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Lecture 4

ADM1301 Lecture 4: Chapter 5

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Rumaisa Shaukat

Chapter 5-Stakeholders Who exactly are stakeholders?  Any group or individual who is affected by or can affect the achievement of an organization‟s objectives (Freeman: 1984)  Individuals and groups with a multitude of interests, expectations, and demands as to what business should provide to society.  Anyone or any organization with a perceived stake the organization activities and operation  We live in a pluralistic society therefore ether is diffusion of power  In a nutshell everyone is a stakeholder Defining Stakeholders/Publics • Geographics • Demographics: look into ecosystem to see how many demographic differences are there; ethnic political, religious • Psychographics: shows quality of life and more educated people = more aware of how business decision may affect the society • Covert power: this is something that you cannot see by legitimate authority but by networking and connections • Position • Reputation: shows who is influential • Membership: • Role in decision process: look into how people participate in public policy Pluralistic Society Diffusion of Power A pluralistic society is one in which there is wide decentralization and diversity of power concentrations. Pluralism implies the existence of many stakeholders Strengths  Prevents concentration of power: power is more decentralized; people have a more equal distribution of power  Maximizes freedom: everyone has freed of expression, belief etc.  Disperses individual allegiances  Creates diversified loyalties; more complexities; v. important in a multicultural Society like Canada that there will many differences  Provides safeguards Weaknesses  Pursuit of self-interest individual and organization may pursue their self- interest; may not necessarily be bad  Proliferates organizations with similar goals  Forces conflicts : different groups and individuals leads to a lot of completion and a lot of conflict  Promotes inefficiency Stakeholders vs. Stakeholder Viewpoints  Shareholder Viewpoint: o A business exists to make money – greatest efficiency is achieved through profit maximization  Work w/ a profit generating perspective- main goal is to make money and profits: o profits, > taxes paid to government for use in dealing with social issues o Property rights theory (corporation owned by shareholders)  Business in not equipped to deal with social issues because it more efficient and effective when it does what it was originally intended to do  Cost of socially responsibility must be passed to either the shareholders or the customers  Business is not government- its mangers and shareholders are not elected by the voting public and as such cannot be held accountable for its social activities  Many large multinational companies generate more revenues than some developing countries- giving these companies power over socially responsibility decision would further dilute the power of gov‟t  Stakeholder Viewpoint: o Business has a responsibility to do more than maximize profits o Social institution theory (society provides the very existence of business through legal frameworks)  Business has caused several problems so it has a responsibility to fix them o Supporters of the stakeholder viewpoint also argue that:  More secure longer-term profits can result when a company is socially responsible through risk mitigation and by enhancing the effectiveness and efficiency of the company.  Organisational reputation can be enhances resulting in the recruitment and retention of high-calibre staff  Market position and competitiveness can be improved through mitigating the potential negative actions of stakeholders  Ability to attract and build effective and efficient supply chain relationships and address change will be enhanced  Relationship with regulators would improve Shareholder View vs. Stakeholder View  Why view is correct? o The correct view is in the grey area o The stakeholder map is complex o First must identify who your stakeholders are and prioritize them o Cannot have one definite strategy to handle to stakeholder o Different stakeholder have different stake in the business Stakeholders: Some Realities 1. Stakeholders‟ interests will not always be clear 2. Some stakeholders will win, others will lose: it is almost impossible to please every stakeholder; it is not to 3. Stakeholders watch how the organization treats other stakeholders: stakeholders are gatekeepers; they watch how you treat your other stakeholders to make sure you‟re Socially Responsible 4. Stakeholder management will cost money, but might be cheaper than not managing stakeholders: Costly but may actually less costly in the long run 5. Stakeholders and stakeholder groups are not static 6. Stakeholder contributions are essential: if your stakeholder is dissatisfied w/ you it could negatively affect your operation Who are Typical Stakeholders? Key Questions in Stakeholder Management 1. Who are stakeholders? 2. What are stakeholders‟ stakes? 3. What opportunities and challenges do stakeholders represent? 4. What economic, legal, ethical, and philanthropic responsibilities does a firm have? 5. What strategies or actions should firms take to manage stakeholders‟ opportunities and challenges? Way of identifying key stakeholder created by Robert Sexty Key Question In Stakeholder Management Who are our stakeholders? Management must identify generic stakeholder groups and specific subgroups Generic subgroups ex, Employees sub-subgroup unionized and non-unionized emp
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