CHAPTER 1

Introduction to Business
Ethics / Understanding
Corporate Social Responsibility

1
 CHAPTER 1-IN T R O D U C T
ION
• Ethics is the rational reflection on what is right, what is
wrong, what is just, what is unjust, what is good & what
is bad in terms of human behaviour.

• Some ethical principles are:

o Truthfulness
o Honesty
o Loyalty
o Respect
o Fairness
o Integrity
 ORIGIN OF ETHICS
• The word Ethics is derived from Latin word ‘Ethicus’ &
the Greek word ‘Ethikos’

• Ethics are an arrangement of decent principles & a branch

of attitude which defines what is good for individuals &
society

• There are many well known figures in the history of ethics,

Greek philosophers Plato & Aristotle, modern influences
include such people as Immanuel Kant, Jeremy Bentham,
John Stuart Mill, D.W.Ross, C.L.Stevenson, Alasdair
MacIntyre & John Rawls
 MEANING OF ETHICS
Ethics refers to the evaluation of
moral values, principles & standards of human
conduct & its application in daily life to determine
acceptable human behaviour.
Definition of Ethics
• Where does ethics fall? Prescribed law vs free
Choice
• Definition: Ethics
• Is the study of moral obligation involving the distinction
between right and wrong
• Business Ethics
• The study of the complex business practices and
behaviors that give rise to ethical issues in organizations
Business Ethics
• Business ethics is concerned with truth and justice,
and has a variety of aspects, such as the
expectations of society, fair competition,
advertising, public relations, social responsibility,
consumer autonomy, and corporate behaviour
• Business ethics examines ethical principles and
morals that can arise in a business environment
• Business ethics promote non-economic values
under a variety of headings (e.g. ethics code, social
responsibility, charters)

6
Business Ethics
• In this section, we want to look at the ethical dimension of
managerial decisions.
• Many decisions that managers make require looking at the
ethical dimension of managerial decisions.
• Many decisions that managers make require them to
consider who may be affected in terms of the results as
well as the process.
• We will consider four different views of ethics and look at
the factors that influence a manager’s ethics. We will
conclude by offering some suggestions for what
organisations can do to improve the ethical behaviour of
employees.
Four Different Approaches to Ethical decision-making

• Utilitarian approach
• Rights approach
• Theory of Justice approach
• Integrative social contracts approach
 Utilitarian view of ethics
• Decisions are made solely on the basis of their outcomes or consequences.
• A manager studies the effects of a particular action on the people directly
affected by it and takes a decision that will benefit most people
• The goal of utilitarianism is to provide the greatest good for the greatest
number.
• Following the utilitarian view, a manager can conclude that laying off 20
percent of the workforce in her plant is justified because it will increase the
plant’s profitability, improve job security for the remaining 80 percent, and
be in the best interest of stockholders.
• On the one hand, utilitarianism encourages efficiency and productivity and
is consistence with the goal of profit maximization.
• On the other hand, however, it can result in biased allocations of resources,
especially when some of those affected by the decision lack representation
or a voice in the decision.
• Utilitarian can also result in the rights of some stakeholders (minority) being
ignored.
Rights view of ethics
• According to the human rights approach, the individual is entitled
to fundamental freedom and rights that another cannot take
away
• An ethically correct decision is one that protects the rights of
those affected by it (e.g. human rights, bill of rights)
• This position is concerned with respecting and protecting
individual liberties and privilege, including the rights to privacy
freedom of conscience, free speech, and due process.
• This would include for example, protecting the rights of
employees to free speech when they report violations of laws by
their employers.
• The positive side of the rights perspective is that it protects
individuals’ freedom and privacy.
• But it has a negative side in organisations. It can present obstacles
to high productivity and efficiency by creating a work that is more
concerned with legally protecting individual’s rights than getting
the job done.
Theory of Justice approach
• States that ethical decisions are equitable, fair, and impartial
distribution of benefits and costs among individuals and
groups
• This calls for managers to impose and enforce rules fairly and
impartially.
• A manager would be using a theory-of justice perspective in
deciding to pay a new entry-level employee $7.50 an hour
over the minimum wage because he or she believes that the
minimum wage is inadequate to allow employees to meet
their basic financial obligations.
• Imposing standards of justice also comes with pluses and
minuses.
• It protects the interests of those stakeholders who may be
under represented or lack of power; but it can encourage a
sense of entitlement that might make employees reduce risk
taking, innovation, and productivity.
Integrative social contracts theory
• This view proposes combining empirical (what is) and
normative (what should be) approaches to business
ethics.
• This view of ethics is based on the integration of two
“contracts”: the general social contract among
economic participants that defines the ground rule for
doing business and a more specific contract among
specific members of a community that covers the
acceptable ways of behaving.
• This view of business ethics differ from the other three
in that it suggests managers need to look at existing
ethical norms in industries and corporations in order to
determine what is right and wrong.
What's the best ethical approach?

