© 2018 Cengage 1

Chapter 3
The Stakeholder
Approach to
Business, Society,
and Ethics

© 2018 Cengage 2
 Learning Outcomes
1. Identify origins of the stakeholder concept by explaining what a
stake is and what a stakeholder is.
2. Explain who business’s stakeholders are in primary and secondary
terms.
3. Differentiate among the three stakeholder approaches—strategic,
multifiduciary, and synthesis.
4. Identify and explain the three values of the stakeholder model.
5. Name and describe the five key questions that capture the
essence of stakeholder management.
6. Explain major concepts in effective stakeholder management to
include stakeholder thinking, stakeholder culture, stakeholder
management capability, and stakeholder engagement.
7. Describe the three strategic steps toward global stakeholder
management.
© 2018 Cengage 3
 Chapter Outline
• Origins of the Stakeholder Concept
• Who Are Business’s Stakeholders?
• Stakeholder Approaches
• Three Values of the Stakeholder Model
• Stakeholder Management Five Key Questions
• Effective Stakeholder Management
• Strategic Steps Toward Global Stakeholder Management
• Summary
• Key Terms
• Discussion Questions
© 2018 Cengage 4
 Origins of the Stakeholder Concept
Stake -
• An interest or a share in an undertaking.

Can be categorized as:

An Interest A Right Ownership

Legal Right

Moral Right
5
© 2018 Cengage
 Stakeholders

Stakeholder -
• Any individual or group who can affect or
is affected by the actions, decisions,
policies, practices, or goals of the
organization.
• Stakeholder is a variant of the concept of
stockholder—an investor/owner of
businesses.

6
© 2018 Cengage
Who are Business’s Stakeholders?
Stockholders Employees

Customers Community Competitors

Business Stakeholder Groups

Special-Interest
Suppliers Media
Groups

General
Society
Public
© 2018 Cengage 7
 Three Views of the Firm

Production Managerial Stakeholder

View View View

© 2018 Cengage 8
Production and Managerial Views
of the Firm

© 2018 Cengage 9
Stakeholder View of the Firm

© 2018 Cengage 10
 Primary & Secondary Stakeholders

Primary stakeholders -
• Have a direct stake in the organization and
its success.
Secondary stakeholders -
• Have a public or special interest stake in
the organization that is more indirect.

11
© 2018 Cengage
 Social Stakeholders

Primary social Secondary social

stakeholders stakeholders
Shareholders and investors Government regulators
Employees and managers Civic institutions
Customers Social pressure groups
Local communities Media and academic
commentators
Suppliers and other Trade bodies
business partners
Competitors

12
© 2018 Cengage
 Nonsocial Stakeholders

Primary nonsocial Secondary nonsocial

stakeholders stakeholders
Natural environment Environmental interest
groups
Future generations Animal welfare
organizations
Nonhuman species

13
© 2018 Cengage
Important Stakeholder Attributes: Legitimacy,
Power, Urgency
Legitimacy -
• Refers to the perceived validity or
appropriateness of the stakeholder’s claim to a
stake.
Power -
• Refers to the ability or capacity of a stakeholder
to produce an effect.
Urgency -
• Refers to the degree to which the stakeholder’s
claim demands immediate attention or response.
Proximity -
• The spatial distance between the organization
and its stakeholders.
14
© 2018 Cengage
Stakeholder Typology

15
© 2018 Cengage
 Stakeholder Approaches
Strategic approach -
• Views stakeholders primarily as factors managers
should manage in pursuit of shareholder profits.
Multifiduciary approach -
• Views stakeholders as a group to which
management has a fiduciary responsibility.
Stakeholder synthesis approach -
• Considers stakeholders as a group to whom
management owes an ethical, but not a fiduciary,
obligation.

16
© 2018 Cengage
 Corporate Governance
Corporate Governance atau disebut juga tata kelola perusahaan
adalah suatu rangkaian proses yang terdiri dari aturan, kebijakan,
dan proses kerja karywan dan management perusahaan, dimana
bisnis perusahaan tersebut dioperasikan, diarahkan, diatur, dan
dikendalikan agar dapat meningkatkan kinerja perusahaan dan
secar berkesinambungan dengan tujuan menaikan nilai saham
perusahaannya sebagai bentuk pertanggungjawaban kepada
shareholders tanpa mengabaikan kepentingan stakeholder lain
seperti manager, komisaris, karyawan, kreditur dan masyarakat.

© 2018 Cengage 17
Nilai-nilai Corporate Governance

18
 Nilai-nilai Corporate Governance
- Transparansi: Hal material yang mempengaruhi pengambilan keputusan
tentang korporasi diungkapkan dengan akurat dan tepat waktu,
termasuk posisi dan kinerja keuangan, struktur governance, dan
kepemilikan saham.
- Akuntabilitas: berkaitan dengan tanggung jawab secara hukum yg
mencangkup rencana korporasi untuk mencapai visi misi, direksi yang
memantau jajaran dibawahnya, komisaris yang mengawasi direksi, dan
akuntabilitas direksi dan komisaris kepada pemegang saham.
- Responsibility: Berkaitan dengan tanggung jawab secara moral yang
mencangkup mengakui hak pemegang saham dan stakeholders dan
kerjasama untuk keberlanjutan usaha korporasi.
- Independensi: Direksi, komisaris, dan jajaran dibawahnya tidak saling
mendominasi dan tidak dapat diintervensi oleh pihak mana pun.
- Fairness (kesetaraan/ kewajaran): Melindungi hak dan kesetaraan
shareholders dan memperlakukan stakeholders dengan setara.

