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Society Suppliers Government
Who are the stakeholders of a firm?
•Normative (- Logic to consider certain classes as stakeholders
To whom do managers pay attention?
•Descriptive )- conditions to identify stakeholders
Broad v/s Narrow definition
•Broad view-The empirical reality
Who can affect the organisation-Influencers
Who are affected by the organisation- Claimants
•Narrow view-Pragmatic reality that managers can‟t and don‟t consider all stakeholder claims(risk factor)
Voluntary and involuntary stakeholders
Any group or individual who can affect or is affected by the achievement of the organisation‟sobjectives
What is a stake?
•The things that you loose or gain by taking the risk.
Eg: Monetary share in a business
•Stake may go beyond ownership
Eg:-Environmental hazards for public
“ A relationship among social actors in which one social actor A, can get another social actor B, to do something that B would not otherwise have done”(Dahl et al, 1957)
“to influence the firm”
Types of Power
1. Coercive Power : Based on the physical resources of force, violence or restraint
2. Utilitarian Power: Based on material or financial resources
3. Normative Power: Based on symbolic resources
A generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values and beliefs (Suchman, 1995)
“It is the legitimacy of the relationship in terms of desirability or appropriateness with the firm”
Urgency is defined as the degree to which stakeholder claims for immediate attention (Mitchell et. al, 1997)
The degree depends on
A) When a relationship or claim is of time sensitive
B) How critical/ important is the claim to the stakeholder
“ Calling for immediate attention or pressing”
The degree to which managers give priority to competing stakeholder claims.
•The morethe attributesthe morethe salience
•They are group of stakeholders who enter into a contractual relationship with all other stakeholders
•Direct control over the decision-making apparatus of the firm (Hill & Jones, 1992)
•They determine which stakeholders are salientand to whom they should pay attention.
Role of manager?
Stakeholder salience will be positively related to the cumulative number of stakeholder attributes – power, legitimacy, and urgency –perceived by managers to be present.
1.Low Salient Class (Latent)
2.Moderate Salient Class (Expectant)
3.High Salient Class
Class I-Latent Stakeholders
•Only one of three attributes & Low salience
•No attention from managers
•Little or no interaction/involvement
Eg: Those who spend a lot of money
2. Discretionary Stakeholders
•Likely to be recipients of corporate philanthropy
•No pressure on managers
•Eg. –Beneficiaries of charity,
Schools and hospitals
3. Demanding Stakeholders
•Those with urgent claims but no legitimacy or power
•Irritants for management but not worth considering
Eg:-People with unjustified grudges, serial complainers
Class 2 -Expectant Stakeholders
•2 Attributes & Moderate Salience
•Active rather than Passive
1. Dominant Stakeholders
Only stakeholders of an organisation/formal
Possess Power + Legitimacy
Eg:-Board of Directors, HR Dept.
2. Dangerous Stakeholders
•Those with powerfuland urgentclaims
Eg:-strikers and terrorists
3. Dependent Stakeholders
•Dependent on other bodies to carry out their will
•Lack the power to enforce their stake
Eg: –Residents & animals impacted by incidents like Oil Spill, Mining etc.
Class 3 -Definitive Stakeholders
•Possess the three attributes
•Top priority by the managers
Eg:-Democratic legitimacy achieved by a „Dangerous‟ nationalist party by winning national elections
DYNAMISM in RELATIONS
•A stakeholder can increase/decrease their salience by acquiring or losing one of the attributes: power, legitimacy or urgency
•Example: When DB receives a complaint, it moves from being a expectant to a definitive stakeholder
•Stakeholders possess combination of three critical attributes-power, legitimacy and urgency
•Salienceof a stakeholder is low when one attribute, moderate when two attributes and high when all three attributes
•As there is change in these variable-dynamic model
•Attributes are not objective, but based on human perception.
•Multinational oil & gas company
•Upstream segment -oil and natural gas exploration, field development and production.
•Downstream segment -product and service-led arm of focused on fuels, lubricants and petrochemicals.
•Shareholder-driven company (bottom-line)
•Attempted to gain higher stock values through higher profits at the expense of safety concerns
Deepwater Horizon oil Spill
•20 April 2010
•Gas release and explosion
•Macondoexploration well for BP in the Gulf of Mexico
Deep Water Horizon Oil Spill
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
•Environmental, health & economic consequences.
•Most importantly, it was not the first disaster linked to the BP brand.
Failed in stakeholder identification and prioritisation!
1.Undermined the extent of the damage!
2.No empathy with those affected!
3.It was too late to take moral responsibility before dealing with legal liabilities
4.Given priority to the company‟s shareholders and managers after those of the environment and the communities affected by the spill!
5.Denied various claims made by researchers
Stakeholders of BP Identified
Government(federal and state)
Businesses along the coast
Activity (as on 31 December 2013)
Response and clean-up
Claims, advances and settlements
Funding for the natural resource damage assessment process
Early restoration projects
(Reflects projects that BP and the trusteeshave reached agreement or agreement in principle)
State-led tourism campaigns
State-led seafood marketing programmes
State-led seafood testing
BP's payments related to Gulf Coast recovery
Stakeholders and their Classes for BP
Power Legitimacy Urgency
Businesses alongthe coast
•Managers should never forget that stakeholders change in salience, requiring different degrees and types of attention(Eg: ANC)
•This stakeholder approach can improve upon existing theories, which emphasize on power and interests
•Enables a more systematic classes of stakeholder-manager relationships