• Capitalists and managers follow utilitarian approach

• However, the emphasis on individual rights and
social justices forcing managers to use new
approaches
• Maintain right balance depending situation &
stakeholders
• Shortcut ethical test – based on common sense
• Treat others as you would want to be treated
• Intuition ethics – people have a moral sense of what
is right or wrong
Ethical Issues in organisations
• Many people with limited business experience find
themselves making decision about product quality,
advertising, pricing, hiring practices, and pollution control
• The values learn from family, church, and school may not
provide specific guidelines for these complex business
decisions
• Examples?
Is a particular advertisement deceptive?
Should a gift from a customer be considered a bribe, or is it a
special promotional incentive?
• Many business ethics decisions are close calls.
Practical Lessons From Business Ethics Research
• a) Ethical Hot Spots: Research reveals that
employees from all levels across industries
performed at least one illegal or unethical act from
a list of 25 questionable practices. E.g calling sick
when well, cheating on expenses accounts, forging
signatures, and giving or accept in kickbacks, to
ignoring violation of environmental laws.
• The top 10 workplace hot spots responsible for
triggering unethical and illegal conduct are:
Practical Lessons from Business
Ethics Research
• Ethical Hot Spots – Need to meet sales,
– Balancing work and family budget, or profit goals
– Poor internal – Little or no recognition of
communications achievements
– Poor leadership – Company politics
– Work hours, work load – Personal financial worries
– Lack of management – Insufficient resources
support
Practical Lessons From Business
Ethics Research (Cont’d)
(b) Pressure from Above
• A number of studies have uncovered the problem of superiors
pressuring subordinates to achieve results is widespread.
(E.g. Walt Pavlo, Zambeef)
• Excessive pressure to achieve results is a serious
problem, because it can cause otherwise good and
decent people to take ethical shortcuts just to keep their
jobs.
• The challenge for managers is to know where to draw
the line between motivation to excel and undue
pressure.
• Managers’ responses to pressure from above
1. Consciously avoid putting undue pressure on subordinates
(who may act unethically to relieve the pressure).
2. Prepare to deal with excessive organizational pressure.
Practical Lessons From Business
Ethics Research (Cont’d)
• c) Ambiguous Situations: These are situations in
which there are no clear-cut ethical guidelines.
Ethical codes can satisfy this need for guidelines.
• Surveys of purchasing managers and field sales
personnel showed that the respondents were
uncomfortable with ambiguous situations in which
there were no clear-cut ethical guidelines.
Practical Lessons From Business
Ethics Research (Cont’d)
• d) A Call to Action: Each manager needs to
understand her own personal code of ethics: what
is fair; what is right; what is wrong? Where is the
ethical line that I draw, the line beyond which I shall
not go? And where is the line beyond which I shall
not allow my organization to go?
• Rationalization: How Good People End Up Doing
Bad Things
• Perceiving an objectively questionable action as normal
and acceptable
How Employees Tend to Rationalize Unethical Conduct
Corporate social responsibility (CSR)
• Corporate social responsibility (CSR) has had many
definitions to date; one is the way a corporation achieves
a balance among its economic, social, and environmental
responsibilities in its operations so as to address
shareholder and other stakeholder expectations.
• CSR is known by many names, including corporate
responsibility, corporate accountability, corporate ethics,
corporate citizenship, sustainability, stewardship, and the
triple-E bottom line (economical, ethical, and
environmental).
• CSR is a general management concern; that is, it is
important to all aspects of business, and it is integrated
into a corporation's operations through its values, culture,
decision making, strategy, and reporting mechanisms.
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 Corporate social responsibility (CSR)
• A definition receiving some attention is the one developed
by the International Organization for Standardization (ISO).
This standards-setting organization already has formulated
standards for risk, quality, environmental, and energy
management.
• Its ISO 26000 standard defined social responsibility as the
responsibility of an organization for the impacts of its
decisions and activities on society and the environment,
through transparent and ethical behaviour that:
• contributes to sustainable development, including health
and the welfare of society;
• takes into account the expectations of stakeholders;
• is in compliance with applicable Jaw and consistent with
international norms of behaviour; and
• is integrated throughout the organization and practised in its
relationships
 Corporate citizenship
• Corporate citizenship has recently become a
commonly used term to describe the role of business
in society.
• The term appears in the academic literature and
business media and is used by corporations to
describe their activities. Consulting firms promote
their version of corporate citizenship and sell services
to assist corporations in establishing and describing
their citizenship activities.
• University research centres have been established on
the topic, numerous books describe the concept, and
there is a Journal of Corporate Citizenship.

