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

2. 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

3. a stakeholder
‘any group or individual who can affect or is affected by [a business] organizations’ objectives’ (Freeman, 1984: 46)
see 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

4. 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

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

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

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

8. 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

9. 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

10. 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

11. 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

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

13. 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

14. Glencore and Stakeholder Rights
theory in practice
Glencore and Stakeholder Rights
see Theory in Practice: Glencore and Stakeholder Rights
see also
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.

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

16. privileging more influential stakeholders over less influential stakeholders
see Video Activity 1.4

17. 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

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