A Stakeholder Approach to CorporateSocial Responsibility .docx

A Stakeholder Approach to Corporate
Social Responsibility: A Fresh Perspective
into Theory and Practice Dima Jamali
ABSTRACT. Stakeholder theory has gained currency in
the business and society literature in recent years in
light of its practicality from the perspective of managers
and scholars. In accounting for the recent ascendancy
of stakeholder theory, this article presents an overview
of two traditional conceptualizations of corporate
social responsibility (CSR) (Carroll: 1979, ‘A Three-
Dimensional Conceptual Model of Corporate Perfor-
mance’, The Academy of Management Review 4(4), 497–505
and Wood: 1991, ‘Corporate Social Performance
Revisited’, The Academy of Management Review 16(4),
691–717), highlighting their predominant inclination
toward providing static taxonomic CSR descriptions.

The article then makes the case for a stakeholder approach
to CSR, reviewing its rationale and outlining how it
has been integrated into recent empirical studies. In light
of this review, the article adopts a stakeholder framework
– the Ethical Performance Scorecard (EPS) proposed by
Spiller (2000, ‘Ethical Business and Investment: A Model
For Business and Society’, Journal of Business Ethics 27,
149–160) – to examine the CSR approach of a sample
of Lebanese and Syrian firms with an interest in
CSR and test relevant hypotheses derived from the
CSR/stakeholder literature. The findings are analyzed
and implications drawn regarding the usefulness of a
stakeholder approach to CSR.
KEY WORDS: corporate social responsibility (CSR),
stakeholder theory, Lebanese and Syrian context
Introduction
The topic of the social responsibilities of business has
been a subject of intense controversy and interest

over the past three decades. In part, this debate is an
outgrowth of the proliferation of different concep-
tualizations of corporate social responsibility (CSR).
The term CSR has indeed been defined in various
ways from the narrow economic perspective of
increasing shareholder wealth (Friedman, 1962), to
economic, legal, ethical and discretionary strands of
responsibility (Carroll, 1979) to good corporate
citizenship (Hemphill, 2004). These variations
stem in part from differing fundamental assumptions
about what CSR entails, varying from concep-
tions of minimal legal and economic obligations
and accountability to stockholders to broader
responsibilities to the wider social system in which a
corporation is embedded.
Resulting from these divergent fundamental
assumptions is a lingering skepticism in the field of
business and society, inviting Frankental (2001) to

argue for example that ‘‘CSR is a vague and
intangible term which can mean anything to any-
body, and therefore is effectively without meaning.’’
The confederation of British industry has similarly
argued that ‘‘CSR is highly subjective and therefore
does not allow for a universally applicable
definition.’’ Social responsibility has been variously
described as an elusive concept (Lee, 1987), a vague
and ill-defined concept (Preston and Post, 1975),
a concept with a variety of definitions (Votaw,
1973), a concept lacking theoretical integration and
empirical verification (DeFillipi, 1982; Post, 1978;
Preston, 1978), a concept lacking a dominant par-
adigm (Jones, 1983), and a concept susceptible to
subjective and value-laden judgments (Aupperle
et al., 1983).
Along the same lines, Clarkson (1995) has force-
fully argued that a fundamental problem in the field
of business and society has been the notable absence

of definitions of corporate social performance (CSP),
corporate social responsibility (CSR1) and corporate
social responsiveness (CSR2), and the lack of con-
sensus about the meaning of these terms from an
Journal of Business Ethics (2008) 82:213–231 � Springer 2008
DOI 10.1007/s10551-007-9572-4
operational or managerial viewpoint (Clarkson,
1995). He makes the case that CSP can be analyzed
more effectively by using a framework based on the
management of a corporation’s relationships with its
stakeholders than by using CSR models and meth-
odologies given that corporations are the nexus of a
complex web of stakeholder relationships and indeed
manage relationships with specific stakeholder
groups rather than with society at large.
Maignan et al. (2005) similarly find that senior
management and many marketers still struggle with

the notion of CSR. The crux of the problem
stems from the meaning of the word ‘social’ and
how it links to daily business activities. Indeed,
because of the level of abstraction of the word
‘social’, managers may have problems evaluating
how their own organization can contribute to the
well being of society as a whole (Clarkson, 1995;
Maignan et al., 2005). Indeed as suggested by
Clarkson (1995) ‘‘society is a level of analysis that
is more inclusive, more ambiguous and further up
the ladder of abstraction than a corporation itself.’’
Based on casual observation, the term society is
often used interchangeably with the community
stakeholder group in the business and society lit-
erature, raising a legitimate concern as to whether
the societal level of abstraction is indeed helpful or
justified.
Hence, there is clearly some merit to a stake-

holder approach to CSR, which will be further
probed and explored in this article. Indeed as pro-
posed by Maignan et al. (2005), even though
businesses in general are accountable toward society
at large, an individual business can be deemed
responsible only toward stakeholders, or the
definable agents with whom it interacts. The article
starts by presenting an overview of two popular
conceptualizations of CSR, highlighting their pre-
dominant inclination toward providing static taxo-
nomic CSR descriptions. The article then makes
the case for a stakeholder approach to CSR,
reviewing its inherent logic and outlining how it
has been integrated into recent empirical studies. In
light of this review, the article adopts a stakeholder
framework – the Ethical Performance Scorecard
(EPS) proposed by Spiller (2000) – to examine the
CSR approach of a number of Lebanese and Syrian

firms that are considered active in CSR. The
findings are presented and relevant implications
drawn regarding the usefulness of a stakeholder
CSR approach.
Traditional CSR conceptualizations
Various CSR conceptualizations are on offer in the
literature. This section will shed briefly the light on
two robust CSR conceptualizations that are well-
grounded in the literature. The first is Carroll (1979)
four-part definition of CSR that was embedded into
a conceptual model of CSP. The other is the CSP
model by Wood (1991), which placed CSR into a
comprehensive framework, emphasizing principles
guiding responsibility behavior, processes of
responsiveness and outcomes of performance. The
purpose is to show that despite their groundbreaking
insights, the models on offer still qualify as taxo-
nomic, helping in turn accentuate or bring to light

the dynamism inherent in a stakeholder approach as
well as its practicality from a managerial perspective.
Carroll’s 1979/1991 conceptualization
In 1979, Carroll differentiated between four types of
CSR: economic, legal, ethical, and discretionary.
The first category that Carroll (1979) delineated is a
responsibility that is economic in nature, entailing,
for example, providing a return on investment to
owners and shareholders; creating jobs and fair pay
for workers; discovering new resources; promoting
technological advancement, innovation, and the
creation of new products and services. Business from
this perspective is the basic economic unit in society
and all its other roles are predicated on this funda-
mental assumption (Carroll, 1979).
The legal responsibility is the second part of the
definition and entails expectations of legal compli-
ance and playing by the ‘‘rules of the game.’’ From

this perspective, society expects business to fulfill its
economic mission within the framework of legal
requirements set forth by the societal legal system.
But, while regulations may successfully coerce firms
to respond to an issue, it is difficult to ensure that
they are applied equitably (Pratima, 2002). More-
over, regulations are reactive in nature, leaving little
opportunity for firms to be proactive. Laws, there-
fore, attempt to circumscribe the limits of tolerable
214 Dima Jamali
business behavior, but they neither define ethics nor
do they ‘‘legislate morality’’ (Solomon, 1994).
In essence, ethical responsibility overcomes the
limitation of law by creating an ethics ethos that
companies can live by (Solomon, 1994). It portrays
business as being moral, and doing what is right, just,
and fair. Therefore, ethical responsibility encom-

passes activities that are not necessarily codified into
law, but nevertheless are expected of business by
societal members such as respecting people, avoiding
social harm, and preventing social injury. Such
responsibility is mainly rooted in religious convic-
tions, humane principles and human rights com-
mitment (Novak, 1996). However, one limitation to
this type of responsibility is its blurry definition and
the consequent difficulty for business to concretely
deal with it (Carroll, 1979).
The final type of responsibility is where firms
have the widest scope of discretionary judgment and
choice, in terms of deciding on specific activities or
philanthropic contributions that are aimed at giving
back to society. The roots of this type of responsi-
bility lie in the belief that business and society are
intertwined in an organic way (Frederick, 1994).
Examples of such activities might include philan-

thropic contributions, conducting in-house training
programs for drug abusers, or attempts at increasing
literacy rates (Carroll, 1979). This type of responsi-
bility is the most controversial of all since its limits
are broad and its implications could conflict with the
economic and profit-making orientation of business
firms.
Carroll (1991) revisited his four-part definition of
CSR and organized the notion of multiple corporate
social responsibilities in a pyramid construct (Fig-
ure 1). In this pyramid, economic responsibility is
the basic foundation and discretionary the apex. This
revised conceptualization implies that the four
responsibilities are additive or aggregative. From this
perspective, economic and legal responsibilities are
socially required (i.e., mandatory), ethical responsi-
bility is socially expected, while philanthropy is
socially desired (Windsor, 2001) and each of these