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Corporate citizenship
• Despite the common usage of the term, definitions vary.
Corporate citizenship occurs when a corporation
demonstrates that it takes into account its complete impact
on society and the environment as well as its economic
influence.
• It concerns the economic, ethical or social, and
environmental responsibilities to all stakeholders involved,
with consideration given to inputs from various stakeholders
and the practices of corporations to develop relationships
with stakeholders.
• Many justifications for corporate citizenship exist, with one
of the most frequently referenced being the "Business Case
for Corporate Citizenship" that was posted on the World
Economic Forum website.
• According to this report, good corporate citizenship can
provide business benefits in eight areas: 24
Corporate citizenship
• Reputation management-A corporate reputation is
built and maintained by fulfilling the expectations
of multiple stakeholders.
• Risk profile and risk management-Risk is reduced
when corporations understand stakeholder
concerns.
• Employee recruitment, motivation, and retention-
Obtaining and keeping employees is made easier
for companies known as good corporate citizens.
• Investor relations and access to capital-Many
investors are interested in non-financial as well as
financial performance, and there is a proven link
between good corporate citizenship and good
financial performance. 25
Corporate citizenship
• Learning and innovation-Corporate citizenship objectives can
encourage creativity and innovation.
• Competitiveness and, market positioning-Increasingly,
consumers are inquiring about the corporate citizenship
performance of companies and tend to be loyal to those with
a good record.
• Operational efficiency-A focus on corporate citizenship can
lead to direct improvements to the bottom line.
• Licence to operate-Companies with a good record of
corporate citizenship are given greater leeway when
problems occur and are less subject to unfair criticism.
• This list illustrates the broad scope of activities and
stakeholders that are impacted by corporate citizenship
practices, including on a global scale. The report concluded
that increasing corporate citizenship was an integral part of
good business management. 26
Chapter 2- Stakeholder
Management
Origins of the Stakeholder
Concept
• The stakeholder concept has become a key to
understanding business and society relationships.
The term stakeholder is a variant of the more
familiar and traditional concept of stockholders—the
investors in or owners of businesses.
• Just as a private individual might own his or her
house, automobile, or iPod, a stockholder owns a
portion or a share of one or more businesses. Thus, a
stockholder is also a stakeholder.
• However, stockholders are just one group of many
legitimate stakeholders that business and
organizations must address today to be effective.
 WHAT I S THE STAKE IN STAKEHOLDER?
• A stake is an interest in or a share in an
undertaking. If a group is planning to go out to
dinner and a movie for the evening, each person
in the group has a stake, or interest, in the
group’s decision. No money has yet been spent,
but each member sees his or her interest
(preference, taste, priority) in the decision.
• A stake may also be a claim. A claim is a demand
for something due or believed to be due.
• We can see clearly that an owner or a
stockholder has an interest in and an ownership
of a share of a business.
STAKE
• The idea of a stake can range from simply an interest in an
undertaking at one extreme to a legal claim of ownership
at the other extreme. In between these two extremes
might be a “right” to something. Such a right might be a
legal right to certain treatment rather than a legal claim of
ownership, such as that of a shareholder.
• Legal rights might include the right to fair treatment (e.g.,
not to be discriminated against) or the right to privacy (not
to have one’s privacy invaded or abridged). A right also
might be thought of as a moral right, such as that
expressed by an employee: “I’ve got a right not to be fired
because I’ve worked here thirty years, and I’ve given this
firm the best years of my life.” Or a consumer might say,
• “I’ve got a right to a safe product after all I’ve paid for this.”
2
 WHAT I S A STAKEHOLDER?
• It follows, then, that a stakeholder is an individual or a
group that has one or more of the various kinds of stakes in
the organization. Just as stakeholders may be affected by
the actions, decisions, policies, or practices of the business
firm, these stakeholders also may affect the organization’s
actions, decisions, policies, or practices. With stakeholders,
therefore, there is a potential two-way interaction or
exchange of influence.
• In short, a stakeholder may be thought of as “any individual
or group who can affect or is affected by the actions,
decisions, policies, practices, or goals of the organization.”
• This definition is quite broad, but in this broad concept, the
organization or decision maker is more likely to explore its
social and ethical responsibilities fully than when using a
narrower definition.
Who Are Business’s Stakeholders?
• In today’s competitive, global business environment,
there are many individuals and groups who are
business’s stakeholders. From the business point of
view, there are certain individuals and groups that
have legitimacy in the eyes of management.
• That is, they have a legitimate, direct interest in, or
