186 Asia Pacific Journal of Human Resources 2009 47(2)

‘I used to be an employee but now I am a stakeholder’:

Implications of labelling employees as stakeholders

Michelle Greenwood and Eve Anderson

Monash University, Melbourne, Victoria, Australia

The term ‘stakeholder’ has become ubiquitous. By almost any definition, employees
are stakeholders in the firm. But what are the implications for employees to be
classified as stakeholders? The expression carries a connotation of social responsibility;
however, identification of persons as stakeholders remains controversial. This paper
addresses significant implications of the labelling of employed persons as stakeholders
which have not been fully explored in extant literature: the homogenising and
unifying of employee interests; the construction of employees as their roles; the
undermining of employment stability; and the risk to individual dignity and rights. It
is argued that act of labelling employees as stakeholders is more likely to serve the
interest of the organisation rather than the interests of employees.

Keywords: employees, ethics, pluralism, stakeholder identification, stakeholder theory

Stakeholders are everywhere. By most accounts, employees are important

stakeholders in the firm. According to the Michelin Group, ‘Few stakeholders
are as vital in a business as its workers. A worldwide company has to invest a
great deal to respect all staff interests. Staff have a big interest in the success of
the company’ (The Times 100 2006). For Chevron Texaco (2003) ‘employees
are vital stakeholders who are critical to helping our company meet its obli-
gations to investors, partners, customers and governments’. From a legal
perspective, Lynch-Fannon argues ‘employees are the most significant non-
shareholding corporate stakeholding group’ (2004, 155). Companies such as
Nokia (2007), Centrica (2007) and BHP Billiton (2007) list employees as stake-
holders in corporate responsibility reports.
But what does classifying a group of individual employees as stakeholders
mean? Identification as stakeholder groups as legitimate, powerful or urgent

Correspondence to: Dr Michelle Greenwood, Department of Management, Monash

University, Box 11e, Monash University Victoria 3800, Australia; fax: +613 9905 5412; e-mail:
michelle.greenwood@buseco.monash.edu.au

Asia Pacific Journal of Human Resources. Published by SAGE Publications (Los Angeles, London, New Delhi,
Singapore and Washington DC; www.sagepublications.com) on behalf of the Australian Human Resources
Institute. Copyright © 2009 Australian Human Resources Institute. Volume 47(2): 186–200. [1038-4111]
DOI: 10.1177/1038411109105441
 Implications of labelling employees as stakeholders 187

has allowed us to understand the attributes of the group and its salience from
the perspective of the organisation (Mitchell, Agle and Wood 1997). Scant
attention has been paid, however, to how these groups are constituted
(Greenwood 2007) or how individuals who are deemed to constitute such
groups are impacted by such classification.
This paper explores the implications of labelling of employees: diverse
employee interests tend to be suppressed by homogenising and unifying of
employee interests; employees are likely to be seen merely in terms of their role
in the organisation; stability of employment for individual employees (as
opposed to the employees as a group) is likely to be undermined; and there
may well be an associated risk to individual dignity and rights. It is argued
that act of labelling employees as stakeholders may well serve the interests of
the organisation rather than the interests of employees.

Ubiquity of the stakeholder concept

Stakeholder theory was originally cast as a theory of strategic management

(Freeman 1984) but soon become a significant theory of business ethics and of
the firm. The basis of the theory is that the role of the organisation and its
managers is to manage for the long-term benefits of organisational stakeholders.
The rationale for this claim is that stakeholders provide a contribution and/or
undertake risk and, as such, it is the duty of the firm to return benefit to stake-
holders (Phillips 1997). The contribution and risks may be financial or non-
financial in nature.
The term ‘stakeholder’ was first used in 19631 with the intention of general-
ising the notion of stockholders as the only group to whom management needs
to be responsive (Freeman 1984). More recently, Freeman has admitted that the
word stakeholder is ‘an obvious literary device meant to call into question the
emphasis on “stockholders”’ (Freeman 1999, 234). The concept was defined as
‘those groups without whose support the organisation would cease to exist’ and
originally included shareowners, employees, customers, lenders and society
(Freeman 1984, 31–2).
By now it is evident that ‘the term stakeholder is a powerful one’ (Phillips,
Freeman, and Wicks 2003, 479). The stakeholder concept has grown in
prominence over recent years due to public interest, increased coverage in the
media, concern about corporate governance, and its adoption by ‘third-way’
politics (Hutton 1998). The popular use of the term culminated in a speech
given by Tony Blair while he was leader of the UK opposition Labour party in

