- 1. PROJECT STAKEHOLDERMANAGEMENT PROCESSPART 1: NORMATIVE
STAKEHOLDER THEORY Week 2 & 3
2. Lecture Outcome 2.1 Stakeholder Theories 2.2 Principles of
Stakeholder Management 2.3 Identifying Stakeholders2.3.1 Primary
Stakeholders2.3.2 Secondary Stakeholders2.3.3 Internal
Stakeholders2.3.4 External Stakeholders 2.4 Approaches in
Stakeholder Management 2.5 Examples: Implementing
PracticalStrategies in Managing Stakeholders 3. Stakeholder
Theories Normative StakeholderTheory StakeholderTheories Analytic
StakeholderTheory 4. Normative Stakeholder Theory Is consider the
core of stakeholder theory. Normative can refer to:The norms or
standard practices of society as it existsThe way one would live in
an ideal good societyWhat we ought to do, either in order to
achieve a goodsociety or unconnected with any notion of the good 5.
Type of Normative TheoriesTheories of the first kind In a just
society, business should be managed for the benefit ofstakeholders
(Ideal just society).Theories of the second kind Changes in the law
and institutions of society are required toensure greater corporate
responsibility towards stakeholders(Laws and institutions).Theories
of the third kind Manager should take account of the interest of
all thestakeholders in the firm, given the existing legal
andinstitutional environment (Corporate response). 6. Type of
Normative Theories NormativeNormative Normative theories of
thetheories of the theories of thefirst kind second kind third kind
Ecology & Feminist Theories Property Rights:Spirituality:
Starik Donaldson &(1994) Preston (1995) Kantian Stakeholder
StakeholderTheories Paradox: Integrative Social Goodpaster
(1991)Contract Theory: Public Policy:Donaldson &Boatright
(1994)Dunfee (1994, Aristotelian1999)Stakeholder Theory: Rawlsian
Wijnberg (2000)Stakeholder Theory The Common Good:Argandona (1998)
7. Normative theories 1st kind Ecology & Spirituality: Starik
(1994) Stariks contribution lies in his argument that non-entities,
particularly the natural environment, is asimportant as stakeholder
status due to the extent ofenvironment deterioration of the planet
caused byhuman. Starik includes the natural environment (living and
non-living) in terms of elements (particular landmarks),categories
of elements (trees, rocks) and systems ofelements (like river delta
systems on a micro scale andthe cosmos on a macro scale) 8.
Normative theories 1st kind Ecology & Spirituality: Starik
(1994)Proposed a very broad stakeholder definition.Ecology
&Spirituality: Any naturally occurring entity Starik which
affects or is affected by(1994) organizational performanceClear
example of unconstrained Justifies using 4first kind of NST
reasons:Heavily criticized 9. Normative Ecology & Spirituality:
Starik (1994) theories 1st kind Justifies using 4 reasons: #1The
natural environment is a business environment. As nature provides
many constraints on business life, itultimately affects and is
affected by organizations. Stakeholder idea to include
social-emotional (spiritual), ethical and legal (Eg. Slaves,
political prisoners who #2 although do not have political voice
would be counted asstakeholders). Traditional: Those without
political andeconomic power, to have their voices heard by
theorganization cannot be regarded as stakeholders. 10. Normative
Ecology & Spirituality: Starik (1994) theories 1st kind
Justifies using 4 reasons: Human stakeholders, acting as proxies
for the environment through activists groups and government #3
agencies, are necessary but insufficient given how degraded the
natural environment is. People can try to manage their interaction
with the natural #4 environment using stakeholder management
processesas evidenced by environmental audits impact statements.
11. Normative theories Kantian Stakeholder Theories 1st kind
Immanuel Kant (1724 1804) consideredmoral actions to arise from the
sense of duty(obligation). Focuses on the intention or motive
behind theact rather than the consequences that makeactions good.
Example: If corporate managers support acharity only because they
believe it will bringcheap advertising or enhance
corporatereputation, it cheapens the act and cannot bethought of as
moral. 12. Normative theoriesKantian Stakeholder Theories 1st kind
Kantian Capitalism: Evan & Freeman (1988, 1993) The true
purpose of the organization is topursue the interest of
stakeholders Management have the duty to stakeholders toact as
their agents and stakeholders mustparticipate in determining the
future directionof the firm in which they have a stake. 13.