claim on, the operations of the firm. The most
obvious of these groups are stockholders, employees,
and customers. But, from the point of view of a highly
pluralistic society, stakeholders include not only these
groups, but other groups as well.
• These other groups include the community,
competitors, suppliers, special-interest groups, the
media, and society, or the public at large.
 Three Values of the Stakeholder Model
• In addition to the strategic, multifiduciary, and stakeholder synthesis
approaches, there are three aspects or values of the stakeholder
model of the firm that should be appreciated. These three values,
although interrelated, include the descriptive, instrumental, and
normative values or aspects of the stakeholder approach.
• Descriptive Value
• First, the stakeholder model has value because it is descriptive.
• That is, it provides language and concepts to effectively describe the
corporation or organization. The corporation is a constellation of
cooperative and competitive interests possessing both instrumental
and intrinsic value. Understanding organizations in this way allows us
to have a fuller description or explanation of how they function.
• The language and terms used in stakeholder theory are useful in
helping us to understand organizations. As a result, we have seen
stakeholder language and concepts used more and more in many
fields of endeavour—business, government, politics, education, and
so on.
Instrumental Value
• Second, the stakeholder model has value because it
is instrumental. It is useful in characterizing the
relationship between the practice of stakeholder
management and the resulting achievement of
corporate performance goals. The fundamental
premise here is that practicing effective stakeholder
management should lead to the achievement of
traditional business goals, such as profitability,
stability, and growth.
• Business school courses in strategic management
often employ the instrumental model.
 Normative Value
• Third, the stakeholder model has value because it is normative. In
the normative perspective, stakeholders are seen as possessing
value irrespective of their instrumental use to management. The
normative view is often thought of as the moral or ethical view
because it emphasizes how stakeholders should be treated.
• The “principle of stakeholder fairness” is the moral underpinning,
or normative justification, for the stakeholder model.
• Thus, the normative value of stakeholder thinking is of central
importance in business ethics and business and society.
• To summarize, stakeholder theory is managerial in the broad sense
of the term in that it does not simply describe or predict but also
recommends attitudes, structures, and practices that constitute
stakeholder management.
• Management necessitates the simultaneous attention to the
legitimate interests of all appropriate stakeholders in the creation
of organizational structures and policies.
 Key Questions in Stakeholder Management
• Stakeholder management has become important as managers have
discovered the many groups that have to be addressed and relatively
satisfied for the firm to meet its objectives. Without question, we still
recognize the significance and necessity of profits as a return on the
stockholders’ investments, but now we also perceive and understand the
growing claims of other stakeholder groups and the success they have
had in getting what they want.
• The challenge of stakeholder management, therefore, is to see to it that
the firm’s primary stakeholders achieve their objectives and that other
stakeholders are dealt with ethically and are also relatively satisfied. At
the same time, the firm is expected to be profitable. This is the classic
“win-win” situation.
• It does not always occur, but it is the appropriate goal for management
to pursue to protect its long-term best interests. Management’s second-
best alternative is to meet the goals of its primary stakeholders, keeping
in mind the important role of its owner investors.
• Without economic viability, all other stakeholders’ interests become
unresolved.
 Key Questions in Stakeholder Management
• With these perspectives in mind, let us approach stakeholder
management with the idea that managers can become
successful stewards of their stakeholders’ resources by gaining
knowledge about stakeholders and using this knowledge to
predict and take care of their behaviours and actions.
• Ultimately, we should manage in such a way that we achieve
our objectives ethically and effectively.
• Thus, the important functions of stakeholder management are
to describe, to analyse, to understand, and, finally, to manage.
• The quest for stakeholder management embraces social,
ethical, and economic considerations. Normative as well as
instrumental objectives and perspectives are essential.
• Five key questions should be asked if we are to capture the
essential information needed for stakeholder management:
 information needed for stakeholder management:
1. Who are our stakeholders?
2. What are our stakeholders’ stakes?
3. What opportunities and challenges do our
stakeholders present to the firm?
4. What responsibilities (economic, legal, ethical,
and philanthropic) does the firm have to its
stakeholders?
5. What strategies or actions should the firm take
to best address stakeholder challenges and
opportunities?
 Effective Stakeholder Management
• Effective stakeholder management requires the
careful assessment of the five key questions posed
here. To deal successfully with those who assert