responsibilities comprises a basic component of the
total social responsibility of a business firm.
The other components of the CSP model origi-
nally proposed by Carroll (1979) entailed an iden-
tification of the social issues that business must
address and a specification of the philosophy of
responsiveness to the issues. Recognizing that social
issues may change over time depending on the
industry in which firms exist, an effective responsi-
bility performance entails a systematic attempt at
fleshing out the social issues that are of most
interest to the firm. A strategy or mode of respon-
siveness must also be identified, although this com-
ponent was vaguely addressed in Carroll’s (1979)
conceptualization, with a simple differentiation
between reactive, defensive, accommodative or
proactive responsiveness strategies.
Carroll’s (1979) conceptualization was useful and

timely, and represented a significant advance in CSR
research by specifying the different types or
dimensions of social responsibility. However, his
contribution qualifies primarily as taxonomic, out-
lining the range of responsibilities that managers are
expected to fulfill. Details and guidelines regarding
process and measurement however remain scant for
both managers and scholars. As per Clarkson (1995),
‘‘Carroll’s model in the form of a three dimensional
cube was complex and difficult to test. It did not
lend itself to the development of a methodology that
could be used in the field to collect, organize, and
evaluate corporate data.’’ Herein lies the caveat of
any taxonomic approach, which can be potentially
remedied with a more practical stakeholder
approach.
Wood 1991 conceptualization
In 1991, Wood revisited the CSP model and

introduced important refinements by going beyond
an identification of the different types of responsi-
bilities to examine issues relating to the principles
Discretionary Responsibility
Legal Responsibility
Economic Responsibility
Ethical Responsibility
Total Responsibility
Figure 1. A hierarchy of CSR (adapted from Carroll,
1991)
A Stakeholder Approach to Corporate Social Responsibility 215
motivating responsible behavior, the processes of
responsiveness and the outcomes of performance.
Her refined postulation, therefore, placed CSR into
a broader context than just a stand-alone definition,
and conceptualized CSP as the product of a business
firm’s particular configuration of principles of social

responsibility, processes of social responsiveness, as
well as observable outcomes as they relate to the
firm’s societal relationships (Table I).
The model offered by Wood (1991) constitutes a
significant advance in CSR research. A researcher
using the model would first consider the principles
that motivate a firm’s social responsibility actions at
three levels of analysis: institutional, organizational
and individual. Therefore, the motivation for a
firm’s social responsibility actions may stem from the
principle of legitimacy (institutional level), i.e., from
a desire to maintain credibility and legitimacy as a
responsible societal actor in a shared environment.
Alternatively, the motivation could stem from an
organizational sense of public responsibility, partic-
ularly for outcomes related to the firm’s primary and
secondary areas of involvement. Finally, the moti-
vation could stem from the choices of individual

managers and their personal responsibility prefer-
ences and inclinations. There is also room for
interactivity among two or more of these principles
in motivating CSP.
Responsiveness according to Wood (1991) consti-
tutes an action dimension that is needed to com-
plement the normative and motivational component
of social responsibility. It is conceptualized as com-
prising three facets – environmental assessment,
stakeholder management and issues management,
which are effectively interlocked. Responsiveness is
rooted in knowledge about the external environ-
ment and in rigorous environmental scanning/anal-
ysis. This knowledge could then be used to devise
strategies for adapting to the environment or con-
versely changing it. Stakeholder management is an-
other tenet of responsiveness and can be investigated
by examining particular kinds of stakeholder man-

agement devices (e.g., employee newsletters, public
affairs officials, and corporate social reporting). Issues
management on the other hand entails an investi-
gation of the firm’s approach to devising and mon-
itoring responses to social issues.
The outcomes of corporate behavior are in turn of
direct and obvious interest in the assessment of CSP.
According to Wood’s CSP model, outcomes are
divided into three types: the social impacts of cor-
porate behavior, the programs companies use to
implement responsibility and the policies developed
by companies to handle social issues and stakeholder
interests. Whether corporate behavior is having
positive or negative impact should objectively be
assessed (positive impact as in the provision of jobs,
the creation of wealth or technological innovation
and negative impact as in toxic wastes or illegal
payments to politicians). The nature of programs

selected for investment of resources to achieve spe-
cific ends is also important as is the extent of the
integration of social issues and impacts within the
body of company policy.
Although Wood’s (1991) CSP model integrates
much of the earlier work into a coherent model for
assessing an organization’s corporate social perfor-
mance, it does not, according to Waddock (2004),
fully consider the significance of stakeholder im-
pacts. Stakeholder management is indeed accorded
only limited attention in discussion of responsiveness
processes. More fundamentally, Wood’s (1991)
model may suffer from a certain level of abstraction
from the perspective of practicing managers in view
of its scholarly language of principles of CSR and
processes of corporate social responsiveness. As
articulated by Meehan et al. (2006) ‘‘While Wood’s
1991 model represents a significant piece of schol-

arship, it nevertheless failed to address the needs of
practicing managers charged with implementing
CSR/CSP programs and crucially measuring their
impacts.’’
TABLE I
The CSP model (Wood, 1991)
Principles of CSR1
Institutional principle: legitimacy
Organizational principle: public responsibility
Individual principle: managerial discretion
Processes of CSR2
Environmental assessment
Stakeholder management
Issues management
Outcomes of corporate behavior
Social impacts
Social programs
Social policies

216 Dima Jamali
Both frameworks hence seem more oriented
toward advancing theory and research in the field
rather than influencing practice. The complex and
dynamic nature of the social environment faced by
most modern organizations, implying the need for
on-going stakeholder management, is also difficult
to capture with such taxonomic descriptions.
Inherent in a stakeholder approach or model is an
exchange perspective for social responsibility man-
agement, recognizing the changing/evolving needs
of different groups of stakeholders which need to be
continuously monitored and addressed in a fluid and
dynamic manner. The potential usefulness/added
value of a stakeholder approach will be further
explored in the next section.
A stakeholder approach to corporate social

responsibility (CSR)
Some of the central concepts associated with what is
known today as stakeholder theory began to gain
currency during the mid-1980s (Freeman, 1984;
Freeman and Reed, 1983). Freeman’s (1984) work
helped to re-conceptualize the nature of the firm to
encourage consideration of new external stake-
holders, beyond the traditional pool – shareholders,
customers, employees, and suppliers – legitimizing in
turn new forms of managerial understanding and
action (Jonker and Foster, 2002). Organizations
from this perspective are expected to manage
responsibly an extended web of stakeholder interests
across increasingly permeable organization bound-
aries and acknowledge a duty of care towards tra-
ditional interest groups as well as silent stakeholders
– such as local communities and the environment
(Simmons, 2004).

Stakeholder theory hence offered a new way to
organize thinking about organizational responsibili-
ties. By suggesting that the needs of shareholders
cannot be met without satisfying to some degree the
needs of other stakeholders, it turned attention to
considerations beyond direct profit maximization. In
other words, even when a firm seeks to serve its
shareholders as a primary concern, its success in
doing so is likely to be affected by other stake-
holders (Foster and Jonker, 2005; Hawkins, 2006).
Some even argue that an inclusive stakeholder
approach makes commercial sense, allowing the firm
to maximize shareholder wealth, while also
increasing total value added (Hawkins, 2006; Phillips
et al., 2003; Wallace, 2003).
By the end of the decade, many researchers were
using stakeholder ideas and terminology (Wood,
1991). Several authors have indeed favored a stake-

holder approach when examining CSR. In their
assessment of CSR and CSP in the context of a
sample of Italian SMEs, Longo et al. (2005) identi-
fied the demands of key stakeholders regarding the
creation of value by the business, resulting in a grid
of values (Table II), which associates each stake-
holder with value classes that satisfy their respective
expectations. These value classes have been derived
based on studies and models already covered in
existing literature, as well as on the basis of the
analysis of various social audit and sustainability
reports. Companies in their study are considered as
socially responsible if they demonstrate social
behavior satisfying the expectations of at least half of
the value classes identified for each stakeholder.
A similar approach was used by Abreu et al.
(2005) in their exploration of the CSR experience
and practice of enterprises in Portugal, whereby five

key stakeholders were identified, including con-
sumers, suppliers, the community, the government
and the environment. Internally, they also examined
workplace practices vis-a-vis employees. Their
TABLE II
The grid of values (Longo et al., 2005)
Stakeholder Expectations divided into value classes
Employees Health and safety at work
Development of workers’ skills
Wellbeing and satisfaction of worker
Quality of work
Social equity
Suppliers Partnership between ordering company
and supplier
Selection and analysis systems of suppliers
Customers Product quality
Safety of customer during use of product
Consumer protection

