Stakeholder Theory A very brief overview Dr. Randy Richards, Ph.D. St. Ambrose University

Development Descriptive As a strategy As an ethical approach

Who are the stakeholders? Shareholders/owners Employees Suppliers Customers “Community”

In whose interest should a corporation be managed? Traditional answer The stake holder alternative answer Who are the stakeholders? What are the stakes and expectations of each?

In whose interest: The Traditional Answer The shareholders/owners Managers have a fiduciary relationship to the owners to look after their interests Legal constraints on this duty Problems with this understanding of single view of responsibility

A shareholder mission statement From Coca-Cola: We exist to create value for our share owners on a long term basis by building a business that enhances the Coca-Cola company’s trademark. This is also our ultimate commitment. Discussion

In whose interest: the stake holder alternative Stockholders are one group among many. Stakeholders are those groups that have a “stake in” or claim on the resources / activities of the company. Each has a right to be treated as a end itself not just means for enrichment of the stockholders.

A stakeholder mission statement Cadbury Schweppes Our task is to build upon our tradition of quality and value and to provide brands, products, financial results and management performance that meet the interest of our shareholders. Discussion

Resource Base Stakeholders Investors Employees Customers

Owners / Shareholders Their stake: stocks, bonds, equity, etc. Their expectation: some ROI

Stakes and expectations: Employees Their stake: jobs, livelihood, career, human capital investments Their expectation: decent wages, security, benefits and meaningful work

Stakes and expectations: Customers Their stake: need for / purchases of products and services Their expectations: honesty, quality goods, fair pricing

Stakes and expectations: Suppliers Their stake: income from goods and services Their expectation: fairness, mutual prosperity, honesty

Stakes and expectations: the community Their stake: the environment, taxes, payroll, infrastructure improvements Their expectations: good citizenship, open partnership

How to decide in cases of conflicting interests? The traditional answer simple The stakeholder model much more difficult

The web of stakeholder relationships Can you serve the long term interests of the shareholders without paying attention to the others? The interconnectedness of wealth creation Long term relationships are source of wealth not individual transactions The key to organizational long term viability is manage the entire web of interconnected stakeholder relationships for everyone’s mutual benefit as much as possible.