1
The term was first used in a research report produced by the Stanford Research Institute’s
Long Range Planning Service in 1963 (Freeman 1984).
188 Asia Pacific Journal of Human Resources 2009 47(2)

Figure 1 Percentage of annual reports from 1992 to 2007 using the term ‘stakeholder’

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%
1992

1994

1996

1998

2000

2002

2004

2006
Source: based on a search of Connect4 (2008) database of top 500 Australian companies

January 1996.2 According to Freeman and Phillips (2002, 332) ‘the past 15 years
has seen the development of the idea of stakeholders into an “idea of currency”’.
It is now used as everyday terminology in business (examples include Australian
Stock Exchange (ASX) 2001; Westpac 2002; World Economic Forum 2003). In
the opinion of Donaldson (2002, 107): ‘Today the term has arrived. Management
journals and consultants flaunt it, and articles devoted to one or another inter-
pretation of stakeholder theory are commonplace’.
The stakeholder concept represents a rare case where philosophical termi-
nology has become part of the popular lexicon (Bowie 2002). The use of the
term has increased significantly in top 500 Australian companies’ annual
reports from negligible in the early 1990s (<1%) to substantial (14–42%) in the
middle of the current decade as shown in figure 1.3 The years from 1992 to
2007 show a steady increase including a surge in 2004–05 which may be
explained by the introduction in 2003 of the Australian Stock Exchange’s
(ASX) Principles of good corporate governance guidelines (ASX 2003).
According to Freeman (1999) stakeholder management is fundamentally a
pragmatic concept. Regardless of the objectives of a firm, the effective firm will
manage the relationships that are important. Freeman intended stakeholder

2
Blair gave a pledge to create a ‘stakeholder economy’ in which ‘each citizen gets a stake’ in the
creation of wealth. He linked the stakeholder economy to a ‘need to build a relationship of trust
not just within a firm but within a society’ (Fairclough 2000, 89)
3
These figures are taken from a search of the Connect4 (2008) database of the top 500 Australian
companies.
 Implications of labelling employees as stakeholders 189

theory to be conceptually rigorous and prescriptive of managerial actions. It is

‘inherently prescriptive’ in the sense that it ‘prescribes action for organisational
managers in a rational sense’ (Freeman 1984, 47–8). When used unreflectively,
the managerial prescriptions and implications of stakeholder theory are almost
limitless (Phillips, Freeman, and Wicks 2003). Indeed the ‘ambiguity and inde-
terminacy of the concept may appeal to those … who seek to use it rhetorically’
(Stoney and Winstanley 2001, 625). The examination of practices at the level of
social transactions and interactions between organisational members (managers,
employees and other stakeholders) could help bridge the gap between academic
theory and practice (Cornelius and Gagnon 1999).

Identifying stakeholders

The issue of which groups or individuals are identified as organisational stake-

holders is significant because of implied assumptions about the strategic and
moral relationships between an organisation and its stakeholders. From a theo-
retical point of view, stakeholder identification is fundamental to consideration
of the moral content of relationships between organisations and stakeholders
(Kaler 2002). From a practical point of view, it is an immediate and observable
way of ascertaining the broader posture of an organisation towards its stake-
holder relationships (Miles and Friedman 2002).
Stakeholder theory offers a ‘maddening list of signals’ on how the questions
of stakeholder identification can be answered (Mitchell, Agle, and Wood 1997,
853). These include stakeholders identified as primary or secondary; as owners
and non-owners of the firm; as owners of capital or owners of less tangible assets;
as actors or those acted upon; as those existing in a voluntary or an involuntary
relationship with the firm; as right holders, contractors or moral claimants; as
resource providers to or dependents of the firm; as risk-takers or influencers;
and as legal principles to whom agent-managers bear a fiduciary duty (Mitchell,
Agle, and Wood 1997). The methods by which stakeholders are defined reflect
particular views of the stakeholder conception.
It is tempting to see a broad inclusive definition of stakeholders as more
moral or responsible; however, a narrow conception of the term is needed for
it to hold theoretical and practical value (Phillips 1999). Demarcation of stake-
holders is necessary to allow for a moral relationship between the organisation
and its stakeholders by excluding those without a moral stake. It is useful to
consider definitions as depicting the stakeholder as either having a moral claim
or as having a strategically important influence on the organisation. Kaler
(2002, 91) argues that, by dividing definitions of stakeholders into ‘claimant’
definitions and ‘influencer’ definitions, the moral duties of the organisation
can be greatly clarified.
Definitions of stakeholders as claimants imply that the business owes perfect
or imperfect duties to these stakeholders and, as such, are seen as moral defini-
tions. In the terminology used in the landmark model of stakeholder salience
190 Asia Pacific Journal of Human Resources 2009 47(2)