claims on the organization, managers must
understand these core questions. It is tempting to
wish that none of this were necessary.
• However, such wishing would require management to
accept the production or managerial view of the firm,
and these views are no longer tenable. Business today
cannot turn back the clock to a simpler period.
• Business has been and will continue to be subjected
to careful scrutiny of its actions, practices, policies,
and ethics by current and future stakeholder groups.
 Effective Stakeholder Management
• This is the real world in which management lives, and
management must accept it and deal with it.
Criticisms of business and calls for better corporate
citizenship have been the consequences of the
changes in the business and society relationship, and
the stakeholder approach to viewing the organization
has become one needed response.
• To do less is to deny the realities of business’s plight in
the modern world, which is increasingly global in
scope, and to fail to see the kinds of adaptations that
are essential if businesses are to prosper in the
present and in the future.
 Stakeholder Thinking
• In fairness, we should also note that there are criticisms and
limitations of the stakeholder management approach. One
major criticism relates to the complexity and time-
consuming nature of identifying, assessing, and responding
to stakeholder claims, which constitute an extremely
demanding process.
• Also, the ranking of stakeholder claims is no easy task. Some
managers continue to think in stockholder terms because
this is easier. To think in stakeholder terms increases the
complexity of decision making, and it is quite taxing for
some managers to determine which stakeholders’ claims
take priority in a given situation. Despite its complexity,
however, the stakeholder management view is most
consistent with the environment that business faces today,
and “stakeholder thinking” has become a necessary part of
the successful manager's job.
Stakeholder Thinking
• Stakeholder thinking is the process of always
reasoning in stakeholder terms throughout the
management process, and especially when an
organization’s decisions and actions have important
implications for others.
• Effective stakeholder management is facilitated by a
number of other useful concepts. The following
concepts—stakeholder culture, stakeholder
management capability, the stakeholder
corporation model, and principles of stakeholder
management—round out a useful approach to
stakeholder management effectiveness. Each of
these will now be considered.
 Developing a Stakeholder Culture
• In recent years, the importance of developing a strong,
values-based corporate culture has been identified as a
key to successful enterprises. Corporate culture refers to
the taken-for-granted beliefs, functional guidelines, ways
of doing things, priorities, and values important to
managers.
• It has recently been proposed that developing a strong
stakeholder culture is a major idea behind successful
stakeholder management. Stakeholder culture embraces
the beliefs, values, and practices that organizations have
developed for addressing stakeholder issues and
relationships.
• There are at least five categories of stakeholder cultures
that reside on a continuum from little concern to great
concern for stakeholders
Developing a Stakeholder Culture
• The first is agency culture, which basically is not concerned
with others. The next are two cultures characterized by
limited morality—corporate egoist and instrumentalist—
which focus mostly on the firm’s shareholders as the
important stakeholders. These cultures focus on short-
term profit maximization. The final two cultures are
broadly moral—moralist and altruist. Both of these
cultures are morally based and provide the broadest
concern for stakeholders.
• Effective stakeholder management requires the
development of a corporate culture that most broadly
conceives of responsibilities to others. In the above
scheme, the moralist and altruist cultures would be most
compatible with stakeholder management and a
stakeholder corporation.
Stakeholder Management Capability
• Another way of thinking about effective stakeholder
management is in terms of the extent to which the
organization has developed its stakeholder
management capability (SMC).
• Stakeholder management capability may reside at
one of three levels of increasing sophistication.
 Level 1—The Rational Level
• This first level simply entails the company identifying who
their stakeholders are and what their stakes happen to be.
• The rational level is descriptive and somewhat analytical,
because the legitimacy of stakes, the stakeholders’ power,
and urgency are identified.
• This actually represents a beginning or early level of SMC.
Most organizations have at least identified who their
stakeholders are, but not all have analysed the nature of
the stakes or the stakeholders’ power.
• This first level has also been identified as the component of
familiarization and comprehensiveness, because
management operating at Level 1 is seeking to become
familiar with their stakeholders and to develop a
comprehensive assessment as to their identification and
stakes.
 Level 2—The Process Level
• At the process level, organizations go a step further than Level 1
and actually develop and implement approaches, procedures,
policies, and practices by which the firm may scan the
environment and receive relevant information about
stakeholders, which is then used for decision-making purposes.
