Stakeholder approach toStakeholder approach toCorporate governanceCorporate governance

Jana KlokočníkováJiří Brejcha

FSV IES 2007

ContentContent

Bit of Definitions

Historical development of the stakeholder approach

Classification and Division of stakeholders

Core questions when applying the stakeholder model

Conclusion

Bit Bit ofof Definitions Definitions

Stake= an interest or a share in an undertaking

(i.e. legal right, moral right, ownership)

Stakeholder= A group or an individual, that has either a

material or immaterial stake in the corporation

(R. Freeman (1984): Strategic Management. A Stakeholder Approach)

Historical development of the Historical development of the stakeholder approachstakeholder approach

Production view of the firm resources or bought products or services

Managerial view of the firmownership vs. control

Stakeholder approachshareholders vs. stakeholders

CorporationSuppliers Customers

The The production view of the firmproduction view of the firm

The The managerial view of the firmmanagerial view of the firm

Employees

Corporation

Shareholders

Suppliers Customers

The stakeholder view of the firmThe stakeholder view of the firm

Enviromental groups

Localcommunities

CreditorsGovernment

Suppliers Customers

Employees

Corporation

Shareholders

Classification and Division of Classification and Division of stakeholdersstakeholders

Classification Generic groups of stakeholders

Specific groups of stakeholders

Division Internal vs. External stakeholders Primary vs. Secondary stakeholders

Internal vs. External stakeholdersInternal vs. External stakeholders

Enviromental groups

Localcommunities

CreditorsGovernment

Suppliers Customers

Employees

Corporation

Shareholders

Enviromental groups

Localcommunities

CreditorsGovernment

Suppliers Customers

Primary vs. Secondary stakeholder Primary vs. Secondary stakeholder groupsgroups

Employees

Corporation

Shareholders

Core questions when applying the Core questions when applying the stakeholder modelstakeholder model

Who are our stakeholders?

What are their stakes?

What opportunities and challenges are presented to our firm?

What responsibilities does our firm have to all its stakeholders?

What strategies or actions should our firm take to best deal with stakeholder challenges and opportunities?

EmployeesEmployees

Stake livelihood in the present day pensions ensured by the company’s pension scheme

whistle-blowing procedures

training programs, working conditions, equal opportunities, employees share scheme

trade unions

CreditorsCreditors

Stake the company’s ability to repay their debts

to maintain the confidence of these providers

SuppliersSuppliers

Stake to be paid in a timely fashion for the goods and services

they supplied

interest in the continuance of the company

treat their suppliers with understanding and ensure that they settle their debts on time

Local communitiesLocal communities

Stake - in the companies which operate in their region in the interest of sustained employment levels act in an environmentally friendly way

Environmental groupsEnvironmental groups

Stake the companies operate to both national and international

environmental standards (CERES Principles and the Global Reporting Initiative (GRI) Sustainability Guidelines)

environmentally responsible company will not subject its workers to potentially hazardous processes without adequate protection, will not pollute the environment, and will, where possible, use recyclable materials or engage in a recycling process

GovernmentGovernment

Stake to make sure the companies act in a socially responsible

way taking account of socially, ethical and environmental considerations

to analyze corporate trends for various purposes such as employment levels, monetary policy, and market supply and demand of goods and services

looking at various aspects to do with fiscal policy such as capital allowances, incentives for investing in various industries or various parts of the country, and of course the taxation raised from companies

Conclusion Conclusion

Three values of the stakeholder model

Descriptive

Instrumental

Normative

ConclusionConclusion

the involvement of shareholders and/or stakeholders depends on national laws and customs

‘…directors as a board are responsible for relations with stakeholders; but they are accountable to shareholders…’

(Hampel, R. (1998): Committee on Corporate governance: Final report,Gee & Co. Ltd.)

References References

Carroll, A.B.: Business and society. Ethics and stakeholder management. South-western publishing Co. 1989, Ohio.

Colley, J.L., Doyle, J.L., Logan, G.W., Stettinius, W.: Corporate governance. The McGraw-Hill Companies, Inc. 2003, the United States of America.