Transparency of consumer product infor-
mation
Community Creation of added value to the community
Environmental safety and production
research suggests a clear inclination on the part of
firms operating in Portugal to attend to the external
dimension of CSR. Another study in the Spanish
context (Uhlaner et al., 2004) also utilized a stake-
holder approach, defining CSR effectiveness as the
ability to satisfy a wide range of constituents within/
outside the organization. Two categories of stake-
holders, economic and social, were identified with
the findings suggesting the salience of the economic
stakeholders – clients and employees – over the so-
cial ones including sports clubs, the church, and the
environment. The researchers confirm on the basis

of their study the utility of a stakeholder approach in
the context of CSR.
A stakeholder approach was also used by Papa-
solomou et al. (2005) in the context of Cypriot
businesses. Their rationale for using a stakeholder
approach is that stakeholders invariably affect or are
affected by business organizations and therefore can
be seen as imposing on them different responsibili-
ties. They identify six groups as key stakeholders
including employees, customers, investors, suppliers,
the community and the environment and delineate
relevant CSR actions vis-a-vis each cluster respec-
tively as illustrated in Table III. Their findings sug-
gest that Cypriot firms accord the most attention to
employees and consumers in their pursuit of CSR,
moderate attention to the community stakeholder,
TABLE III
CSR actions vis-a-vis key stakeholders (Papasolomou et al.,
2005)

Stakeholder Actions vis-a-vis key stakeholders
Employees Provides a family friendly work environment
Engages in responsible human resource management
Provides an equitable reward and wage system for employees
Engages in open and flexible communication with employees
Invests in employee development
Encourages freedom of speech and promotes employee rights to
speak up and report their concerns at
work
Provides child care support/paternity/maternity leave in
addition to what is expected by law
Engages in employment diversity in hiring and promoting
women, ethnic minorities and the physically
handicapped
Promotes a dignified and fair treatment of all employees
Consumers Respects the rights of consumers
Offers quality products and services
Provides information that is truthful, honest and useful
Products and services provided are safe and fit with their
intended use

Avoids false and misleading advertising
Discloses all substantial risks associated with product or service
Avoids sales promotions that are deceptive/manipulative
Avoids manipulating the availability of a product for purpose of
exploitation
Avoids engagement in price fixing
Community Fosters reciprocal relationships between the
corporation and community
Invests in communities in which corporation operates
Launches community development activities
Encourages employee participation in community projects
Investors Strives for a competitive return on investment
Engages in fair and honest business practices in relationships
with shareholders
Suppliers Engages in fair trading transactions with suppliers
Environment Demonstrates a commitment to sustainable
development
Demonstrates a commitment to the environment
218 Dima Jamali

and limited attention to suppliers, investors and the
environment.
The bulk of the studies encountered in the
literature and outlined above fall within the scope of
descriptive stakeholder theory, which seeks to
outline the views of participants of the mission/
objectives of their organization and its actions vis-a-vis
different stakeholders (Brickson, 2007). This meth-
odology can yield interesting insights particularly
that organizations are socially constructed and act in
accordance with shared perceptions (Brickson,
2007). There are also flavors in the literature of
assessments along the lines of instrumental or nor-
mative stakeholder theory. Instrumental stakeholder
theory assumes that the corporation is an instrument
for wealth creation with CSR conceived as a stra-
tegic tool to promote economic objectives (Garriga
and Mele, 2004). Normative stakeholder theory on

the other hand delineates philosophically based
moral obligations towards stakeholders (Brickson,
2007), focusing on the ethical requirements that
cement the relationship between business and soci-
ety (Garriga and Mele, 2004).
While the tenet of stakeholder theory is that all
stakeholders matter and that organizations should
integrate their responsibilities to the various stake-
holder constituencies, this balancing exercise has
proven difficult to enact in practice (Galbreath,
2006; Vos and Achterkamp, 2006). Rather than
producing every kind of social value for every
stakeholder, organizations find themselves
constrained in practice by limited resources and
bounded rationality, and thus tend to prioritize their
stakeholders according to instrumental and/or nor-
mative considerations. Such stakeholder classifica-
tion or prioritization usually draws on managerial

discretion, their specific instrumental or normative
inclinations as well as their assessment of relational
stakeholder attributes of power, legitimacy and
urgency (Mitchell et al., 1997), legitimizing in turn
the usefulness of a descriptive stakeholder theory or
methodology.
Overall, stakeholder theory in all its three veins or
branches brought to the fore a set of new insights for
CSR academics and practitioners. It accentuated the
notion that corporations must be viewed as operat-
ing at the center of a ‘‘network of interrelated
stakeholders that create, sustain and enhance value
creating capacity’’ (Post et al., 2002) challenging in
turn an exclusive focus on shareholders. The lan-
guage of stakeholder theory was also easier to grasp
by managers/practitioners as most organizations
understood and defined obligations and responsibil-
ities vis-a-vis their traditional stakeholders (Clarkson,

1995). Stakeholder theory seems also easier to
maneuver in collecting and analyzing CSR data as
evidenced by the proliferation of empirical studies
that have essentially integrated a stakeholder ap-
proach as outlined in the previous section. This
stream of research has also led to the delineation of
relevant stakeholder issues and associated measures of
impacts, which, with further refinement, can serve as
useful guidelines for managers in their pursuit of
CSR actions and interventions (Davenport, 2000).
The next section highlights how a stakeholder CSR
approach – the EPS proposed by Spiller (2000) – was
used to collect and analyze CSR data in the context
of a sample of Lebanese and Syrian firms, allowing in
turn to draw relevant implications regarding the
usefulness of a stakeholder CSR approach.
Research methodology
Research hypotheses

The research methodology is consistent with
descriptive stakeholder theory, which seeks to
outline participants’ views of what the business
organization is doing vis-a-vis its stakeholders, as
well as the mechanisms through which different
views come into being (Brickson, 2007). This
descriptive stakeholder methodology will be sup-
plemented in turn by reference to the two other
veins of stakeholder theory, namely instrumental
stakeholder theory and normative stakeholder
theory. In the framework of these three branches of
stakeholder theory, the following research hypoth-
eses are derived and tested after being presented here
in the context of the corresponding CSR literature
in which they are respectively anchored.
Hypothesis 1 (H1) Developing country firms pri-
oritize their stakeholders based primarily on
instrumental considerations.

H1 draws on a large body of literature that shows
unequivocally that stakeholder management is often
conceived and approached instrumentally in relation
to its implications for the bottom line and firm per-
formance. Windsor argues in this respect that ’’a
leitmotiv of wealth creation progressively dominates
the managerial conception of responsibility’’
(Windsor, 2001). Firms tend to accord systematic
attention to primary stakeholder management in
anticipation of expected bottom line benefits. This
is also consistent with the view that firms priori-
tize their stakeholders and investments based on
stakeholder attributes of power, legitimacy and
urgency – or indirect instrumental considerations
(Mitchell et al., 1997). A wide range of empirical
studies in various contexts provide support for this

hypothesis (please see Uhlaner et al., 2004 and
Papasolomou et al., 2005 who highlight the salience
of the economic stakeholders in their respective
studies; de Madariaga and Valor, 2007 who report
differential firm attention across stakeholder groups
particularly in relation to customers, employees and
shareholders; Snider et al., 2003 who report that three
stakeholder groups stand out in their study as essential
to firm success namely customers, employees and
owners; and Galbreath, 2006 who makes the case for
an instrumental stakeholder management approach in
his empirical study). H1 is applicable globally and in
developing countries more specifically in view of the
scarcity of resources and the salience of resource
dependency theory in this particular context.
Hypothesis 2 (H2) Developing country firms are
according systematic attention to a limited range
of stakeholders.

H2 is related to H1 and consistent with an instru-
mental stakeholder management process. In view of
limited resources and bounded rationality consider-
ations, firms identify or prioritize a small number of
what they consider to be core or focal stakeholders,
with their stakeholder management process revol-
ving around these key stakeholders. This hypothesis
is grounded in the literature, with Clarkson (1995)
differentiating between primary and secondary
stakeholders and highlighting the inclination of firms
to focus on primary stakeholders. It is also reflected
in the writings of Carroll and Buckhholtz (2003),
who make a distinction between core, strategic and
environmental stakeholders. There is ample empir-
ical evidence suggesting that firms channel their
stakeholder management efforts around specific
stakeholders, with Knox et al. (2005) arguing for
example that the majority of FTSE companies in

their sample focused on less than three stakeholders;
de Madariaga and Valor (2007) arguing that their
sampled Spanish companies focus on three core
stakeholders and Galbreath (2006) revealing through
his study the criticality of focusing on few primary
internal stakeholders. H2 is applicable globally and in
developing countries more specifically where man-
agerial resources and attention are stretched thin in
light of limited budgets, competing pressures and less
favorable contextual conditions.
Hypothesis 3 (H3) Instrumental stakeholder man-
agement inclinations are counter-balanced or
nuanced by normative flavors, particularly vis-a-vis
the community stakeholder.
H3 draws on a large body of literature that argues that
firms need to maintain credibility and legitimacy as
responsible societal actors in a shared environment.
This is consistent with Wood’s (1991) legitimacy

principle and Davis’ (1960) iron law of responsibility.
H3 is also grounded in integrative theories and the
integrative social contract theory specifically (please
see Donaldson, 1982 and Donaldson and Dunfee,
1994), which assume that an implicit social contract
exists between business and society, implying indirect
obligations of business toward society. It is also
anchored in the corporate citizenship postulation, a
new notion connoting a sense of belonging and
responsibility to a community (Matten et al., 2003).
Finally, it is anchored in normative stakeholder the-
ory which postulates that the interests of all stake-
holders are of intrinsic value and merit consideration
based on ethical motives and principles (Freeman and
Philips, 2002). Normative stakeholder interpretations
are frequently encountered in the literature, with
various empirical studies reporting on firms’ strong
sense of obligation to the community stakeholder

group whose freedom and well-being is affected by
their activities (see Jamali and Mirshak, 2007; Mar-
golis and Walsh, 2003; Papasolomou et al., 2005).
Hypothesis 4 (H4) Stakeholder management is
affected by the relational attributes of specific
stakeholders (power, legitimacy, urgency) as well
the pressures they can exert on corporations.
220 Dima Jamali
H4 draws on a large body of literature which argues
that managers will prioritize stakeholder claims
according to their relative power, legitimacy and
urgency. It is thus consistent with Mitchell’s et al.’s
(1997) theory of stakeholder identification and sal-
ience which proposes that the cumulative number of
the three attributes of power, legitimacy and urgency
contributes to a stakeholder’ s claim being salient
from the perception of management. More recently,