© 2018 Cengage 19
 Three Values
of the Stakeholder Model

Descriptive Value

Instrumental Value

Normative Value

20
© 2018 Cengage
Stakeholder Management: Five
Key Questions
1. Who are our organization’s stakeholders?
2. What are our stakeholders’ stakes?
3. What opportunities and challenges do our
stakeholders present to the firm?
4. What responsibilities (economic, legal, ethical,
and philanthropic) does the firm have to its
stakeholders?
5. What strategies or actions should the firm
take to best address stakeholder challenges
and opportunities?
21
© 2018 Cengage
© 2018 Cengage 22
Who Are Our Stakeholders?

© 2018 Cengage 23
 What Are
Our Stakeholders’ Stakes?
To identify them, consider -
• the nature and legitimacy of a group’s
stakes.
• the power of a group’s stakes.
• subgroups within a generic group.

24
© 2018 Cengage
What Opportunities and Challenges do
Stakeholders Present?

• Build productive working

relationships with stakeholders
Opportunities
• The potential for cooperation

• Representative of how the firm

handles its stakeholders
Challenges
• The potential for threat

© 2018 Cengage 25
 What Responsibilities Does a
Firm Have to its Stakeholders?
Apply Corporate Social Responsibility -
• Responsibilities are
• Economic
• Legal
• Ethical
• Philanthropic

26
© 2018 Cengage
The Stakeholder Responsibility Matrix

Stakeholders Economic Legal Ethical Philanthropic

Owners

Customers

Employees

Community

Public at large

Social Activists

Other

© 2018 Cengage 27
 What Strategies or Actions
Should Management Take?
• Do we deal directly or indirectly with
stakeholders?
• Do we take the offense or the defense in
dealing with stakeholders?
• Do we accommodate, negotiate,
manipulate, or resist stakeholder overtures?
• Do we employ a combination of the above
strategies or pursue a singular course of
action?
28
© 2018 Cengage
 Four Stakeholder Types -
1. The Supportive Stakeholder
• High potential for cooperation, low for threat
2. The Marginal Stakeholder
• Low potential for cooperation and threat
3. The Nonsupportive Stakeholder
• High potential for threat, low for cooperation
4. The Mixed-Blessing Stakeholder
• High on potential for threat & cooperation

29
© 2018 Cengage
 Effective
Stakeholder Management
Stakeholder thinking -
• The process of always reasoning in stakeholder
terms throughout the management process.
• Increases the complexity of decision-making,
but most consistent with today’s business
environment.
• Is facilitated by
• Stakeholder culture
• Stakeholder management capability
• Stakeholder corporation model
• Principles of stakeholder management
30
© 2018 Cengage
 Developing a Stakeholder Culture
Stakeholder Culture embraces the beliefs, values, and
practices that organizations have developed for addressing
stakeholder issues and relationships.

Agency Corporate egoist Instrumentalist Moralist Altruist

Little concern Great concern

for stakeholders for stakeholders

© 2018 Cengage 31
Stakeholder Management Capability

3-Transactional level

2-Process Level

1-Rational Level

© 2018 Cengage 32
 Stakeholder Engagement -
• An approach by which companies successfully
implement the transactional level of strategic
management capability.
• Interaction with stakeholders must be integrated into
every level of decision-making in the organization.
• A ladder of stakeholder engagement depicts a
continuum from low engagement to high
engagement.
• Transparency means working toward the open
corporation.
• Sustainability is the latest emphasis on engaging
stakeholders.
• Dialogue is primarily focused on exchanging
communications with stakeholder groups.
33
© 2018 Cengage
The Stakeholder Corporation

The central element:

Stakeholder inclusiveness

In the future, development of loyal relationships

with customers, employees, shareholders, and
other stakeholders will become one of the
most important determinants of success.

34
© 2018 Cengage
The “Clarkson Principles” of Stakeholder
Management

© 2018 Cengage 35
 Strategic Steps Toward Global Stakeholder
Management
1. Governing Philosophy
Integrate stakeholder management into the firm’s
governing philosophy.

2. Values Statement
Create a stakeholder-inclusive “values statement.”

3. Measurement System
Implement a stakeholder performance measurement system.

© 2018 Cengage 36
 Implementation
Indicators of successful stakeholder management
include:

Survival

Avoided costs

Continued acceptance and use

Expanded recognition and adoption

© 2018 Cengage 37
 Key Terms (1 of 2)
• Clarkson principles
• descriptive value (of stakeholder model)
• instrumental value (of stakeholder model)
• key questions (in stakeholder management)
• legitimacy
• managerial view of the firm
• marginal stakeholder
• mixed-blessing stakeholder
• multifiduciary approach (to stakeholders)
• nonsupportive stakeholder
• normative value (of stakeholder model)
• power
• primary social Stakeholders
• principles of stakeholder management
• process level
• production view of the firm
• proximity
© 2018 Cengage 38
 Key Terms (2 of 2)
• rational level • stakeholder map
• secondary nonsocial • stakeholder mindset
stakeholders • stakeholder responsibility
• secondary social stakeholders matrix
• stake • stakeholder symbiosis
• stakeholder • stakeholder thinking
• stakeholder corporation • stakeholder unity
• stakeholder culture • stakeholder view of the
• stakeholder engagement firm
• stakeholder inclusiveness • supportive stakeholder
• stakeholder management • synthesis approach to
• stakeholder management stakeholders
capability • transactional level
• urgency
© 2018 Cengage 39