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MGMT 1040 Chapter Notes -Stakeholder Management, Strategic Management, Fiduciary

Course Code
MGMT 1040
William(bill) Woof

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Chapter 3: The Stakeholder Approach to Business, Society, and Ethics
By Melody Cheng
Stake in stakeholder
Interest/share in an undertaking or legal claim of ownership
Any individual or group who can affect or is affected by the actions, decisions,
policies, practices or goals of the organization
3 views of the Firm
1) Production
Main stakeholder: individuals or groups that supply resources or bought
2) Managerial
Main stakeholder: business firms who have responsibilities toward other major
constituent groups
3) Stakeholder
Main stakeholder: the firm itself and its multilateral relationships with constituent or
stakeholder groups
Primary & secondary stakeholders
Primary social stakeholders
Direct stake in the organization and its success
Most influential
Ex. –Shareholders & investors
-Employees & managers
-Local communities
-Suppliers & other business partners
Secondary social stakeholders
Extremely influential in affecting reputation and public standing
Stake in organization more indirect
Can become a primary stakeholder when a claim’s urgency (boycott or
demonstration) takes precedence over its legitimacy
Ex. –Gov’t & regulators
-Civic institutions
-Social pressure groups
-Media & academic commentators
-Trade bodies
Typology of stakeholder attributes
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Perceived validity or appropriateness of a stakeholder’s claim to a stake
Ex. Owners, employees and customers have a high degree of legitimacy due to their
explicit, formal and direct relationships with a company
Ability or capacity to produce an effect (to get something done that otherwise
may not be done)
Ex. With the help of the media, a large, social, vocal activist group could wield power
over a business firm
Degree to which stakeholder claim on the business calls for the business’s
immediate attention or response
Ex. A union strike, boycott or picketing outside headquarters is considered urgent
Spatial distance between the organization and its stakeholders is a relevant
consideration in evaluating stakeholders’ importance and priority
Ex. Greater the proximity, greater the likelihood of relevant and important stakeholder
Stakeholder approaches
Sees stakeholders as instruments that may facilitate or impede the firm’s pursuit
of its strategic, business objectives
Broadens the idea of fiduciary responsibility to include stockholders and other
important stakeholders
Stakeholder synthesis
Holds that business does have moral responsibilities to stakeholders
3 values of the stakeholder model
Provides language and concepts to describe effectively the corporation or
organization in inclusive terms
Useful in portraying the relationship between the practice of stakeholder
management and resulting achievement of corporate performance goals such as
profitability, stability and growth
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