Neville et al. (2004) have argued that an increase in
the degree of any of the three attributes will result in
an increase in stakeholder salience. H4 is also
consistent with the issues management and crisis
management literatures. H4 is finally consistent with
institutional theory that emphasizes that institutions
and stakeholders in the firm’s external environment
place pressures on firms, molding responses ranging
from passive conformity to active compromise,
defiance or strategic manipulation (Oliver, 1991).
In this respect, it draws on the institutional
isomorphism body of theory, and coercive institu-
tionalism in specific, which argues that firms will be
coerced to respond to the pressures exerted by
institutionalized stakeholders and that a tendency to
homogenization can be detected when formal and
informal pressures come to bear on business firms via
stakeholder activism and emerging cultural expec-

tations (Shepard et al., 1997).
Hypothesis 5 (H5) Multinational corporations have
a more balanced stakeholder management pro-
cess, translating into attention to a wider range of
stakeholders.
H5 draws on a large body of literature that seems to
suggest that MNCs are diffusing their responsibility
practices across countries in which they set shop
(Hawkins, 2006). It is also grounded in the body of
literature that seems to suggest the increased
sophistication of MNCs in relation to CSR generally
and stakeholder management specifically (Snider
et al., 2003). With the advent of globalization,
MNCs have unprecedented access to markets and
lower production costs. They also have come under
intense scrutiny by stakeholders and are thus
expected to be increasingly more proficient at
identifying and reconciling multiple stakeholder

interests. It is frequently mentioned that MNCs are
making systematic efforts at nurturing a wide
spectrum of trust-based stakeholder relationships
grounded in their greater appreciation and sensiti-
zation to risks and repercussions associated with non-
responsible action and the competitive advantages of
responsible social action. Various empirical studies
provide support to this hypothesis, suggesting that
MNCs are more prone to establish real dialogue with
their stakeholders (Foster and Jonker, 2005) and to
tailor their corporate community involvement
activities in response to the preferences of societal
stakeholders (Brammer and Millington, 2003).
Research sample
The first step in the research entailed an identifica-
tion of potential companies in both Lebanon and
Syria with an interest in CSR who could take part in
the research. The companies were contacted first by

phone, and then a formal introductory letter high-
lighting the aims of the research and its queries was
sent to the companies, with the EPS form enclosed.
An in-depth interview was then scheduled and
conducted by the author and two graduate assistants
(one in each country) with the person(s) responsible
for CSR. The interviewees were all managers,
occupying top managerial positions in their respec-
tive organizations (e.g., heads of public relations or
communications units; marketing managers and
development regional directors).
The companies that finally confirmed their par-
ticipation spanned different industries, including
banking and financial services, Internet/multi-media
services, telecommunications, energy and petro-
chemicals, food and beverage, hospitality, tobacco,
pharmaceuticals and sales/distribution (Table IV).
From a targeted pool of 20 companies operating in

Lebanon, 14 confirmed their participation in the
study by March 2006. Similarly, from a targeted pool
of 13 companies operating in Syria, 8 confirmed
their participation by late March, 2006. Interest-
ingly, the sample comprised companies that are both
national and international. Such sample composition
is potentially interesting, allowing a comparison of
the extent to which the CSR practices of local
companies (Lebanese or Syrian) differ from their
international counterparts as well as the extent to
which local subsidiaries are influenced by the CSR
approach of their mother firms.
Research tool and protocol
The EPS proposed by Spiller in 2000 was selected
for the primary component of this research.
According to Spiller (2000), the EPS extends the

Balanced Scorecard focus on satisfying shareholders
and customers to take account of the other primary
stakeholders comprising employees, suppliers, the
community and the environment. While the EPS
accords attention to the vision and purpose of the
firm and its ethical principles, the primary focus of
this diagnostic tool is on the company’s practices
vis-a-vis primary stakeholders. These have been
categorized in terms of the six main stakeholder
groups and considered in terms of an inventory of
60 best practices that the author compiled based on
an extensive review of international case studies and
investment analysis (Table V).
According to Spiller (2000), the EPS can be
prepared at varying levels of depth. It can simply be
an account of publicly available information vis-a-vis
key stakeholder issues. Quantitative measures can be
considered from the level of donations disclosed in

the company’s accounts to financial results as well as
qualitative assessments such as stakeholder percep-
tions of company performance included in media
reports, or through additional consultation with
stakeholders. Company involvement is, however,
key in terms of provision of relevant information,
as well as opportunity for discussion and justification
TABLE IV
Sample profile
Company name Type of industry Line of business
Lebanese sample
Company A
*
Financial services International banking and investment
Company B Banking and financial services Commercial, retail
and investment banking
Company C
*
Banking and financial services International banking and
investment

Company D Banking and financial services Banking services
Company E Insurance Financial protection and insurance
Company F Internet services Regional internet
services/connections
Company G
*
Multimedia services Provider of news and financial information
Company H Food and beverage Casual dining and fast food
restaurant
Company I
*
Food and beverage Global food service retailer
Company J
*
Hospitality Accommodation and recreational activities
Company K
*
Hospitality Accommodation and recreational activities
Company L
*
Tobacco Distribution and sales of tobacco products

Company M
*
Pharmaceuticals Development, manufacturing and marketing
of leading prescription medicines
Company N Sales and distribution Sales and distribution of
consumer products
(personal care, cosmetics and perfumery)
Syrian Sample
Company O Telecommunications GSM telephone lines and pre-
paid cards
Company P Telecommunications GSM telephone lines and pre-
paid cards
Company Q Management information systems Information and
computer technology
services
Company R Energy and petrochemicals Oil/natural gas
exploration and production
Company S Energy and petrochemicals Oil/natural gas
exploration and production
Company T Metal and contracting Metals and contracting
services
Company U Food and beverage Manufacturing and distribution
of soft drinks

Company V Food and beverage Manufacturing of consumer
packaged biscuits
and beverage products
* Subsidiaries of International Corporations
222 Dima Jamali
TABLE V
The EPS (Spiller, 2000)
Stakeholder Key business practices
Community Generous financial donations
Innovative giving
Support for education and job training programs
Direct involvement in community projects and affairs
Community volunteer programs
Support for the local community
Campaigning for environmental and social change
An employee-led approach to philanthropy
Efficient and effective community activity

Disclosure of environmental and social performance
Environment Environmental policies, organization and
management
Materials policy of reduction, reuse and recycling
Monitoring, minimizing and taking responsibility for releases to
the envi-
ronment
Waste management
Energy conservation
Effective emergency response
Public dialogue and disclosure
Product stewardship
Environmental requirements for suppliers
Environmental audits
Employees Fair remuneration
Effective communication
Learning and development opportunities
Fulfilling work
A healthy and safe work environment

Equal employment opportunities
Job security
Competent leadership
Community spirit
Social mission integration
Customers Industry-leading quality program
Value for money
Truthful promotion
Full product disclosure
Leadership in research and development
Minimal packaging
Rapid and respectful responses to customer comments/concerns
Customer dialogue
Safe products
Environmentally and socially responsible product composition
of areas of strength and concern from the perspective

of practicing managers. It is precisely such discus-
sions with managers relating to different conceptions
of the stakeholder management process relative to
specific stakeholder issues and the ability to gauge
variations in prioritization in light of instrumental vs
normative managerial inclinations and changing
societal expectations that help account for the
superiority and dynamism of a stakeholder approach
to CSR over more taxonomic models.
As illustrated in Table V, the terminology used in
the EPS is simple. The interview entailed a discus-
sion with the manager concerned of the relevant
practices across stakeholder groups as per Table V.
Numeric ratings to assess each of the 60 practices
were then respectively reflected upon and decided
by the managers interviewed, with a major strength
recorded as 2, a strength as 1, no strengths/concerns
as 0, a concern as )1 and a major concern as )2,
allowing in turn to obtain as per Spiller (2000) an

overall quantitative EPS score – with the EPS scores
ranging between 120 where each of the 60 practices
is a major strength and )120 where each of the 60
practices is a major concern. The interviews were
tape recorded with the ratings as dictated by the
managers noted down by the researcher and dis-
cussion of specific ratings often dwelled upon in the
context of the interview in way of further clarifi-
cation.
It should be noted that, while the EPS may
provide interesting insights in the context of an
exploratory research study, this approach is not
without its caveats or limitations. One such limita-
tion stems from the equal initial weighting of all 60
issues as reflected in the 5-point scale across issues
which could at the outset be contested based on
TABLE V
continued