(Mitchell, Agle, and Wood 1997) claimant stakeholders are high on the attribute
of legitimacy rather than the attributes of power or urgency. Acknowledgement
of the possession of legitimate moral claims implies stakeholder’s rights to pursue
their own interests and, as such, conforms to pluralist ideology. In contrast, influencer
stakeholders have the attribute of power and/or urgency rather than legitimacy.4
Definitions of stakeholders as having an influence on the organisation, as being
influenced by the organisation, or as mutually influential, hold only strategic
considerations (Mitchell, Agle, and Wood 1997). Influencer definitions eschew
consideration for stakeholder interests and, as such, are seen as consistent with
unitarist assumptions.

Employees as stakeholders

Employees are identified as stakeholders in the organisation from almost all

stakeholder perspectives (Greenwood 2007). Employees are closely integrated
with the firm and this gives them a ‘peculiar role among stakeholders’ (Crane
and Matten 2004, 224). They contribute to the firm in fundamental ways.
However, employees actually ‘constitute’ the firm: they are in many cases the
most important factor or ‘resource’ of the corporation, they represent the
company towards other stakeholders, and they act in the name of the corpora-
tion (Crane and Matten 2004).
Employees are greatly affected by the success or failure of the firm; have
an investment of experience and specialised skills (Maltby and Wilkinson
1998), accrued resources, and personal relationships; and are dependent upon
their employer’s success through income or equity. People often make a
substantial investment in their work: a geographical move, a change in rela-
tionships, and further investment in training. Accompanying this investment,
workers often depend on their work for social relationships, self-identity, and
self-actualisation (Crane and Matten 2004). It is on this basis that employees
can be identified as having a moral claim (Kaler 2002) and high legitimacy
(Mitchell, Agle, and Wood 1997) in the firm (Greenwood and De Cieri 2006).
From the organisation’s perspective, employees have significant influence
on the firm and as such have high power relative to other stakeholders
(Mitchell, Agle, and Wood 1997). It is noted that individuals and groups often
belong to more than one stakeholder category (Greenwood 2001). An
employee also may be an owner, a member of the local community, a manager
in the organisation, active in a union or a combination of these. In addition,
stakeholder groups are rarely homogeneous (Greenwood 2001). Organisations
comprise individuals from different racial and cultural backgrounds, with

4
Claimants can of course be influencers/influenced. Indeed, it can be argued that claimants must
affect or be affected. Kaler (2003) notes that there seems no point in having a claim against
anyone or anything which cannot affect you in any way. Importantly, the opposite, however,
does not hold true: to be influenced does not mean that you have a claim.
 Implications of labelling employees as stakeholders 191

varying family circumstances, with different physical abilities and limitations

or employed under different work arrangements. Such individuals may have
markedly different interests in the workplace. In order be considered a stake-
holder group, however, these employees must share a number of elemental
interests (Greenwood and De Cieri 2006).
Despite holding the stakeholder attributes of high legitimacy and high
power, employees are not assured fair treatment by their employers. The position
under Australian corporate legislation is that, despite their substantial invest-
ment in the organisation, employees are vulnerable in regards to redundancies,
relocations or closures, or corporate insolvencies (Anderson et al. 2006).
Anderson et al. (2006) note that it is difficult for employees to avoid harmful
situations and to achieve their dues in such situations. Employees may not have
information on warning signs of corporate failures, nor can they protect their
interests as fully as other stakeholder groups. Where a company has failed,
claims of secured creditors are met before unsecured creditors, including
employees (albeit employees have priority among these groups). Jacoby (2005)
notes that in US public companies, many of the risks associated with business
have been shifted over time to ordinary employees.