An applicable stakeholder principle here is “constantly monitoring
and redesigning processes to better serve stakeholders.”
• Typical approaches at the process level include portfolio analysis
processes, strategic review processes, and environmental
scanning processes, which are used to assist managers in their
strategic management.
• Other approaches, such as issues management or crisis
management might also be considered examples of Level 2 SMC.
This second level has been described as planning integrativeness,
because management does focus on planning processes for
stakeholders and integrating a consideration for stakeholders into
organizational decision making.
 Level 3—The Transactional Level
• The transactional level is the highest and most developed of the
three levels. This is the highest goal for stakeholder
management—the extent to which managers actually engage in
transactions (relationships) with stakeholders.
• At this highest level of SMC, management must take the
initiative in meeting stakeholders face-to- face and attempting to
be responsive to their needs. The transactional level may
require actual negotiations with stakeholders.
• This also is the communication level, which is characterized by
communication proactiveness, interactiveness, genuineness,
frequency, satisfaction, and resource adequacy. Resource
adequacy refers to management actually spending resources on
stakeholder transactions. Regarding stakeholder
communications, a relevant principle is that business must
“engage in intensive communication and dialogue with (all)
stakeholders, not just those who are friendly.
 Principles of Stakeholder Management
• Based upon years of observation and research, a set of
“principles of stakeholder management” has been developed for
use by managers and organizations. These principles, known as
“the Clarkson principles,” were named after the late Max
Clarkson, a dedicated researcher on the topic of stakeholder
management.
• The principles are intended to provide managers with guiding
precepts regarding how stakeholders should be treated.
Managers interested in effective stakeholder management, the
transactional level of stakeholder management capability, and
the stakeholder corporation, would quickly seek to use these
guidelines.
• The Figure summarizes these principles. The key words in the
principles suggest action words that should reflect the kind of
cooperative spirit that should be used in building stakeholder
relationships: acknowledge, monitor, listen, communicate,
adopt, recognize, work, avoid, acknowledge conflicts.
Strategic Steps Toward Successful Stakeholder
Management
• The global competition that characterizes
business firms in the twenty-first century
necessitates a stakeholder approach, both for
managing effectively and managing ethically.
• The stakeholder approach requires that
stakeholders be moved to the centre of
management’s vision. Three strategic steps may
be taken that can lead today’s global competitors
toward a more balanced view, which is needed in
today’s changing business environment.
 1.Governing Philosophy
• Integrating stakeholder management into the firm’s governing
philosophy. Boards of directors and top management groups
should move the organization from the idea of “shareholder
agent” to “stakeholder trustee.” Long-term shareholder value
will be the objective of this transition in corporate governance.
For stakeholder management to be successful, it must be seen
as the overall, governing principle of the enterprise.
2. Values Statement. Create a stakeholder-inclusive “values
statement.” Various firms have done this. Johnson & Johnson’s
was called a “credo.” Microsoft calls its a “values statement.”
Microsoft emphasizes integrity and honesty, and accountability
to customers, shareholders, partners, and employees.
Regardless of what such a values statement is called, such a
pledge reinforces the organization’s commitment to
stakeholders by way of a public statement.
 Strategic Steps Toward Successful Stakeholder Management
3. Measurement System. Implement a stakeholder
performance measurement system. Such a system should
be auditable, integrated, and monitored as stakeholder
relations are improved. Measurement is evidence of
serious intent to achieve results, and such a system will
motivate a sustainable commitment to the stakeholder
view.
• The key to effective stakeholder management is in its
implementation. Corporate social responsibility is made
operable when companies translate their stakeholder
dialogue into practice.
 Strategic Steps Toward Successful Stakeholder Management
• After studying three companies in detail—Cummins Engine Company,
Motorola, and the Royal Dutch/Shell Group—researchers concluded
that the key to effective implementation is in recognizing and using
stakeholder management as a core competence.
• When this is done, at least four indicators or manifestations of
successful stakeholder management will be apparent.
• First, stakeholder management results in survival.
• Second, there are avoided costs.
• Third, there was continued acceptance and use in the companies
studied. This implies success.
• Fourth, there was evidence of expanded recognition and adoption of
stakeholder-oriented policies by other companies and consultants.
• These indicators suggest the value and practical benefits that may be
derived from the stakeholder approach. Finally, it should be
mentioned that organizations develop learning processes over time in
implementing their changing or evolving stakeholder orientations.