Stakeholder Key business practices
Suppliers Develop and maintain long-term purchasing
relationships
Clear expectations
Pay fair prices and bills according to terms agreed upon
Fair and competent handling of conflicts and disputes
Reliable anticipated purchasing requirements
Encouragement to provide innovative suggestions
Assist suppliers to improve their environmental/social
performance
Utilize local suppliers
Sourcing from minority-owned suppliers
Inclusion of environmental/social criteria in the suppliers’
selection
Shareholders Good rate of long term return to shareholders
Disseminate comprehensive and clear information
Encourage staff ownership of shares
Develop and build relationships with shareholders
Clear dividend policy and payment of appropriate dividends
Corporate governance issues are well managed

Access to company’s directors and senior managers
Annual reports provide a picture of company’s performance
Clear long-term business strategy
Open communication with financial community
224 Dima Jamali
subjective value judgments or normative inclina-
tions. More fundamentally, however, is that the total
EPS score calculated may be construed to reflect
aggregative assumptions about the social impact or
social performance of the firm, a concept that is also
highly contestable (please see Norman and Mac-
Donald, 2004). The EPS scores are thus used in the
context of this study to conjure basic trends in
relation to stakeholder management practices and
not to provide an aggregative weighing of the
overall social performance of the firm.
The EPS methodology was nevertheless deemed

useful for various reasons. First, it reflected a simple
and comprehensive illustration of a stakeholder
approach to CSR. The EPS provides in this respect a
valuable tool for operationalizing the stakeholder
approach to CSR. Second, it provides an opportu-
nity for gauging the practices of a company vis-a-vis
its key stakeholders and allows a comparative
benchmark assessment of the patterns of firm per-
formance vis-a-vis different stakeholders relative to
other firms. This is particularly true when the EPS
scores derived are supplemented by discussions with
managers to gauge their assumptions, inclinations
and changing perspectives with regard to various
stakeholders and stakeholder issues.
Research findings
The EPS ratings for each of the case study companies
are presented in Tables VI and VII. These ratings
are not intended as a definitive statement of the

performance of the companies vis-a-vis core stake-
holders, but simply report the findings compiled
based on the interviews conducted. The EPS results
reflect the pioneering work of Company A, which
stands out for its successful balancing of the interests
and concerns of all six stakeholder groups. It also
reflects the consistent efforts of Company L at
managing successfully the spectrum of stakeholder
relationships. A question arises here as to whether
the legitimacy of CSR practices can and should be
questioned because of the nature of the industry in
question (e.g. tobacco).
As illustrated in Table VI, the EPS scores for the
companies operating in Lebanon (both national and
international) have ranged from a low of 40 to a high
of 114, with an average EPS score of 73. The pur-
pose here is not to consider the EPS scores as
reflective of aggregate social performance, but rather

to gauge stakeholder management patterns vis-a-vis
the different stakeholders. Companies operating
in Lebanon seem to be according the most attention
TABLE VI
Ethical performance scores – Lebanese sample
Company Name Community Environment Employees Customers
Suppliers Shareholders Total EPS
Company A
*
14 20 20 20 20 20 114
Company B 2 )2 14 13 7 16 50
Company C
*
9 13 15 14 6 13 70
Company D 12 )5 8 13 7 9 44
Company E 10 )9 16 16 13 20 66
Company F 5 0 17 18 4 6 50
Company G
*
3 0 12 9 6 10 40
Company H 13 7 20 20 17 18 95

Company I
*
9 12 18 19 17 15 90
Company J
*
15 4 18 16 14 16 83
Company K
*
10 4 18 12 5 12 61
Company L
*
10 18 20 18 18 19 103
Company M
*
10 2 20 18 14 16 80
Company N 13 12 17 10 11 13 76
Lebanese sample averages 10 5 17 16 11 15 73
to the traditional stakeholders, namely employees,

customers and shareholders, respectively, and only
limited attention to the silent stakeholders, including
the community and the environment. This is pos-
sibly because ‘silent stakeholders’ tend to be less
easily identifiable and less coherent in articulating
demands and hence relegated to lower priority in a
developing country context.
Results for the Syrian sample are comparable,
with consistently lower EPS scores across all stake-
holder groups (Table VII). The highest EPS score
for the Syrian sample is 98 and the lowest is 30, with
an average EPS score of 60. Similar to the Lebanese
sample, the weakest performance is in the environ-
mental dimension, followed by the community
dimension or in other words vis-a-vis the silent
stakeholder groups. The highest consideration is
accorded on the other hand to what Uhlaner et al.
(2004) refer to as the economic stakeholders, namely

customers and employees. It is clear from both tables
that stakeholders are accorded systematic attention
when they represent rational and/or economic
motives for the firm.
A comparative assessment of the EPS scores of
Lebanese and Syrian firms is shown in Table VIII.
When excluding the subsidiaries of international
corporations that may have potentially skewed the
EPS scores of the Lebanese sample, we notice that
the CSR performance of Lebanese and Syrian
companies vis-a-vis key stakeholders are comparable,
with Lebanese companies exhibiting a slightly
better performance vis-a-vis organizational and eco-
nomic stakeholders (e.g. employees, customers and
shareholders) but worse performance vis-a-vis the
environment. Overall, the findings suggest the
salience of an instrumental stakeholder approach in
developing countries (i.e. firms addressing stake-

holder interests that most directly affect performance).
Discussion of findings
An investigation into the application of the
stakeholder approach in the Lebanese and Syrian
contexts suggests a number of interesting findings
and insights. This section will dwell on the findings
TABLE VIII
A comparative benchmark – Lebanese vs Syrian samples
Community Environment Employees Customers Suppliers
Shareholders Total EPS
Lebanese sample (including *) 10 5 17 16 11 15 73
Syrian sample 9 4 13 13 10 10 60
Lebanese sample (excluding *) 9 1 15 15 10 14 64
Syrian sample 9 4 13 13 10 10 60
TABLE VII
Ethical performance scores – Syrian sample
Company Name Community Environment Employees Customers
Suppliers Shareholders Total EPS

Company O 13 1 17 13 11 17 72
Company P 18 10 18 18 14 20 98
Company Q 10 )2 20 17 17 4 66
Company R 12 6 16 6 7 13 60
Company S )1 14 8 9 0 0 30
Company T 11 9 4 9 10 5 48
Company U 6 12 15 19 13 10 75
Company V 5 )16 6 16 10 9 30
Syrian sample averages 9 4 13 13 10 10 60
226 Dima Jamali
obtained in more detail in relation to the hypotheses
derived from the literature. An articulation and
explanation of the main findings will be supple-
mented as appropriate by the opinions and perspec-
tives of the managers interviewed, which have been
recorded and compiled during the interviews and
can add much value here in terms of highlighting
relevant nuances. The identities of the respective

managers however will be kept anonymous.
Hypothesis 1 (H1) Developing country firms pri-
oritize their stakeholders based primarily on
instrumental considerations.
Our findings suggest that Lebanese and Syrian firms
seem to prioritize their stakeholders based on
instrumental considerations as reflected in the
higher EPS scores in relation to organizational and
economic stakeholders, namely employees, cus-
tomers and shareholders respectively (Tables VI and
VII). Discussions with managers from both contexts
suggest that they indeed tend to selectively address
stakeholder issues for instrumental reasons. One of
the managers dwelled on this point ‘‘our primary
mandate is to serve customers who in turn significantly
influence the performance of our business. Firms exist in
the first place to meet the needs of their customers.’’
Another manager highlighted the critical impor-

tance of good employee management in the sense
that ‘‘productivity gains resulting from enlightened em-
ployee management policies yield substantial performance
advantages over non responsible firms.’’ A similar view
was expressed by another manager noting that ‘‘how
employees are treated affects firm performance.’’A Leba-
nese manager summed it up nicely, ’’firms have to
manage stakeholder relationships strategically in order to
meet performance objectives.In the context of scarce re-
sources, we must ask if any specific stakeholder relation-
ship has the potential to generate advantages that
positively affect the bottom line.’’ Based on these two
sets of data H1 is accepted.
Hypothesis 2 (H2) Developing country firms are
according systematic attention to a limited range
of stakeholders.
Our findings suggest that Lebanese and Syrian firms
seem to be according systematic attention to a lim-

ited number of stakeholders as reflected in the dif-
ferential higher EPS scores in relation to three core
stakeholders namely employees, customers and
shareholders respectively. This is true for both
samples (Tables VI and VII) but is more clearly
accentuated in relation to the EPS scores of the
Lebanese sample. Discussions with managers in turn
reinforce these observations. One of the managers
expressed the view that despite the need to balance
the interests of different stakeholders, ‘‘competitive
pressures and traditional accounting systems tend to keep all
eyes focused on the short-term and key stakeholder rela-
tionships.’’ In an attempt to justify the limited
attention accorded to suppliers for example, one of
our managers expressed the view that ‘‘we do not have
the resources to ensure that appropriate controls are in place
to monitor our entire supply chain. Attention to a few key
stakeholders is thus dictated by practical considerations and

