Copyright © 2008 McGraw-Hill Ryerson Ltd. 1 Chapter Four Understanding Stakeholder Relations Canadian Business and Society: Ethics & Responsibilities

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.2 Chapter Outline Basic Stakeholder Analysis Stakeholder Management Capability Stakeholder Matrix Mapping Diagnostic Typology of Organizational Stakeholders Stakeholder Identification and Salience Examples of Stakeholder Types Stakeholder Influence Strategies Stakeholder Collaboration Stakeholders and Social Capital

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.3 Basic Stakeholder Analysis 1. Who are our stakeholders? 2. What are their stakes? 3. What opportunities and challenges are presented to our firm? 4. What responsibilities (economic, legal, ethical, and philanthropic) does our firm have to all its stakeholders? 5. What strategies or actions should our firm take to best deal with stakeholder challenges and opportunities?

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.4 Stakeholder Management Capability The ability of managers to: (1) identify stakeholders and their influence; (2) develop the organizational practices to understand stakeholders; and (3) undertake direct contact with stakeholders.

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.5 Stakeholder Matrix Mapping A technique of categorizing an organization’s stakeholders by their influence according to two variables; usually involves plotting them on a two-by-two matrix:  Y Axis: Oppose or support corporation  X Axis: Importance of stakeholders

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.6 Diagnostic Typology of Organizational Stakeholders Type 1: Supportive stakeholder and strategy (i.e., involve) Type 2: The marginal stakeholder and strategy (i.e., monitor) Type 3: The non-supportive stakeholder and strategy (i.e., defend) Type 4: The mixed-blessing stakeholder and strategy (i.e., collaborate) Source: Savage et al., 1991

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.7 Stakeholder Identification and Salience Power  ability to get firm to do something that it would not otherwise do based on force, threat, incentives, etc. Legitimacy  Perception or assumption that actions of firm are desirable, proper, or appropriate Urgency  degree to which stakeholder’s claim or relationship calls for immediate attention Source: Mitchell et al., 1997

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.8 Examples of Stakeholder Types Latent stakeholders  Managers may not recognize their existence Expectant stakeholders  Require more attention from managers Definitive stakeholders  Management must address the claims of these stakeholders immediately Non-stakeholders Source: Mitchell et al., 1997

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.9 Stakeholder Influence Strategies Withholding strategies  stakeholder discontinues providing a resource Usage strategies  stakeholder continues to supply resource but specifies how it is to be used Influence pathway  when withholding and usage strategies are used by an ally of the stakeholder Source: Frooman, 1999

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.10 Stakeholder Collaboration Creating a foundation Organizational alignment Strategy development Trust building Evaluation Repeat the process Source: Svendsen, 1999

Chapter 4 Copyright © 2008 McGraw-Hill Ryerson Ltd.11 Stakeholders and Social Capital Definition: Any aspect of a corporation’s organizational arrangement that creates value and facilitates the actions of stakeholders within and external to the corporation. Question: What are the benefits to the firm of creating social capital?