Rowlands & Medeleev (R&M)

Rowlands & Medeleev (R&M), a major listed European civil engineering company, was successful in its
bid to become principal (lead) contractor to build the Giant Dam Project in an East Asian country. The
board of R&M prided itself in observing the highest standards of corporate governance. R&M’s client,
the government of the East Asian country, had taken into account several factors in appointing the
principal contractor including each bidder’s track record in large civil engineering projects, the value of
the bid and a statement, required from each bidder, on how it would deal with the ‘sensitive issues’ and
publicity that might arise as a result of the project.

The Giant Dam Project was seen as vital to the East Asian country’s economic development as it would
provide a large amount of hydroelectric power. This was seen as a ‘clean energy’ driver of future
economic growth. The government was keen to point out that because hydroelectric power did not
involve the burning of fossil fuels, the power would be environmentally clean and would contribute to
the East Asian country’s ability to meet its internationally agreed carbon emission targets. This, in turn,
would contribute to the reduction of greenhouse gases in the environment. Critics, such as the
environmental pressure group ‘Stop-the-dam’, however, argued that the project was far too large and
the cost to the local environment would be unacceptable. Stop-the-dam was highly organized and,
according to press report in Europe was capable of disrupting progress on the dam by measures such as
creating ‘human barriers’ to the site and hiding people in tunnels who would have to be physically
removed before proceeding. A spokesman for Stop-the-dam said it would definitely be attempting to
resist the Giant Dam Project when construction started.

The project was intended to dam one of region’s largest rivers, thus creating a massive lake behind it.
The lake would, the critics claimed, not only displace an estimated 100,000 people from their homes,
but would also flood productive farmland and destroy several rare plant and animal habitats.

A number of important archaeological sites would also be lost. The largest community to be relocated
was the indigenous First Nation people who had lived on and farmed the land for an estimated thousand
years. A spokesman for the First Nation community said that the ‘true price’ of hydroelectric power was
‘misery and cruelty’. A press report said that whilst the First Nation would be unlikely to disrupt the
building of the dam, it was highly likely that they would protest and also attempt to mobilise opinion in
other parts of the world against the Giant Dam Project.

When it was announced that R&M had won the contract to build the Giant Dam Project, some of its
institutional shareholders contracted Richard Markovnikoff, the chairman. They wanted reassurance
that the company had fully taken the environmental issues and other risks into account. One fund
manager asked if Mr Markovonikoff could explain the sustainability implications of the projects to assess
whether R&M shares were still suitable for his environmentally sensitive clients. Mr Markovnikoff could
explain the sustainability implications of the project to assess whether R&M shares were still suitable for
his environmentally sensitive clients. Mr Markovnkoff said, through the company’s investor relations
department that he intended to give a statement at the next annual general meeting (AGM) that he
hoped would address these environmental concerns.

These and other issues were discussed at the last Board meeting where it was agreed that as part of
detailed risk assessment for the project, a preliminary step should be to identify key external
stakeholders and assess their claims and potential influence.
As an external consultant you have been approached by the Board to assist with this step.

Required: (Total 14 marks)

Draft a report extract for the Board of R&M that identifies key external stakeholders, describes their
claims and evaluates their potential level of influence on the project’s success.
(12 marks)

Professional skills mark will be awarded for demonstrating analysis skills for assessing the relative level
of stakeholder interest/ influence. (2
marks)

Key answer tips

It is not sufficient within SBL to merely describe a scenario- here stakeholder claims. Instead you must
assess and evaluate the situation in order to give relevant advice.

Marking Scheme- technical marks

Up to 3 marks for discussion of each stakeholders, including relative importance (and why), Marks
assessment of interest and assessment of influence
12

How well has the Not at all Not so well Quite well Very well
candidate
demonstrated
Professional
skills as follows:

Analytical skills The candidate The candidate The candidate The candidate
for assessing the merely described made an attempt demonstrated comprehensively
relative power the scenario with to discuss good analytical and accurately
and interest of no attempt to interest and skills by applying assessed
stakeholders analyse or influence but scenario stakeholder
prioritise adequately used information claims and put
stakeholders. relevant correctly to the forward a clear
information from problem. argument to
the scenario and justify their
failed to priortisation
prioritise claims.
However, their
prioritization
 lacked
justification.

0 0.5 1 2

ANSWER:

To: The Board of R&M

Date: Today

By: External Consultant

Subject: Key external Stakeholder for the Giant Dam Project

Introduction

A stakeholder is any person or group that can affect or be affected by an entity. According to the
case, stakeholders are those that can affect or be affected by the building of the Giant Dam Project.

All stakeholding is characterised by the making of ‘claims’ upon an organisation. Put simply,
stakeholders ‘want something’ although in some cases, the ‘want’ may not be known by the stakeholder
(such as future generations).

It is the task of management to decide on the strengths of each stakeholder’s claim in

formulating strategy and in making decisions. In most situations it is likely that some stakeholder claims
will be privileged over others.

Four of R&M’s external stakeholders.

– The client (the government of the East Asian country)

– Stop-the-dam pressure group

 – First Nation (the indigenous people group)

– The shareholder

The client (the government of the East Asian country) -key player

This stakeholder has a high level of interest in the building of Giant Dam Project, This stakeholder wants
the project completed to budget and on time. It may also be concerned to minimise negative publicity
in respect of the construction of the dam and the possible negative environmental consequences.

This stakeholder has also a high level of influence because it paying for the dam and could withhold
progress payments if it is unhappy with how the project is proceeding, including the management of
risks and publicity.

Given permission for the project

Stop-the-dam pressure group- slow consideration, key player

The vocal and well organised pressure group. This stakeholder wants the project stopped completely,
seemingly and slightly paradoxically, for environmental and social footprint reasons.

This stakeholder has high level of interest because it may delay and disrupt progress as much as
possible.

But the potential influence of their activities should considered as low as the creating ‘human barriers’
to the site and hiding people in tunnels will only cause a short-term delay.

power from newspaper

First Nation-key player

Lastly, the indigenous people group currently resident on the land behind the dam that would be
flooded after its construction.

This stakeholder will considered as high level of interest as they want the project stopped so they can
continue to live on and farm the land.

However, the possible increasing for the level of influence. Due to it was highly likely that they would
protest and also attempt to mobilise opinion in other parts of the world against the Giant Dam Project.

-reporting newspaper

The shareholder

The shareholders have a high level of interest due to they may consider the project whether maximize
their wealth by utilising their fund. ROI
However, the influence of major shareholder may also high as they may prohibit to finance the project if
the company is not achieve maximising their value and not ease problem of sensitive environmental
issue.

-control and check the R&M management