priorities.’’ Another manager pointed out that ‘‘our
objective is to attend to the needs of our customers and
employees, with highest priority placed on the profitable
creation and maintenance of superior customer value.’’ The
two sets of data suggest that H1 and H2 are indeed
related, and that H2 in turn is also accepted.
Hypothesis 3 (H3) Instrumental stakeholder man-
agement inclinations are counter-balanced or
nuanced by normative flavors, particularly vis-a-
vis the community stakeholder.
There is limited room to gauge whether H3 is
supported by looking at the EPS scores in Tables VI
and VII. The only relevant observation in this re-
spect is that the community stakeholder group has
received systematically higher EPS scores than the
environment stakeholder in both samples. But this
alone does not take us very far in way of evaluating
H3. Discussions with managers on the other hand

helped unveil interesting nuances in support of H3.
According to one of the managers, ’’we have an
obligation to assist the less fortunate community segments
and constituencies. This is a responsibility of which we are
conscious at all times.’’ Another manager expressed the
view that ‘‘firms should seek to alleviate local problems
and improve the quality of life of the local community.’’ A
more progressive view was expressed by another
manager who articulated that ’’business prosperity is
linked to the well-being of the local community.’’These
views are consistent with integrative social contract
theory and with the corporate citizenship postula-
tion, but more importantly seem to reflect norma-
tive flavors and inclinations vis-a-vis the community
stakeholder group specifically and hence H3 is ac-
cepted.

Hypothesis 4 (H4) Stakeholder management is af-
fected by the relational attributes of specific
stakeholders (power, legitimacy, urgency) as well
as the pressures they can exert on corporations.
H4 is difficult to assess systematically in light of the
EPS scores obtained and the fact that our data was
derived through interviews with managers without
equal consideration of stakeholder claims and per-
spectives. Nonetheless, it is safe to infer that our
managers consider the employees, customers,
shareholder and supplier stakeholder groups fol-
lowed by the community stakeholder group to wield
more power/legitimacy based on instrumental and
normative considerations. More importantly in the
context of our findings is the inferred limited pres-
sures exerted by institutions and institutionalized
stakeholders for environmental issues as can be
detected in the lowest EPS scores in relation to the

environmental stakeholder group in both samples
(Tables VI and VII). This is further supported by
discussions with managers, one of whom suggested
that ‘‘given more pressing priorities, our stakeholders are
least concerned about improvements in corporate environ-
mental performance.’’ Another manager expressed the
view that ‘‘there is not enough pressure on corporations to
assume fuller responsibility for their environmental impacts
and NGOs/environmental activist groups are virtually
dormant.’’One of the managers noted that ‘‘the
importance of corporate environmental performance is sim-
ply not appreciated in this neck of the world.’’ Given that
the environment is a silent stakeholder, environ-
mental issues tend to be channeled through coercive
institutional pressures, which is clearly not the case
in Syria and Lebanon and hence the relegation of the
environment to the lowest priority in both contexts.
Based on the above analysis, H4 is also accepted.

Hypothesis 5 (H5) Multinational corporations have
a more balanced stakeholder management pro-
cess, translating into attention to a wider range of
stakeholders.
Findings from the Lebanese context suggest that
multinational companies (MNCs) have transplanted
with them a strong sense of responsibility, given that
as illustrated in Table VI, the EPS scores of the
subsidiaries of international corporations which have
been included in the sample are better than those of
their local counterparts.
1
The EPS scores obtained
suggest that MNCs and their subsidiaries are making
systematic efforts at managing the spectrum of
stakeholder relationships. Discussions with MNC
managers support this view. One of the most
progressive managers of an MNC noted in this
respect that ’’it is essential to nurture a wide spectrum of

trust-based stakeholder relationships, which can serve as a
source of opportunity and competitive advantage. Positive
stakeholder relationships are associated with the on-going
participation of stakeholders with the firm, thus increasing
its stability and expanding its overall capacity, effectiveness
and consistency of response.’’ Another MNC manager
expressed the view that ‘‘balancing stakeholder
relationships is the only way to protect the firm against
constant environmental volatility and ultimate erosion of
financial benefits.’’While the stakeholder management
approach of MNCs seem also anchored in instru-
mental motivations, the EPS scores obtained suggest
that MNCs have a more balanced stakeholder
management process and are according attention to a
wider range of stakeholders and thus H5 is accepted.
Concluding remarks
The recent ascendancy of stakeholder theory is
grounded in the belief that firm–stakeholder rela-

tionships are the essential assets that managers must
manage (Post et al., 2002). While CSR aims to
define what responsibilities business ought to fulfill,
the stakeholder concept addresses the issue of whom
business is or should be accountable to (Kakabadse
et al., 2005). Both concepts are closely inter-related.
However, while the CSR concept still suffers from a
level of abstraction, the stakeholder approach offers a
practical alternative for assessing the performance of
firms vis-a-vis key stakeholder groups and hence also
indirectly gauging their CSP.
Indeed, although the literature has made progress
in terms of theoretical development, Clarkson’s
(1995) concern that the business and society field has
been hampered by the absence of widely accepted
definitions of core concepts remains a valid criticism
(Doh and Guay, 2006). This lack of clarity/
consensus has inhibited empirical testing of the

228 Dima Jamali
traditional business and society theories and trans-
lated into a relative paucity of systematic assessments
of the societal impacts of business operations
(Davenport, 2000). Clarkson’s (1995) integration of
the concepts of stakeholders and CSP thus consti-
tuted an advance in this respect, providing an
alternative theoretical lens, and making it easier for
research to accrue.
Stakeholder theory has accordingly witnessed a
new resurgence and ascendancy in the context of
CSR research. Brenner and Chochran postulated as
early as 1991 that stakeholder theory holds the
promise of becoming the theoretical centerpiece in a
field that is searching for workable paradigms. Doh
and Guay (2006) similarly find the adoption of a
stakeholder model as a potentially appropriate and

insightful theoretical lens, given its ability to
systematically identify social stakeholder issues, and
establish specific measures of performance. An
organization’s stakeholder management data can thus
be gathered and compared to other firms within and
across industries, making social auditing for internal
and external use both practical and possible (Dav-
enport, 2000).
Along these lines, this article has tried to make the
case for a stakeholder approach to CSR, by arguing
(1) that stakeholder theory in all its three veins or
branches can bring to the fore a set of new insights for
CSR academics and practitioners; (2) that the lan-
guage of stakeholder theory is easy to grasp by man-
agers as most firms understand and define obligations
and responsibilities vis-a-vis their traditional stake-
holders; and (3) that stakeholder theory seems easier
to maneuver in collecting and analyzing CSR data as

evidenced by the proliferation of empirical studies
that have essentially integrated a stakeholder approach
to CSR. It thus increasingly represents a concrete
alternative to traditional taxonomic models on offer.
Our empirical excursion in the Lebanese and
Syrian contexts has shown on the other hand how
stakeholder theory can be used to draw and test
new hypotheses, and to derive insights into general
CSR patterns/motivations. We have noted in this
respect the continued preoccupation of firms with
traditional core stakeholders (e.g., employees, cus-
tomers and shareholders) and the salience of an
instrumental stakeholder management approach
based on a narrow definition/understanding of
CSR, with the integration of some normative fla-
vors, vis-a-vis the community stakeholder. We
have also noted that stakeholder management is
affected by the relational attributes of stakeholders

and the pressures they can exert on corporations,
while also noting the increased proficiency of
MNCs in balancing a broader range of stakeholder
interests.
While no over-generalizations can be drawn from
our findings, particularly in relation to the latter two
hypotheses (H4 and H5), the study is generally
indicative of the possibilities and range of issues that
can be explored within the context a stakeholder
approach to CSR. The EPS methodology adopted
in turn has its own limitations, but these have been
noted and circumvented through using this tool for
gauging stakeholder management patterns (and not
as an aggregate measure of CSP) and by supple-
menting the data obtained through interviews with
managers. Our empirical study shows that stake-
holder methodology offers clear benefits in way of
deriving intuitive insights particularly in the context

of fleshing out specific stakeholder issues in the
context of familiar language that was easy to grasp
and relate to by managers.
This research allows in turn the delineation of
relevant suggestions for future research. There is a
need for more research along these lines within the
context of a stakeholder approach or framework.
Variations to the EPS can be considered and other
ways of classifying stakeholders (e.g., core vs. stra-
tegic vs. environmental) and differential weightings
of stakeholder issues which could yield equally
interesting insights. Research comparing the patterns
of stakeholder management of local companies and
international firms or subsidiaries is also very infor-
mative and can help build momentum towards
improved global practices. Finally more research
illuminating the patterns of stakeholder management
and CSR in developing countries is also very much

needed in view of the paucity of studies in such
contexts.
Note
1
With the exception of Reuters, which could be ac-
counted for in light of the nature of the industry (news
provider) and the relatively small size of the subsidiary
firm (comprising only 25 employees).
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E-mail: [email protected]