Normative theoriesKantian Stakeholder Theories 1st kind Kantian
Capitalism: Evan & Freeman (1988, 1993) Any theory of
corporations must be consistentwith the Kantian principles
of:Corporate The corporation and its managers may not violate the
legitimate rights ofrights others to determine their own
future.Corporate The corporation and its managers are responsible
for the effects of their effects actions on others. 14. Normative
theoriesKantian Stakeholder Theories 1st kindKantian Capitalism:
Bowie (1999) Proposes 7 principles for Kantian approach to
business:The interests of all affected stakeholders #1 should be
considered on any decision a firm makes.Those affected by the firms
rules and policies #2 should participate in determining those rules
and policies before they are implemented. #3 One stakeholders
interests should notautomatically take priority for all decisions.
15. Normative theoriesKantian Stakeholder Theories 1st kindKantian
Capitalism: Bowie (1999) Proposes 7 principles for Kantian approach
to business:When stakeholder group interests conflict, #4 decisions
should not be made solely on thegrounds of there being a greater
number ofstakeholders in one group than in another. #5Universal
laws of nature and never treatpeople as means to an end. 16.
Normative theories Kantian Stakeholder Theories 1st kindKantian
Capitalism: Bowie (1999) Proposes 7 principles for Kantian approach
to business: #6Every profit-making firm has a limited, but genuine
duty of beneficence. #7 All firms must establish procedures
designedto ensure relations among stakeholders aregoverned by rules
of justice. 17. Normative theories Integrative Social Contract
Theory: 1st kind Donaldson & Dunfee (1994, 1999) ISCT was
intended to be a general businessethics theory. Is based on social
contract. Suggests that management should take intoaccount the
norms (not interests) of certainstakeholders because society
allowscorporations to operate in exchange for thepromotion of
societys interest. 18. Normative theories Integrative Social
Contract Theory: 1st kind Donaldson & Dunfee (1994, 1999)
Donaldson & Dunfee stated that a person isentitled to object or
to try and change a norm(voice), leave an economic group (exit),
orrefuse to obey a norm (civil disobedience). 19. Normative
theories Rawlsian Stakeholder Theory 1st kind John Rawls (1921
2002) Believe that politicsbased on justice and could not rely on
ourintuitions about good social outcomes. Based on fair play and
each person has equalright. 20. Normative theories Rawlsian
Stakeholder Theory 1st kind Fair contracts: Freeman (1994, 2004)
According to Freeman, stakeholder theoryshould reflect the
principle of stakeholderfairness based on the concept of fair play.
Introduced: 6 ground rules Doctrine of FairContract 21. Normative
theories Rawlsian Stakeholder Theory 1st kindFair contracts:
Freeman (1994, 2004)The The contract has to define processes
thatDoctrine of Fair Contractclarify entry, exit and
renegotiationprinciple ofconditions for stakeholders to decide
whenentry & exitan agreement exists and if it can be
fulfilled.The Procedures for changing the rules of theprinciple
ofgame must be agreed by unanimous(majority) consent.governanceThe
If a contract between A and B imposes acost on C, then C has the
option to becomeprinciple ofa party to the contract, and the
termsexternalities renegotiated. 22. Normative theoriesRawlsian
Stakeholder Theory 1st kind Fair contracts: Freeman (1994, 2004)The
principle All parties to the contract must share in theDoctrine of
Fair Contractof contracting cost of contracting.costsThe agency Any
agent must serve the interests of all stakeholders. It must resolve
conflicts principle within the bounds of the other principals.The
principle The corporation shall be managed as if itof limited can
continue to serve the interests of immortality stakeholders through
time. 23. Normative theories Rawlsian Stakeholder Theory 1st kind
Stakeholder fairness: Phillips (1997, 2003b) Obligations of
fairness arise when individuals orgroups of individuals interact
for mutual benefits. Such persons and groups engage in
voluntaryactivities that require mutual contribution andrestriction
of liberty. This voluntary activities provide a
normativejustification for the idea of stakeholdermanagement. 24.
Normative theories The Common Good: Argandona (1998) 1st kind Is
the only religion-based value used to developnormative stakeholder
model. The concept is largely associated with Christiantheologians.
