Ethics Theory and Business Practice 1.2 Rights Theory – Part Two Rights and Stakeholders

aims to explain how stakeholding offers a basis for considering rights in business contexts to highlight the need for businesses to consider the rights of affected stakeholders as well as those of influential stakeholders

a stakeholder ‘any group or individual who can affect or is affected by [a business] organizations’ objectives’ (Freeman, 1984: 46) see www.youtube.com/watch?v=17hnaKFjDU8. A two-minute video in which R. Edward Freeman defines stakeholders. Interestingly, having defined stakeholders as people who can affect or be affected by a businesses purpose Freeman defends it against criticism by focusing primarily on those who can help business to create value – i.e. influential stakeholders. He thus seems to undermine the comprehensiveness of his definition in an effort to defend its instrumentalist ‘strategic’ legitimacy. see Exercise 1.2a

two types of stakeholder influential stakeholders: groups or individuals who can influence a company’s achievement of its objectives affected stakeholders: groups or individuals who are affected by a company’s activities

identifying influential stakeholders what groups or individuals can influence a company’s achievement of its objectives? class activity

identifying affected stakeholders what groups or individuals may be affected by a company’s activities? class activity

influential stakeholders affected stakeholders influence effect emphasise the fact that some of the most obvious stakeholders fall into both categories company

influential stakeholders: reciprocity rights reciprocity: ‘the practice of exchanging things with others for mutual benefit’ (Oxford English Dictionary) stakeholders influence the success of a company by supporting it therefore they have, in exchange, a right to expect that their interests will be taken into account by that company

affected stakeholders: effect entails a right to consideration if our actions have an effect on other people, those people have a right to be taken into account by us similarly, if a company’s activity has an effect on stakeholders, those stakeholders have a right to be taken into account by that company

normative relationships ‘normative’ denotes some form of ethical content stakeholders have a normative relationship with a company if the company has ethical reasons to take them into account influential stakeholders have a normative relationship because of their reciprocity rights affected stakeholders have a normative relationship because effect entails a right to consideration

instrumental relationships ‘instrumental’ denotes helping something to achieve its objectives stakeholders have an instrumental relationship with a company if they help it to achieve its objectives influential stakeholders have an influential relationship with a company because their support helps it to achieve its objectives affected stakeholders do not have an instrumental relationship with a company because they have no influence on its achievement of its objectives the important point is that, if we only take the reciprocity rights influential stakeholders into account, we overlook the rights of some significant groups of affected stakeholders

influential stakeholders affected stakeholders instrumental relationship and normative relationship normative relationship company

is good ethics good for business? a company has normative reasons and instrumental reasons to look after its influential stakeholders therefore, in its relationships with influential stakeholders, good ethics is good for business a company has normative reasons to look after its affected stakeholders, but no instrumental reasons to do so therefore, in its relationships with affected stakeholders, good ethics is not necessarily good for business

Glencore and Stakeholder Rights theory in practice Glencore and Stakeholder Rights see Theory in Practice: Glencore and Stakeholder Rights see also http://www.youtube.com/watch?v=u6rSBifsvwg A three-minute video entitled ‘Glencore: Trading Away Life's Essentials’, which offers a critical overview of Glencore’s history and the way it uses its power.

variations in stakeholder influence variations in instrumental importance see Exercise 1.2: Comparing Stakeholders’ Instrumental Importance

privileging more influential stakeholders over less influential stakeholders www.youtube.com/watch?v=5tmOHk4Yugo see Video Activity 1.4

key points stakeholder rights offers one basis for thinking about businesses’ ethical responsibilities it is important to think about affected stakeholders as well as influential stakeholders the rights of (non-influential) affected stakeholders may get overlooked by companies who focus just on stakeholders’ instrumental importance

references Freeman, R.E. (1984) Strategic Management: A Stakeholder Approach. Boston: Pitman.