Stakeholder Management Capability:
A Discourse–Theoretical Approach Abe Zakhem
ABSTRACT. Since its inception, Stakeholder Manage-
ment Capability (SMC) has constituted a powerful
hermeneutic through which business organizations have
understood and leveraged stakeholder relationships. On
this model, achieving a high level of capability largely
depends on managerial ability to effectively bargain with
stakeholders and establish solidarity vis-à-vis the successful
negotiation, implementation, and execution of "win–
win" transactional exchanges. Against this account, it is
rightly pointed out that a transactional explanation of
stakeholder relationships, regarded by many as the bottom
line for stakeholder management, fails to provide mana-

gerial direction regarding how to resolve a variety of
normative stakeholder claims that resist commoditization.
In response to this issue, this paper has two overlapping
goals. It seeks to elaborate a discourse theoretical
approach to the problem by first drawing out Jurgen
Habermas’ theory of communicative action and delin-
eating the various types of rational discourse. Second, the
paper attempts to present concrete implications for SMC
relative to reshaping the contours of rational, process,
and transactional analysis in light of central discourse
theoretical conclusions.
KEY WORDS: critical theory, discourse ethics, stake-
holder management capability, stakeholder management
theory, communicative action
Introduction
Managerial stakeholder models often represent
attempts to understand and describe a wide variety of
business relationships as forms of transactional

exchange. In very general terms, transactional rela-
tionships involve the mutual and voluntary trade of
assets for gain. Now broadly construed, ‘‘assets’’
correspond to a wide range of tangible (e.g., capital
and labor) and intangible (e.g., goodwill and social
capital) interests and associated metrics. Since its ori-
ginal characterization (Freeman, 1984), the notion of
Stakeholder Management Capability (SMC) has
constituted one of the more influential and transac-
tional frameworks for understanding and leveraging
stakeholder relationships. Essentially, SMC involves
managerial analysis at rational, process, and transac-
tional levels. Corresponding to each level of analysis,
managers are charged with: 1) mapping stakeholders
and identifying their perceived stakes, 2) structuring
organizational processes to reflect and align organi-
zational and stakeholder goals and expectations, and
3) negotiating transactions or ‘‘bargains’’ with stake-

holders sufficient for ‘‘balancing’’ competing interests
and surfacing discontent. On this model, achieving a
high-level of capability, indeed, the very ‘‘bottom
line’’ for SMC, comes down to the success or failure
of transactional exchanges (Freeman, 1984, p.69).
Provided that managers execute ‘‘win–win’’
exchanges, SMC promises a powerful and useful
heuristic for effective strategic management (Carroll
and Bucholtz, 2006). Despite the optimism, this
strategic and largely instrumental approach has come
under fire. It is rightly pointed out that although a
transactional account of stakeholder relationships may
help to balance stakeholder currencies, SMC fails to
provide managerial direction regarding how to con-
ceptualize, address, and resolve normative interests
that resist commoditization. Adapting a common
example, normative demands for the end of ‘‘sweat-
shop’’ labor are often not leveraged as pleas for

balancing the transactional interests of ‘‘slave’’ labor
against the interests of the business organization.
Dr. Abe J. Zakhem works primarily in the areas of ethical
theory
and business ethics. He has worked in private industry as a
senior management consultant and chief operating officer and
is currently an assistant professor at Seton Hall University.
Journal of Business Ethics (2008) 79:395–405 � Springer 2007
DOI 10.1007/s10551-007-9405-5
On the contrary, claims of this kind constitute
outright rejections of exploitive labor practices by
way of a universal appeal to non-transferable human
rights. Without much effort we can identify a wide
variety of similar claims (e.g., deeply held commu-
nity values and demands for corporate legitimacy)
that call for the recognition and enforcement of
deeply held and non-economic moral obligations.
To reduce such interests to the status of negotiable

assets seems both morally objectionable and too
simple a model for effectively capturing the complex
nature of normative conflict (Orts and Strudler,
2002, p.222). The problem is further exacerbated by
the fact that any single strategic initiative can serve
as a normative flash point for competing stakeholder
conceptions of that, which is good, right, and
legitimate.
Certainly, the normative and practical limitations
of a purely transactional orientation to stakeholder
management constitutes a recognized concern.
Within stakeholder literature, this concern has been
met with rather traditional and largely deontological
attempts to instill in managerial analysis a ‘‘moral
point of view’’ that is sufficient for integrating
conceptions of the good and the right (Evan and
Freeman, 1993). Expanding the debate, this paper
addresses normative SMC concerns from a dis-

course–theoretical perspective. Accordingly, the first
part of the paper outlines the central features of
Jürgen Habermas’ theory of communicative action,
discourse ethics, and political theory and sets up a
general framework for a discourse–theoretical
approach. Particular attention will be paid to
defining a ‘‘moral point of view’’ from a discourse
ethical perspective. The second part advances
previous applications of Habermasian critical theory
to stakeholder management by recasting the SMC
categories of rational, process, and transactional
analysis in light of central discourse–theoretical
principles. Finally, the third and final part summa-
rizes the following conclusions. First, that rational
stakeholder mapping should be regarded as a
dynamic and discursive process that is ultimately
driven towards mutual understanding and partici-
patory solidarity. Second, that overcoming gaps

between discourse and practice requires continued
process analysis at both strategic and operational
levels. Lastly, that the ‘‘bottom line’’ for SMC must
be determined from a ‘‘moral point of view.’’
Communicative action and discourse
Echoing prominent social action theory, Habermas
supports the claim that social solidarity and order
require a basic level of norm regulated coordination
and conduct. Moving beyond traditional attempts to
account for the ‘‘binding’’ power of social norms,
Habermas advances the concept of communicative
practices. Properly defined, communicative practices
refer to those social interactions that are driven
towards dialogically motivating, sustaining, and
renewing intersubjective consensus and mutual
understanding (Habermas, 1984, p.17). In short,
Habermas explains that speakers of a language
express criticizable validity claims concerning how

social action ‘‘ought to be’’ structured. Speakers
further warrant that, if called upon, they will provide
publicly justified reasons and point to shared
convictions that support their contentions. Under-
standing the very conditions of validity, hearers
likewise commit to respond with counteracting
reasons in the event of disagreement and dispute.
Collectively, both parties commit to an intersub-
jective and consensual process of reasoning with
the illocutionary goal of achieving mutual
understanding. Habermas refers to this process as
‘‘communicative reasoning’’ (Habermas, 1984,
p.11). Within this framework, social norms ulti-
mately owe their ‘‘binding’’ force to the fact that
definitive obligations on the parts of speakers
and hearers are incurred in the collective pursuit of
rational and consensual agreement.
Although foundational, communicative practices

certainly do not account for or adequately explain all
of the mechanisms affecting social order and coor-
dination. In fact, communicative appeals are often
rejected in favor of dogmatically held worldviews
and perlocutionary aims and goals. Habermas uses
the category of ‘‘rational-purposive’’ action to
explain the mode of reasoning at work in such sit-
uations. As opposed to communicative reasoning and
action, rational-purposive reasoning is not oriented
towards mutual understanding and consent and tends
to assess situational significance relative to an agent’s
own ‘‘privately held’’ interests and standards of
choice. Although a necessary component of social
interaction and coordination, Habermas observes
that lifeworld orientations dominated by operation-
alized forms of rational-purposive reasoning tend to
396 Abe Zakhem

reduce meaningful action to ‘‘strategic action.’’
Strategic actions are thusly defined as attempts to
influence situations and the behavior of other social
agents with the intent of advancing individual ends
(Habermas, 1984).
The pervasive rationalization of strategic orienta-
tions, however, carries with it two interrelated
problems and one clear way out. First, Habermas
observes that the reduction of meaningful social
interaction to strategic considerations resoundingly
erodes the communicative ‘‘glue’’ that produces
mutual understanding and social solidarity. This
erosion in turn contributes to such social pathologies
as lifeworld fragmentation, legitimation crises, ano-
mie, alienation, and social dissonance (Habermas,
1987, p.143). Second, strategic actions tend to
devolve into the use and application of morally
questionable means, such as force, threats, violence,

or inducements to manipulate rational opponents.
For Habermas, the solution to this problem does not
rely on a simple denunciation of strategic actions. If
we desire to avoid the ill effects of strategic action,
then we first ought to harmonize our plans and
pursue our individual and private goals on the
condition of communicative agreement (Habermas,
1984, p.86). In other words, communicative agree-
ment and action must serve as the horizon against
which strategic actions are understood, evaluated,
and harmonized. When communicative bonds are
broken, which is often the case in modern, pluralistic
societies, we require a complementary process
through which the ‘‘fabric’’ of communicative
action is repaired (Smith, 2004, pp. 318–320).
In order to draw out such a process, recall Hab-
ermas’ theory of communicative action. As noted,
communicative action rests on expressed warrants