The common good of a company is to create theconditions that will
enable its members toachieve their personal goals. The company
facilitates achieving thesepersonal goals through achievement of
its owngoal. 25. Normative theories Feminist Theories 2nd kind
Feminist ethics is related to virtues. It emphasis that caring is
good and thatmarginal voices must be heard. The ethics of care
focuses on virtues that areassociated with sympathy, compassion
andfriendship. 26. Normative theories Feminist Theories 2nd kind
Traditional economics-based approaches tomanagement have
concentrated on thelegalistic, contractual, masculine side of
humanexistence. Managers are presumed to view the corporationas
being competition with others and they needto act to protect and
further the interests of thecorporation. 27. Normative theories
Feminist Theories 2nd kind Feminist interpretations of stakeholder
theoryare classified as the 2nd kind of theories Theyargue that
norms, already existing in certainspheres and among certain people,
should beextended to other situations. They call for more
cooperative, caring type ofrelationship in which firms seek to
makedecisions that satisfy stakeholders, leading tosituations where
all parties are involved in arelationship gain. 28. Normative
theories Property Rights: Donaldson & Preston 3rd kind (1995)
Argue that the basis for stakeholder theory canbe based on the
evolving theory of property. Traditional view suggests that
corporationsshould be managed for the exclusive benefit ofthe
shareholders as their property rights aresuperior to all other
interests in the corporation. Donaldson & Preston Property
rights are notexclusively related to the interest of
owners.Property is viewed as a bundle of many rights,some of which
may be limited. 29. Normative theories Property Rights: Donaldson
& Preston 3rd kind (1995) Central to the notion of property is
the notion ofhuman rights and the restrictions againstharmful uses.
This brings the interest of non-ownerstakeholders into the picture
and does notsupport the claim that management should actonly in the
interest of the stakeholders. 30. Normative theoriesStakeholder
Paradox: Goodpaster (1991) 3rd kind Argues that stakeholder
synthesis is naturally eitherstrategic (business without ethics) or
multi-fiduciary(ethics without business).Strategic Stakeholder
Multi-fiduciary StakeholderManagement (SSM)Management (MSM) SSM is
non-moral MSM treats all stakeholders as Specific rules:having
equally important (a) Maximize the benefits andinterests and
deserving joint minimize the costs tomaximization. stockholder
group, short and long term. (b) Pay close attention to the interest
of other stakeholder groups that might potentially influence the
achievements of (a). 31. Normative theoriesStakeholder Paradox:
Goodpaster (1991) 3rd kind Goodpasters model attempts to develop
anaccount of the moral responsibilities ofmanagement that:a) Avoids
surrendering the moral relationship between management and
stakeholders as the strategic view does, whileb) Not transforming
stakeholder obligations into fiduciary obligations. 32. Normative
theories Public Policy: Boatright (1994) 3rd kind Boatright (1994)
asks what is so special aboutstakeholders? Why are they given
special status as discussedin Goodpastel (1991) 33. Normative
theories Public Policy: Boatright (1994) 3rd kind Argues that
shareholders do not need additionalfiduciary duties because they
are given rights,such as to elect directors and to
receivedividends, and have the ability to sell theirshares on the
open market if they aredisappointed with how the corporation is
beingrun. Fiduciary duties of management are and oughtto be
determined by considerations of publicpolicy. 34. Normative
theories Public Policy: Boatright (1994) 3rd kind If public policy
is accepted as the basis forfiduciary, a different solution can
besuggested. This is based on the premise that theobligations of
management to shareholderscan be differentiated according to
whether theyare fiduciary or non-fiduciary. 35. Normative theories
Public Policy: Boatright (1994) 3rd kind Fiduciary duties those for
which they areheld personally liable (act with due diligencewithin
the scope of their authority and exerciseordinary care and
prudence) Non-fiduciary duties All other obligations forwhich there
is no corresponding personalliability. 36. Normative theories
Aristotelian Stakeholder Theory: Wijnberg 3rd kind (2000) A moral
virtue is gained from action, a goodperson of practical wisdom
needs moraldilemmas: to have to act politically and to dealwith
conflicting interests. The corporation is a political association
in whichdecisions have to be made that affect the interestsof
different stakeholders and express the valuesof the
decision-makers. The end is the good life of the individual
decisionmaker, not the welfare of the corporation or thesociety.
37. Normative theoriesAristotelian Stakeholder Theory: Wijnberg 3rd
kind(2000) Recommendations from Wijnberg:1. Corporate structure
must permit sufficient autonomy to allow managers to practice their
practical wisdom.2. A systematic identification of shareholders and
their interests to identify their influence so that decision makers
can strive to acquire and exercise.3. Codes of conduct or mission
statement can be fruitfully used to enforce or encourage virtuous
decision-making.4. Education is of crucial importance. 38. END
