The role of the stakeholder in selecting and implementing strategy SAEC

The role of the stakeholder in selecting and implementing strategy

According to Dr. Belasen a stakeholder approach encourages corporate executives to include external and internal groups and individuals, or stakeholders who value the goals and interests of the organization, in the managerial decision-making processes, and addresses what managers should do to shape their relationship with these stakeholders (Berman, 1999; Freeman, 1984). Furthermore Ledingham and Bruning (1998: 62) state that a "relationship" is a "State which exists between an organization and its key publics in which the actions of either entity impact the economic, social, political and/or cultural well-being of the other entity". It is common to look at stakeholder theory as a wheel, with the corporation at the center and all of its stakeholders as the spokes of that wheel (Frooman, 1999; Page, 2002). As time goes on, the wheel will get more spokes as more and more stakeholders views are considered to be valuable.

In his book Dr. Belasen also notes that the management of stakeholders is an important task scanning the environment, Here are seven principles that have been identified by the Sloan Foundation:

Principles of Stakeholder Management

The concept of stakeholder was the center of a six year project conducted by the Sloan Foundation, Donaldson (2002). This project brought out the principles of stakeholder management, which are commonly referred to as the Clarkson Principles (see Figure 22).

Principle 1: It is very important for management to be aware that every corporation has many diverse stakeholders. Management must understand the role that each stakeholder plays in the organization. Management should listen to what each stakeholder wants; this does not mean that each request must be granted, but it does mean that each request must be evaluated and seriously considered. After serious consideration, it is up to the discretion of management to determine the request's validity. Primary consideration should be given to those stakeholders who are most closely involved with the corporation.

Principle 2: Both internal and external communications are critical for successful stakeholder management. Effective communication not only involves sending messages, but receiving messages as well. It involves discourse between managers and the stakeholders. Managers should try to understand the multiple perspectives of the stakeholders.

Principle 3: Since there are such a variety of different stakeholder groups, managers must decide how to present information, how much information and what type of information to present to each group. Each group of stakeholders varies in their size, complexity, level of involvement, as well as in their primary interests. Some of the different ways information is delivered to stakeholders include: shareholder meetings, collective bargaining agreements, advertising, public relations or press releases, and others such as government agencies are reached through official proceedings or personal contact. It is up to management to decide which method of delivery will be most effective in accomplishing the organization's goals and objectives.

Principle 4: Managers should distribute benefits and burdens (or externalities) that result from corporate activity fairly among the stakeholders. Each stakeholder is vulnerable to a different level.

Principle 5: Corporations and their managers need to rely on other organizations at times. Managers should be proactive in establishing contacts with relevant entities. It is suggested that organizations develop coalitions in order to reduce harmful impacts and compensate affected parties.

Principle 6: Corporate operations and managerial decisions often give rise to risky or unexpected outcomes. It is important for management to communicate these risks to the stakeholders that may be affected. An arrangement is considered satisfactory when stakeholders knowingly agree to accept a certain combination of risks and rewards. There are certain activities where there may be consequences where no compensation would be sufficient. There may be other times where risks are not fully understood or appreciated by critical stakeholders. When this occurs, managers may have to abandon the activity altogether or simply restructure it in order to eliminate the possibility of unacceptable consequences.

Principle 7: Managers are also stakeholders in an organization. This fact is often overlooked. Managers hold access to much privileged information that other stakeholders do not have access to and therefore create asymmetrical relationships that often lead to tension. One way managers can help reduce tension is by subjecting themselves to periodic performance evaluation. Another is maintaining trusting relationships with diverse stakeholders based on mutual respect and credibility.

Principles of Stakeholder Management
Principle 1 Managers should acknowledge and actively monitor the concerns of all legitimate stakeholders, and should take their interests appropriately into account in decision-making and operations.
Principle 2 Managers should listen to and openly communicate with stakeholders about their respective concerns and contributions, and about the risks that they assume because of their involvement with the corporation.
Principle 3 Managers should adopt processes and modes of behavior that are sensitive to the concerns and capabilities of each stakeholder constituency.
Principle 4 Managers should recognize the interdependence of efforts and rewards among stakeholders, and should attempt to achieve a fair distribution of the benefits and burdens of corporate activity among them, taking into account their respective risks and vulnerabilities.
Principle 5 Managers should work cooperatively with other entities, both public and private, to insure that risks and harms arising from corporate activities are minimized and, where they cannot be avoided, appropriately compensated.
Principle 6 Managers should avoid altogether activities that might jeopardize inalienable human rights (e.g., the right to life) or give rise to risks, which if clearly understood, would be patently unacceptable to relevant stakeholders.
Principle 7 Managers should acknowledge the potential conflicts between (a) their own role as corporate stakeholders, and (b) their legal and moral responsibilities for the interests of stakeholders, and should address such conflicts through open communication, appropriate reporting and incentive systems and, where necessary, third party review.

SUNY ESC MBA PROGRAM Last modified: Monday, July 17, 2017, 9:59 AM