and commitments directed towards an intersubjec-
tive and dialogical pursuit of mutual understanding.
Distinct from motivating rational participants by way
of brute force or enticement, the rationality inherent
in communicative practices is ‘‘seen in the fact that a
communicatively achieved agreement must be based
in the end on reasons’’ (Habermas, 1984, p.17).
Further, all competent speakers of language are
aware of these conditions of validity and likewise
bear some level of communicative obligation. Thus
from the very beginning, communicative practices
point to a highly cognitive and ‘‘argumentative’’
form of conflict resolution. In this sense,
‘‘argumentation’’ does not refer to mere rhetorical
debate. On the contrary, ‘‘argumentation’’ marks a
reflective form of communicative action whereby
competent speakers can thematize and dispute
operative validity claims with the aim of achieving

mutual understanding (Habermas, 1984, p. 25). In
other words, Habermas regards the turn towards
argumentation as constituting a rational ‘‘court of
appeal’’ that makes it possible to reestablish com-
municative understanding in spite of participatory
disagreement (Habermas, 1984, p.17–18).
Habermas further explains that efforts to
argumentatively preserve communicative action in
the face of disagreement must meet certain dialogical
conditions. In general, these dialogical conditions
must collectively ensure that validity claims are the
objects of discussion and that discursive outputs
reflect an intersubjective and rationally motivated
agreement. Habermas specifies certain dialogical
conditions within the framework of the discourse
principle (D). In its most basic form, (D) states that
‘‘just those action norms are valid to which all
possibly affected persons could agree as participants

in rational discourses’’ (Habermas, 1996, p. 107). As
such, (D) is the point of view from which norms of
action can be impartially justified. Implied by (D),
the general requirements for rational discourse in-
clude: the exclusion of coercive forces and strategic
influences, truthfulness, freedom of access to infor-
mation, equal participatory rights, and reciprocal
role taking and ‘‘ideal role taking,’’ or the reciprocal
reversal and checking of participatory points of view.
As such, discourse creates the necessary space
whereby competent speakers disengage from probl-
ematized action contexts, isolate validity claims, and
reach a rationally and communicatively motivated
agreement (Habermas, 1996, pp.108–109).
Whereas (D) represents an ‘‘ideal’’ and ‘‘irreduc-
ible’’ order that is ‘‘built into’’ communicatively
structured forms of life in general, actual discourses
take on different forms and require different sorts of

discursive rules. Much of Habermas’ more recent
work in political theory and discourse ethics relies
on distinguishing the separate realms of pragmatic,
ethical, moral, and legitimacy based discourses
(Habermas, 1996; 1993; 1990). While each form of
discourse in some way reflects (D) and thus requires
the same basic sorts of discursive rules, operational-
ized discourses differ with respect to various features:
Stakeholder Management Capability 397
the discursive goals at hand, argumentative criteria,
the required level of preexisting and background
consensus, the scope of the validity claim in ques-
tion, and the status of discursive participants (Reed,
1999). In short, as the nature of the validity claim in
question changes, the contours of rational discourse
likewise change and imply different and more or less
stringent cognitive and procedural demands. In

order to draw out these distinctions, the following
sub-sections briefly explain the different forms of
discourse and clarify that which constitutes and gives
dialogical weight to reasoning from a ‘‘moral point
of view.’’
Pragmatic discourse
Pragmatic discourse centers on collectively deter-
mining the ‘‘best’’ way to achieve predetermined
ends, preferences, and goals. While engaged in
pragmatic discourse, participants advance various
strategic or technical recommendations and evaluate
possible courses of action in light of accepted
decision-making criteria. More often than not,
pragmatic strategies are assessed against a standard of
efficiency and direct participatory attention towards
the critical evaluation of empirical data (Habermas,
1996, p. 160). The selection of the particular
strategy would then provide a rational basis for

implementing certain situational definitions and
norms and providing a context for understanding
and interacting with others. It is critical to note that
a discursive assessment of pragmatic validity claims
requires a high-level of preexisting communicative
consensus relative to that which is determined to be
good, right, and legitimate. So, even as (D) ideally
requires the consideration of all possibly affected
persons, pragmatic discourse must draw on a pre-
viously achieved communicative consensus.
Accordingly, the outputs of pragmatic discourse
constitute ‘‘hypothetical’’ imperatives, ultimately
grounded in particular and historically and culturally
contingent social action situations. When this
shared level of meaning is called into question (i.e.,
the validity claims turn from pragmatic contesta-
tions to questions concerning the good, right, or
legitimate), the application of (D) takes a different

form as do the corresponding features of rational
discourse.
Ethical discourse
Distinct from pragmatic discourse, the goal of ethical
discourse is to collectively determine that which is
‘‘good’’ for an individual, community, or association.
As such, ethical discourse counts as one distinct realm
of normativity (Reed, 1999b). Engaging in ethical
discourse involves proffering arguments in the form of
‘‘clinical advice’’ with the intent of reaching a con-
sensus over guiding values or ‘‘deep preferences.’’ In
other words, ethical discourse engages participants in a
higher form of self-clarification and understanding by
which they become reflectively aware of deeper,
‘‘normative consonances in a common form of life’’
(Habermas, 1996, p. 160–161). Unlike pragmatic
claims, ethical arguments are assessed against a stan-
dard of authenticity and direct participatory attention

towards the critical evaluation of various forms of the
‘‘good’’ life. The selection of an authentic identity
would then provide a rationally motivated and eval-
uative basis for assessing certain pragmatic claims (e.g.,
organizational goals, aims, values, and pragmatic
argumentative criterion), determining situational def-
initions, and interacting and engaging with others.
Similar to strategic determinations regarding the
‘‘best’’ technical recommendations, it is important to
note that conceptions of the ‘‘good’’ are also groun-
ded in particular, non-generalizable life histories, the
validity claims therein constituting hypothetical or
conditional imperatives that are issued from and
evaluated against the backdrop of certain unpro-
blematic meaning structures. Within ethical discourse,
(D) is likewise indirectly applied as appealing to all
members sharing particular ‘‘traditions and strong
evaluations’’ (Habermas, 1996, p.108). Yet, when the

unproblematic meaning structures required for ethical
discourse are called into question, notably, on grounds
that particular ways of life are unjust or illegitimate, an
application of (D) makes additional demands.
Moral discourse
Distinct from both pragmatic and ethical discourse,
moral discourse is geared towards rationally and
collectively determining that which is right. As such,
moral questions constitute a second realm of norm-
ativity. Specifically, moral discourse involves the
redemption of maxims and norms relative to their
398 Abe Zakhem
compatibility with the maxims and norms of others
(Habermas, 1993, p.6). Towing a decidedly Kantian
line, Habermas argues that ‘‘only a maxim that can be
generalized from the perspective of all affected counts
as a norm that can command general assent and to that

extent is worthy of recognition, or, in other words, is
morally binding’’ (Habermas, 1993, p.8). For Hab-
ermas, however, if we expect to find a rationally
motivated and generally binding agreement, then we
must throw into relief those questions ‘‘that can be
resolved by an appeal to a generalizable interest; in
other words, questions of justice’’ (Habermas, 1993,
p.151). Parting with Kantian moral theory, considered
to permit a monological application of universality,
Habermas’ approach rests on the intersubjective and
dialogical determination of that which is just. So,
while moral discourse requires an application of the
principle of universalization (U), it is applied as a rule
of argumentation, stating that a norm is valid only if
all affected can accept the consequences and the side
effects its general observance can be anticipated to
have for the satisfaction of everyone’s interests (and
these consequences are preferred to those of known

alternative possibilities). Correspondingly, (D), as seen
from a ‘‘moral point of view’’, requires that only those
norms can claim to be valid that meet (or could meet)
with the approval of all affected in their capacity as
participants in a practical discourse (Habermas, 1993,
pp.65–66). Within this context, a ‘‘moral point of
view’’ involves separating out questions of justice and
then dialogically testing the validity of social norms
vis-à-vis (U). Distinct from pragmatic and ethical
discourse, the cognitive requirements of moral dis-
course requires an ‘‘idealizing’’ moment of univer-
sality that effectively distances participants from the
contexts of life in which their ‘‘particular identity’’ is
interwoven and as such proffers categorical action
norms (Habermas, 1993, p.12). Despite the possibility
of moral convergence, there remains the distinct
reality that in our complex, pluralistic, and fragmented
society conflict between that which is efficacious,

good, and are inevitable.
Legitimacy
Discourse regarding legitimacy constitutes a third
realm of normativity quite distinct from ethical and
moral orientations. Playing a largely integrative role,
legitimacy-based discourse aims at ensuring that
pragmatic, ethical, and moral discourses are supported
and that the outputs of which are reflected in larger
political and legislative institutions. Although a
complete explication and defense of Habermas’
political theory is well beyond the scope and intent of
this paper, the central argument is that legitimacy
ultimately derives from the communicative power of
citizens (Habermas, 1996, 151). As Darryl Reed
explains, ‘‘It is the exercise of communicative action
in public discourses (involving moral, ethical, and
pragmatic concerns) carried out through a web of
political institutions which generates the basis for

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