the damage Denied various claims made by researchers Use of unethical practices No empathy with those affected No consistency between the image it was trying to portray and what it really was!
  20. 20. What BP should have done? 1. 2. 3. 4. 5. 6. Be more alert to the significance of the company‟s identity in the minds of the public React quickly Be present on the ground to build an emotional connect with those affected Balance legal/economic language with emotional/empathic tones in their public statements Acknowledged the company‟s moral responsibility before dealing with legal liabilities Put the interests of the company‟s shareholders and managers after those of the environment and the communities affected by the spill
  21. 21. References    
  22. 22. Questions