of Enron showed； where shareholders were systematically deceived。 Also；
in the whole sub…prime debacle bankers were rewarded for systematically
repackaging toxic loans and spreading them in near…undetectable layers
around the globe； to the eventual detriment of their shareholders and the
taxpaying public at large who had to pick up the bill。 But even where it is
possible to ally directors’ interests with those of shareholders； that leaves a
myriad of other interested parties effectively disenfranchised； except in so
far as they are expressly protected by laws。
The idea that businesses had a responsibility other than to shareholders
was brought to popular a。。ention in Howard R Bowen’s book Social Responsibilities
of the Businessman （1953； New York： Harper and Brothers）； but it
was a decade later before the term ‘stakeholder’ was coined in an internal
memorandum at the Stanford Research Institute in 1963。 Over the next
two decades the term stakeholder was debated and defined until Edward
Freeman； a professor at the Darden School of Business （darden。
virginia。edu）； University of Virginia； in his book Strategic Management： A
Stakeholder Approach （1984； United States： Pitman Bowen）； set out simple
guidelines that anyone in an organization could understand and follow。
Freeman’s stakeholders were defined as ‘any group or individual who can
affect or is affected by the achievement of the organization’s objectives’。
MAPPING OUT THE STAKEHOLDERS
Freeman （see above） divided stakeholders into six distinct categories； owners；
employees； customers； suppliers； munities and governments； with
which an organization has varying responsibilities or ‘social contracts’。 The
first step in the process of developing an ethical strategy is to identify all the
people； institutions and agencies that your organization is likely to impinge
on in the normal course of its activities。
Figure 9。1 gives an example of a stakeholder map。 It shows how stakeholders
move outwards from the individual at the centre； to internal groups
including their immediate work environment； colleagues； team and peers；
and on to external groups； suppliers； customers； shareholders and eventually
on to ever…distant publics and organizations。
Ethics and Social Responsibility 227
ASSESSING OBLIGATIONS
Not all stakeholders will be affected by any one particular strategy or course
of action； nor will those that are affected be affected to the same degree。 So
the next step in the process is to see which stakeholders will be affected and
to what degree。 This can be done using a Stakeholder Relevance Matrix； as
in Figure 9。2。 This shows which stakeholder groups will be affected by the
decision to relocate a production unit to a new lower…cost country。
Figure 9。1 Stakeholder mapping
You
Organization
Shareholders
Customers
Suppliers
Government
petitors
Department
Teams
Peers
Town/Immediate Neighbourhood
Your Country/Region
Other Countries and Regions
Industry/ business sector
International governments
Wider publics affected
Figure 9。2 Stakeholder relevance matrix
Proposed strategy
Move production to
lower…cost country
Positively affected Adversely affected
Directly affected Employment created in
new country
New munity in new
country
Existing workforce
Existing munity in
existing country
Local subcontractors will
lose work
Indirectly affected Shareholder returns
improved
Home government gets
less tax
Management will have to
travel more
228 The Thirty…Day MBA
The next step in the process is to analyse the specific interests/expectations
and rights/responsibilities of each affected stakeholder group。 Following
through with the example of relocating a factory； we can see in Figure 9。3
the different expectations and rights of the three stakeholder groups seen to
be most relevant to this decision。
Figure 9。3 Stakeholder rights and expectations grid
Stakeholders
Customers Shareholders Employees
Rights Be given
information on all
factors concerning
new production
source
To be informed in the
annual report and
accounts or sooner if the
implications will cause
public discussion
To statutory
redundancy
payments
Expectations Any change should
be seamlessly
implemented
That the pany will
treat employees properly
That the move is in the
long…term best interest of
the organization
To be consulted
and given help with
job search
STAKEHOLDER STRATEGIES
Having identified the stakeholders and weighed up their rights and expectations；
an organization has basically three possible ethical stances it
can take：
。 Immoral business： Make decisions that are clearly unethical to large
groups of stakeholders。 The Mafia and organized crime in general
certainly fit into this category； as in many respects do the sex industry；
large tracts of the gambling industry and arguably the tobacco and
drinks industry too。 These last three are accepted as being a customer’s
inalienable right to free choice； aided by being major employers and
taxpayers。
。 Amoral business： Make decisions without considering their ethical
implications either through carelessness； indifference or the mistaken
belief that business is there to make profit only。 Such businesses see
governments and their laws as the only ethical or moral constraint they
need concern themselves with。
。 Moral business： All decisions are made considering what is ethical； fair
and just。
Ethics and Social Responsibility 229
IMPLEMENTING ETHICAL AND RESPONSIBLE
STRATEGIES
Ethics and values play a central role in shaping a pany’s identity and
reputation； building its brands； and earning the trust of customers； suppliers
or other business partners。 While honesty； fairness and responsibility are
crucial for building a good reputation； an organization that is looking for
pre…eminence in its field needs to go beyond just meeting stakeholders’
needs。 It has to emphasize the message that it is a。。ractive as a business
partner and as a good corporate citizen。 To achieve this status the following
steps need to be pursued：
。 Acknowledge and monitor all stakeholders with a valid claim on your
a。。entions。
。 municate regularly with stakeholders； listening to their interests
and concerns。
。 Actively cooperate with stakeholders to minimize risks。
。 Always avoid actions that endanger lives。
。 Use processes that are sensitive to stakeholders’ needs。
。 Recognize the danger that managers’ convenience and the needs of
most other stakeholder groups will almost always be in conflict。
。 Resolve stakeholder conflicts speedily and fairly。
Resolving conflict
Unfortunately； however ethical and socially responsible an organization
is； it will at some stage； perhaps even frequently； find itself pursuing a
strategy that upsets other stakeholder groups。 A recent example of one
such conflict was Shell’s decision； announced in April 2008； to pull out
of the London Array wind farm。 This ￡2 billion project for 341 turbines
capable of producing 1；000 megawa。。s of power was a key part of the UK
government’s strategy to produce 15 per cent of UK energy needs from
renewable sources by 2015； with an aspiration to raise that to 20 per cent by
2020。 Given that in 2008 renewable energy accounted for only 2 per cent of
output in the UK； the London Array was seen as important； perhaps vital；
to achieving those goals。 But Shell had to weigh up the consequences of
upse。。ing the UK government； Friends of the Earth and its other German
and Dutch partners in the project； with other concerns。 Shell’s view was
that the cost of wind farms was simply spiralling out of control； with steel
prices rising with increased world demand from such countries as China
and India。 In any event； world turbine production was booked up years
in advance。 Shell already had stakes in 11 wind farms producing over
1；100 megawa。。s and reckoned that as a pany it could make the same
230 The Thirty…Day MBA
contribution to the environment at a much lower cost to its shareholders；
but probably on another continent and in another technology。
Resolving stakeholder conflicts calls for tact and munications
and the recognition that while you can’t please everyone； you can still
be ethical。 About 1 per cent of Shell’s investments are in green projects。
For example； a pany subsidiary； Shell Solar； has played a major role
in the development of first…generation CIS （copper indium diselenide）
thin…film technology。 This it believes to be the most mercially viable
form of photovoltaic solar technology to generate electricity from the
sun’s energy。 Together with its joint venture partner in this project； Saint
Gobain； it has a pilot plant under construction in Saxony； Germany that
will produce sufficient solar panels to save 14；000 tonnes of CO2 per year。
So stakeholders such as the UK government and Denmark’s DONG Energy
in the London Array project had to be weighed up against Saint Gobain；
with the German government being party to both strategies through the
participation of that country’s energy gia