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Professor Hector R RodriguezSchool of BusinessMount Ida College

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Course Map – Topics Covered in Course• Society

– The Corporation and Its Stakeholders– People for the Ethical Treatment of Animals– Corporate Citizenship– The Social Responsibility of Business– The Shareholder Primacy Norm– CSR, Citizenship and Sustainability

Reporting– Responsible Investing– The Community and the Corporation– Taxation and Corporate Citizenship– Corporate Philanthropy Programs– Employees and the Corporation– Managing a Diverse Workforce

• Environment– A Balanced Look at Climate Change– Non-anthropogenic Causes of Climate

Change– Sulfates, Urban Warming and Permafrost– Conventional Energy– The Kyoto Protocol– Green Building– Green Information Technology– Transportation, Electric Vehicles and the

Environment– Geo-Engineering– Carbon Capture and Storage– Renewable Energy– Solid, Toxic and Hazardous Waste– Forests, Paper and Carbon Sinks– Life Cycle Analysis– Water Use and Management– Water Pollution

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First a quick refresher…

Business, Society & Environment

Economic Capital

Social Capital

Environmental Capital

Bearable Equitable

Viable

Sustainable

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• Sustainability• Corporate Social Responsibility (CSR)• Corporate Citizenship (CC)

• These terms mean different things to different people, sometimes they mean the same thing.

• For purposes of this course Sustainability encompasses all elements linking business, society and the environment, while CSR / CC the more narrow societal aspects, without addressing environmental concerns.

A Quick Word on Terminology

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Sustainability Management – Where to Begin?

One of the first steps - Find out what’s important to those with an interest in your business (stakeholders)

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• A stakeholder refers to persons or groups that affect, or are affected by, an organization’s decisions, policies, and operations

• Note: Term stakeholder is NOT the same as stockholder

What is a Stakeholder?

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Business – an organization that is engaged in making a product or providing a service for a profit

Society – Human beings and the social structures they

collectively create

Business & Society are Highly Interdependent

Why Talk About Stakeholders?

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• Two critical questions:1. What is the purpose of the modern corporation?2. To whom, or what, should the firm be responsible?

Firm Theory

Ownership Theory of a Firm

Two Contrasting Views

Stakeholder Theory of a Firm

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Ownership theory of the firm– Firm is the property of its owners– Purpose is to maximize returns to

shareholders– Shareholders interests are

paramount and take precedence over all others

Stakeholder theory of the firm– Argues the corporation serves a

broader purpose, to create value for society

– Must make profit for owners to survive, however, creates other sources of value too

– Corporations have multiple obligations, all “stakeholder groups” must be taken into account

Current Views

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Core Arguments for Stakeholder Theory of the Firm

Descriptive - More realistic description of how companies really work

Instrumental - More effective corporate strategy

Normative - Stakeholder management is the right thing to do

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• Stakeholder groups can be divided into two categories:– Market stakeholders– Nonmarket stakeholders

• Drawing “Maps” of stakeholder systems, with the business firm in the center, is one way to visualize the relationships between the firm and its stakeholders

Market and Nonmarket Stakeholders

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• Market stakeholders are those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services– Sometimes referred to as primary stakeholders

Market Stakeholder

Employees

Suppliers

Customers Creditors

StockholdersDistributors

Firm

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• Nonmarket stakeholders are people or groups who, although they do not engage in direct economic exchange with the firm, are affected by or can affect its actions.– Sometimes called secondary stakeholders

Nonmarket Stakeholders

Communities

Media

Public Activists

GovernmentNGO’s

Firm

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• Process to identify relevant stakeholders and to analyze their interest, influence and power

• Asks 4 questions:

1. Who are the relevant stakeholders?2. What are the interests of each stakeholder? 3. What is the power of each stakeholder?

(voting, political, legal, economic)4. How are coalitions likely to form and what

would they be?

Stakeholder Analysis

15Mapping Stakeholder Landscapes, Boston College’s Center for Corporate Citizenship(Relevant)

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• The action component following stakeholder analysis– Once you know who your stakeholders are, their

interests, power, and any coalitions, do you take action to engage with these groups?

• Companies tend to follow a progression of stages in stakeholder engagement (next slide)

Stakeholder Engagement

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• Inactive– Companies ignore stakeholder concerns

• Reactive– Companies act only when forced to do so

• Proactive– Companies try to anticipate stakeholder concerns

• Interactive– Companies actively engage with stakeholders in an

ongoing relationship of mutual respect, openness, and trust

Stakeholder Engagement

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• Helps companies learn about societal expectations

• Generates creative solutions to problems

• Helps win stakeholder support for implementing solutions

• Can neutralize critics

• Can improve corporate reputation for taking constructive action

Stakeholder Engagement and Dialogue Benefits

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• Stakeholder data is complex and dynamic

• Need to develop and keep current

• Stakeholders are disappearing into the web

• X and Y generations have different attitudes, alliances and loyalties

• Finding the ‘real’ stakeholders for your activities becoming more difficult

Challenges in 2010

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1. Find out what’s important to your stakeholders

2. Stakeholders should be considered because business and society are interdependent

3. We should evaluate market and non-market stakeholders

4. Formal process should identify relevant stakeholders

5. Stakeholders should be then engaged in order to identify expectations, create solutions and win support

Summary - Stakeholders

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• In December 1996, in Humboldt County, California, Julia Hill climbed a redwood tree (which she dubbed Luna) to prevent Pacific Lumber from cutting down sequoias.

• The company played into her hands by threatening to cut down Luna with Hill in it, even sending helicopters to threaten her perch.

• By playing Goliath, the company transformed Hill into a heroic, media-beloved David.

• She lived in Luna on a platform 150 feet above the ground for two years until Pacific Lumber agreed to preserve the tree and surrounding forest.

Side Note: The Case of Julia Hill