Threats to pluralism in stakeholder theory

Stakeholder theory assumes that stakeholders are distinct groups, with their
own valid needs and interests, which differ from those of the organisation and
other stakeholder groups. Hence, stakeholder theory is fundamentally based
on pluralist ideology (Stoney and Winstanley 2001). The principles of stake-
holder theory (Evan and Freeman 1993) are in keeping with the pluralist
assumptions that labour is more than a commodity or factor of production,
that there exists inequality of bargaining power between employers and
employees in imperfect labour markets, that employers and employees are
likely to have differing goals and as such there is likely to be conflict between
the parties, and that employee voice is important in a democratic society (Budd
2004). Stakeholder theory is only meaningful in the context of diverse organ-
isational stakeholder interests and the potential for conflict in these interests.
In the words of Frooman (1999, 193), ‘If the potential for conflict did not exist
– that is if the firm and all its stakeholders were largely in agreement –
managers would have no need to concern themselves with stakeholder or
stakeholder theory.’
Stakeholder theory is vulnerable to the general shift in management
studies from the traditional focus on plural and shared interests to the modern
focus on shared values (Provis 1996). Stakeholder groups may be quite diverse
(for example, employees may belong to different ethic, gender, political groups)
but may still hold common interests in relation to the organisation.
Stakeholder groups may hold different values to the organisation (employees
192 Asia Pacific Journal of Human Resources 2009 47(2)

may value their family well being while the organisation may value return on
investment) but may have common interests (the survival of the company) to
the extent that they are motivated to work together. Concomitantly, the organ-
isation may take actions that are in the interest of the stakeholders, but that
does not necessarily mean that it does so with the same values at heart. It may
be that the interests of the organisation and the stakeholder coincide rather
than that the organisation holds the stakeholder’s values in any regard. The
assumption that an organisation is acting with the moral motivation driven by
shared values when it acts in the interests of its stakeholders is a fallacious
assumption (Greenwood 2007) that belies the need and capacity of the organ-
isation to act according to its own goals and undermines recognition of the
importance of an independent employee voice.
Furthermore, as a theory of collaboration, stakeholder theory sidesteps the
issue of power (Everett and Jamal 2004; Clegg and Hardy 1996). Using estab-
lished Marxist criticisms of pluralism, Stoney and Winstanley (2001) argue that
stakeholder theory provides an overly simplistic conceptualisation of power as
a commodity that can be negotiated between the organisation and stakeholder
groups and, thus, is limited in its explanation of the means by which different
interests of stakeholder groups arise and are generated in society. Indeed, it
has been argued that the stakeholder concept has been framed from the
perspective of the business firm and used for purposes of managerial control
and the disenfranchisement of powerless stakeholders (Banerjee 2000).
Without the capacity to distinguish the divergent interests of stakeholders from
those of the organisation, stakeholder theory may be readily subverted to a
unitarist concept.

Implications of labelling employees as stakeholders

By identifying a group of individual, such as employees, as a stakeholder group

it is assumed that the group holds homogeneous interests or values
(Greenwood 2001), is role based (Wolfe and Putler 2002), is stable (Maltby and
Wilkinson 1998), and exists as an entity (Gibson 2000). These assumptions are
analysed herewith to determine the implications of labelling employees as
stakeholders.

Homogenising and unifying employee interests

Most stakeholder theorists assume homogeneity of interests and priorities within

stakeholder groups (Wolfe and Putler 2002; Greenwood 2001) on the grounds
that stakeholder groups are delineated by shared interests. Shared interests,
however, do not imply shared values (Provis 1996) or absence of divergent
interests. Within stakeholder theory, those individuals or groups comprising a
stakeholder group share interests to the extent that they act in unison in their
 Implications of labelling employees as stakeholders 193

