Social Theory Stakeholder theory and how it influences companies to voluntarily undertake corporate social responsibility reporting By Samuel Coyte

A business will manage it’s resources so as to please it’s multiple stakeholders In the organisation’s best interests to maintain it’s relationship with these parties A stakeholder is anyone who can affect or is affected by the success of a firm Stakeholders will usually consist of: Consumers Employees Suppliers Community Shareholders Financiers Government Stakeholder theory

Corporate Social Responsibility Reporting This form of reporting by companies is voluntary Disclosure of social and environmental activities Reasons why a firm might choose to use this include: Innovation Cost saving Brand differentiation Reputation Corporate Social Responsibility Reporting

The effect stakeholder theory has on CSR reporting Stakeholder theory presents a large motive for CSR reporting Consumers and suppliers are likely to favour altruistic actions and provide the company more business Governments are concerned with the well-being of the environment and society A greater pool of potential employees and retention of current ones The increased information given to financiers should benefit how they are perceived as a going concern Shareholders may value a company’s social impact and maintain their investment. However, they may also disapprove of the information, in that many positive programs that benefit society come at a cost and therefore reduces shareholder contributions Satisfying all these stakeholders will help ensure the continuity of a business “The driving force of an organisation becomes, under a voluntarism philosophy of management, to satisfy the needs of as many stakeholders as possible” (Freeman 1984) The effect stakeholder theory has on CSR reporting

Empirical evidence of stakeholder theory in CSR reporting Studies indicate that companies provided CSR reporting which was consistent with their stakeholder theory expectations (Roberts 1992) An analysis (by Smith, Adhikari and Tondker 2005) of 32 Norwegian/Danish companies and 26 US companies, saw greater voluntary reporting from Norway/Denmark, as was to be expected from stakeholder theory A study was done (by Boesso and Kumar 2007) on a sample of 36 companies who had received awards for their corporate communication and 36 who had not. It was found that there was a correlation between investors’ information requirements and how much a company disclosed voluntarily. There was also a relation between companies’ stakeholder engagement emphasis and their volume/quality of disclosure Empirical evidence of stakeholder theory in CSR reporting

Branches of Stakeholder Theory Ethical Managerial This branch asserts that a business should meet the expectations of all stakeholders equally, irrespective of the power or standing certain stakeholders have within the company This branch asserts that a business should focus on satisfying it’s more powerful stakeholder groups, due to the influence they can have on the business’ ability to perform The ethical branch has been met with criticism, as it is impractical for a business to meet the expectations of everyone. And so, the managerial branch is usually adopted when analysing how businesses attempt to satisfy their stakeholders Branches of Stakeholder Theory

Chatterjee et al. 2008, An analysis of the qualitative characteristics of management commentary reporting by New Zealand companies, last viewed 28th of Aug 2013, <http://eprints.qut.edu.au/18804/1/c18804.pdf> Demosthenous M (2011), Governance, Sustainability and Ethics, Pearson, Sydney. Forbes.com 2013, Six Reasons Companies should embrace CSR, last viewed 28th of Aug 2013, <http://www.forbes.com/sites/csr/2012/02/21/six- reasons-companies-should-embrace-csr/> Freeman, E (1984), Strategic Management: A Stakeholder Approach, p.75, Pitman, Boston. References