W hile freemans 1984 list has been criticised as

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Unformatted text preview: tions, unions and terrorist organisations. W hile Freeman’s (1984) list has been criticised as including everything (Frooman, 2002), in selecting which stakeholders to focus on, one needs to start broad and narrow them down with the assistance of context. The more complex exercise is to categorise stakeholders. This is so because for categories to have any useful benefit they must distinguish between important and less 31 important stakeholders. At a basic level, a distinction can be drawn between internal and external stakeholders (Griseri & Seppala, 2010; Carrol, cited in Frooman, 2002). Freeman (1984) draws a distinction between legitimate stakeholders, which are described as those holding similar values and agendas as the firm, and illegitimate stakeholders, described as those holding vastly different values and agendas to that of the firm. They can also be classified as primary or secondary stakeholders on the basis of their significance to the firm (Mitchel et al, 1997; Clarkson, 1995; Savage, Nix, Whitehead & Blair, 1991). Dryzek and Bekerjikian (1993) suggest a framework that allows for stakeholders to categorise themselves. Hare and Pahl-Wostl (2002) use a card-sorting experiment in a stakeholder-led categorisation process, whereas Post et al (2002) propose classification according to the strategic environment, and identify three strategic environments as follows: The core – which is vital to the existence and success of a business. These include investors, employees and customers. The competitive environment – which relates to the organisation’s competitive environment. This includes competitors, business partners, unions and regulatory bodies The external environment – which challenges the company to foresee and respond to new developments that might positively or adversely affect the business. These include social and political actors such as the government. 32 Figure 8: Strategic stakeholder groups The core: investors, employees and customers Competitive environment: business partners, unions, competitors, regulatory bodies External environment: and political actors Source: Adapted from Post et al (2002) Mitchel et al (2007) uses a salient approach that classifies stakeholders according to the following attributes: a. Power of the stakeholder to influence the company. This may be formal power possessed by governments or shareholders or economic power possessed by shareholders. b. Legitimacy of a stakeholder pertaining to the public perception that stakeholder interests are in line with society norms and legitimate. c. Urgency of the stakeholders’ claim to the company. Urgency calls for immediate attention on the basis of time sensitivity or criticality. A highly salient stakeholder would possess all three attributes while a low salient might possess none. Mitchel et al’s (2007) approach finds support in Griseri and Seppala, (2010) and Frooman (2002), who regard this approach as having a the potential to yield 33 a rich analysis of stakeholders. It is important to note that the attributes are not static but dynamic in that they constantly change. What is urgent today may not be tomorrow, likewise what is regarded as legitimate or powerful can change overnight. The tools for identifying and sorting stakeholders will continue evolving, although different tools are not a substitute for others. Once stakeholders have been identified and sorted, the most import step is to manage them. “Stakeholder management involves the process by which managers reconcile the objectives of a company with the claims and expectations of various stakeholders” (Griseri and Seppala, 2010, p.33). Griseri and Seppala (2010) came up with the following three overall approaches to stakeholder management: Generic approach – this approach is based on Savage et al’s (1991) proposal for managing stakeholders based on their potential to threaten or cooperate with the organisation. Relationship – this approach is based on Friedman and Miles’s (2002) approach that posits that decisions taken by the firm and its stakeholders depend on the compatibility of their interests and the nature of the connections between them. Stakeholder network – this approach is based on Rowley (2007) who argues that the way firms respond to stakeholders depends on the centrality of the company in the stakeholder network and the density of the network. 2.3.4 Some Theoretical Questions i) Normative vs. shareholder model Contrasting sharply with Freeman and other stakeholder theorists, who argue for the normative foundation of the stakeholder approach, are the separatists who advocate for 34 the separation of ethics and economics (Sundaram & Inkpen, 2004). In their paper, Sundaram and Inkpen (2004) argue, inter alia, that maximising shareholder value is the only appropriate goal for the modern business. Freeman et al (2010) disagree, arguing that stakeholder theory has developed over the past thirty years partly to counter the notion that corporations belong...
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