relationship with the organisation, or with other stakeholder groups. However,

members of a stakeholder group do not necessarily share broader interests or
values. Individual differences such as gender, religion, ethnicity, and roles
external to the organisation impinge on interests and priorities. In addition,
while group members may share opinions regarding particular issues directly
related to their stake, they may disagree on other issues: for example, employees
may agree on collective bargaining issues but disagree on philanthropic giving
(Wolfe and Putler 2002). Demographic features are also limited as defining
stakeholders, for example, all female constituents (employees, owners, bankers)
do not share a common set of interests.
Despite the potential for disparity of interests within employees as a group,
employers, and indeed industrial parties generally, often find it easier to
respond to employees as one homogenous group. For example, Watson et al.
(2003) outline the prevailing assumption in Australian workplaces that
employees are full-time, permanent and white males. While there is increasing
rhetoric regarding the importance of recognising the diversity of employees,
Wajcman (2000) and Dickens (1998; 1993) draw from a number of studies to
argue that, in practice, employers (and other industrial institutions) remain
profoundly gendered such that men are the standard against which women
are measured.
Stakeholder theory assumes that the organisation and its stakeholders hold
common interests, which provide the rationale for their relationship, and
divergent interests, thereby retaining separate identities. The existence of
common interests between the organisation and its stakeholders, however, does
not imply that they share common values. Alignment of employees’ values with
those of the organisation may be a means of managerial control (Provis 1996).
Evans (1993) reports successful application of shared enacted ‘values’ in a number
of large international firms including General Electric, LaFarge-Coppée and
British Petroleum. The specific intention of these organisations was to ensure
the achievement organisational goals by suppressing different interests.
Consultation with employees was an important tool, not for responding to
employee needs, but for shaping the enacted ‘values’ of employees to meet the
goals of the organisation.
Furthermore, a focus on shared employer and employee interests may result
in the marginalisation of divergent interests and disempower employees from
voicing or pursuing such interests. Kirkbride’s (1986a; 1986b) case-study demon-
strates how managerial language can be framed to place the interests of the
organisation first (emphasising the need for profitability). In this case a constant
reiteration of same values, beliefs and ideology pervaded consultative processes
with employees. Kirbride’s analysis suggested that employees were unconsciously
complying with management rhetoric; that the consultations lacked a critique of
managerially defined reality; and that employee interests were not raised.
Problems of homogeneity and shaping values are not limited to employees
as stakeholders. For example, in a study of 15 Australian co-operative research
194 Asia Pacific Journal of Human Resources 2009 47(2)

centres, communication activities aimed at external stakeholders focused on

influencing the homogeneity of stakeholder groups, as well as encouraging
these groups to think and act in terms of their group identity and the associ-
ated values, norms, and behaviour (Riedlinger, McKay, and Gallois 2004).

Constructing employees as their roles

Definitions of stakeholder groups are generally role based (Wolfe and Putler
2002), that is derived from the group’s role. The members of the group are
assumed to share significant interests related to their role, for example all
members of an employee group are assumed to expect fair working conditions.
The role-based model for the categorisation of organisational stakeholders
including employees is pervasive despite the unifying effects discussed above.
What differentiates the role of employees from other stakeholder groups is
that the role has been created by the organisation and membership of the group
is dependent on the organisation continuing to offer that role. There are two
significant problems with employees as stakeholders in this circumstance. First,
at common law, employees are required to act in the interests of their employers
(Stewart 2008). This establishes a legal onus on employees to suppress their
interests in favour of those of their employer. The nature of the employment
relationship inherently creates a hierarchy of interests and consequently a rela-
tionship of unequal power.
Second, as membership of the stakeholder group is dependent on continued
employment by the organisation, strong motivations for employees to suppress
their interests are created. Employees face the possibility of being displaced by
other employees if they fail to act in the interests of the organisation. A number
of case-studies of employer-controlled consultative mechanisms with employees
have revealed that employer interests are the overriding (and often the only)
matter considered (Kirkbride 1986a, 1986b; Lloyd 2001; Gollan 2002, 2003;
Butler 2005). In these case-studies employer-controlled consultative mechanisms
did not enable effective representation of employee interests. Rather than recog-
nising employees as stakeholders with legitimately different interests, the process
of employee consultation is one of ensuring organisational interests are placed
first – that is, managing the influence of employees. These case-studies conclude
that, for effective employee voice and autonomy, independence from managerial
control is required.

Stability for the stakeholder not for the employee

Another notion implied by stakeholder concept is that there is continuous

membership of a group by particular individuals or types of individuals.
Ongoing membership of the stakeholder groups by particular individuals is
becoming less likely in an environment marked by increasing change. In the
 Implications of labelling employees as stakeholders 195

employee stakeholder category, changing patterns of work emphasise flexibility

and the demise of long-term employment relationships (Maltby and Wilkinson
1998). Employment trends in Australia show a significant increase in the number
of non-permanent employees, with casual employment increasing from 19% of
employees in 1989 to 25% in 2007 and permanent full-time employment
decreasing from 74% to 62% (ABS 2007). Also non-permanent contractors,
agency workers and outworkers increased by nearly 40% in five years – up from
4.7% in 1990 to 6.5% in 1995 (AWIRS 1995). The increase in non-permanent
work has significant implications on both the nature of the stakeholder and the
nature of the stake. The departure of particular individuals from the stakeholder
group may undermine the group’s interests, unless replaced by others who hold
similar interests. For example, despite performing the same work, two part-time
job-sharing employees are likely to have significantly different interests to a full-
time employee.
If stability of the stakeholder group relies upon continuous employment of
a type of employee rather than particular employees, the impact of individ-
uals’ actions is mitigated. As the basis of the employment relationship becomes
one of expected variance, the impact of employee turnover may not felt as
problematic by the organisation. To the contrary, turnover may be welcomed
as flexibility is increasingly sought by organisations (Peetz 2006). Traditional
leverage provided employees by the voice mechanism of exit (Hirschman 1970)
is denied.
As employment becomes increasingly non-standard the choice about
remaining a member of the stakeholder group (that is remaining in employment)
increasingly resides with the organisation, not the employee. Casual workers,
agency and labour hire are engaged and put off as and when required by the
organisation (Stewart 2008). Though these types of arrangements may suit the
needs of some employees, their membership of this stakeholder group is
dependent on the organisation. Thus power over the stakeholder group increas-
ingly resides with the organisation (Watson et al. 2003). As noted above, stake-
holder theory treats notions of power simplistically, and this is especially
problematic for employees as stakeholders because their ongoing membership of
the stakeholder group resides with the organisation.
Several case-studies have investigated voice mechanisms for non-standard
employees (Markey, Hodgkinson, and Kowalczyk 2002; Pocock, Prosser, and
Bridge 2005; Underhill 2005). The consistent finding of these case-studies is
that many non-standard employees (part-time, casual and labour hire) have
diminished access to voice arrangements at their workplaces. A stakeholder
group with a constantly changing membership fails to attain the stability and
therefore the efficacy (knowledge, skills and willingness to pursue own
interests) required for effective voice (Hyman 1997; Butler 2005).
Further with a workforce that continuously changes in response to organ-
isational needs, employers can more readily shape the membership of the stake-
holder group to ensure that employees who are chosen meet organisational
196 Asia Pacific Journal of Human Resources 2009 47(2)

interests. A common organisational staffing strategy is to select staff who fit

the values of the organisation (Compton, Morrissey, and Nankervis 2002;
Williams 2002). Management of organisational culture is enhanced by the
management of employees as an organisationally constructed stakeholder
group rather than as individuals. Treatment of employees as an entity over and
above the sum of the individuals is discussed in the following section.

Managing an entity rather than employees

Stakeholder theory is advanced by the notion that the stakeholder group exists
beyond the sum of the individuals comprising that group and is an entity or
actor in its own right, thus as a collective moral agent. According to Gibson
(2000), stakeholder theory is predicated on the implicit notion of group interests;
otherwise it is simpler and clearer to depict individuals in relation to the organ-
isation. The company may offer respect and benefit to the stakeholder group as
a whole, but this is not equivalent to the moral treatment of individual
employees. Group application of collective-based universal rules may
undermine the dignity of individuals by not allowing for distinctive and indi-
vidualistic concerns (Koehn 1998; Gilligan 1982). Grouping employees in statis-
tical categories (Rowan 2000) risks restricting their personal freedom and
impinging on their individual interests.
Balanced against the need to respect the dignity of individuals is the need
for employees to have effective voice mechanisms. Research discussed earlier
suggests that for effective voice, independence from the organisation and
efficacy (knowledge, skills and willingness) are required. Butler (2005) further
argues that collectivity is needed in order to ensure independence and efficacy.
He draws from Kelly’s (1998) mobilisation theory to suggest that power is
derived from an independent collective group which has the resources to
attain, interpret and act on information. Gollan’s (2006) case-study of employee
representation confirms the importance of power, the ability to act effectively
and independently.
In contrast to the case-studies reported so far, a number of analyses of surveys
have found that direct forms of employee consultation result in improved mana-
gerial responsiveness to employees (Haynes, Boxall, and Macky 2005; Bryson,
Charlwood, and Forth 2006; Pyman et al. 2006). It is argued that this is because
direct voice enables the diversity of interests to be heard and precludes third-party
agents’ interests from distorting employees’ interest. These studies appear to
contradict the case-studies discussed above. It should be noted that, in the case-
studies, observers assessed the degree to which employer and employee interests
were discussed and responded, whereas the surveys reported actual employee
views on the responsiveness of managers. The survey findings may reflect the
acceptance by employees that their role is one of acting in their employer’s interests
or it may be that direct voice provides a better means of representing employee
 Implications of labelling employees as stakeholders 197

interests. The explanation is not known. Two of the surveys cited above (Bryson
et al. 2005 and Pyman et al. 2006) also suggest that direct voice is only effective if
it is accompanied by representative mechanisms.
Issues of respect for individual dignity and a diversity of interests are
similarly important to independent representative collectives as to employer-
controlled collective groups. As noted above, as the traditional form of inde-
pendent employee representation, trade unions have been characterised as
representing the white, male full-time worker (Watson et al. 2003; Wajcman
2000). But as Hyman (1997, 310) suggests, union members have ‘multiple, frag-
mentary and often contradictory grievances and aspirations’. Effective repre-
sentation of employee voice needs to legitimately represent the diversity of
employee interests. What independent collective bodies can provide is
autonomy, efficacy and power in representing employee interests (Hyman
1997); however, legitimate representation of diverse interests can be subsumed
by the collective interest.
This discussion has drawn from case-study analyses which suggest that
managerially controlled voice mechanisms are often a means for controlling
employees. Viewing stakeholders as homogenous, stable, role-based groups,
holding shared rather than divergent interests, aids management efforts to align
stakeholder interests with organisational goals. The classification of employees as
stakeholders allows organisations to shape employees into the entity they need or
want them to be. Employees are important to the organisation based on their
capacity to influence and be influenced by the company. By treating employees as
stakeholders, that is by treating them as a homogenous, role-based, stable entity, the
organisation can disregard individual rights, suppress dissent, and ignore exit,
thereby controlling employees’ influence on the company and concomitantly influ-
encing the employee group.

Conclusions and further research

Despite the pluralist underpinnings of stakeholder theory, the construction of

employees as stakeholders has the potential for unitarist application and conse-
quences. By classifying employees as stakeholders, employee values (in contrast
to interests) may be assumed, thereby treated as homogenous and aligned with
the organisation; employees may be categorised by their interests as employees
whereas they may have predominant interests in their other capacities,
including non-role-based capacities such as gender, race; and employees may
be treated as an entity not as individuals so that respect and duty of care
provided for the individual may be mitigated. By classifying employees as
influencer stakeholders, the purpose of consulting with employees is to ensure
that they are shaped to meet organisational interests. Independence, efficacy,
power and legitimacy are key aspects of effective voice for claimant stake-
holders and these aspects are often absent.
198 Asia Pacific Journal of Human Resources 2009 47(2)

Worthy of further investigation is the notion that the treatment of

employees as stakeholders potentially mitigates other relationships employees
may have with the firm. If employees are ‘stakeholders’ not ‘persons’, respect
for the individual and personal care may be compromised. If employees are
‘stakeholders’ not ‘owners’, then financial gain and structural control mecha-
nisms may be unavailable. If employees are ‘stakeholders’ not ‘union
members’, union membership and collective representation may decline. If
employees are ‘stakeholders’ not ‘employees’, their divergent values and
interest may be suppressed.

Michelle Greenwood (PhD, Monash) is a lecturer in the Department of Management, Monash University
where she teaches and researches in business ethics. Her fields of interest include ethical issues in
HRM, stakeholder theory, and corporate social reporting. She has published in various international
journals has written several book chapters and monographs, and presented at numerous international
conferences. Michelle currently serves on the editorial board of Journal of Business Ethics and is an
international collaborator with the Canadian Business Ethics Research Network.

Eve Anderson (MBus, VU; GradCert (HE), Monash) became a lecturer in the fields of industrial relations
and human resource management at Monash University after extensive employment in the field of
industrial relations. She has undertaken research in occupational health and safety, public sector
management, trade unions and employment relations.

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