Stakeholder Priorities

Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i.e. more loyalty, improved recruitment, increased retention, higher productivity, and so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors), and communities in the areas where the corporation operates its facilities, regulators, academics, and the media.

Branco and Rodrigues (2007) describe the stakeholder perspective of CSR as the inclusion of all groups or constituents (rather than just shareholders) in managerial decision making related to the organization‘s portfolio of socially responsible activities. This normative model implies that the CSR collaborations are positively accepted when they are in the interests of stakeholders and may have no effect or be detrimental to the organization if they are not directly related to stakeholder interests. The stakeholder perspective suffers from a wheel and spoke network metaphor that does not acknowledge the complexity of network interactions that can occur in cross sector partnerships. It also relegates communication to a maintenance function, similar to the exchange perspective.

A stakeholder in an organization is any group or individual who can affect or is affected by the achievement of the organization’s objectives.

Corporate social responsibility differs from place to place, industry to industry and over time. It is increasingly accepted that in order to define precisely what social responsibility means to a company, it needs to engage with its stakeholders and take into account their needs and aspirations when designing CSR strategies and programmes. It is important that companies need to engage in their own stakeholder dialogue, specific to their own company. The business is most likely to succeed in today’s evolving global environment will be those best able to adapt to their dynamic environment by balancing the conflicting interests of multiple stakeholders. Integrating a stakeholder perspective in strategic framework is designed to allow companies to respond to stakeholders demands in the ways that maximize both economic and social value. Just because an individual or organisation merits inclusion in company’s list of relevant stakeholders does not compel the company to comply with every demand a stakeholder makes. To operate effectively a firm needs to prioritize among the stakeholders both in absolute terms and issue by issue case. It is therefore vital to understand the priorities of local stakeholders and take them into account.

The business case for CSR argues that there are legitimate reasons for a corporation to invest in CSR activities. From an economic standpoint, there is theoretical logic and some practical evidence that engaging in socially responsible activities can reduce costs and risks to the firm, build firm competitive advantage, enhance reputation and legitimacy, and create synergies. This business case reconciles to the stakeholder perspective that legitimate reasons to invest in CSR activities must encompass a strong normative core while also supporting and generating economic value.

Some stakeholder theorists argue that managing firm-specific stakeholder relationships is good for value-added bottom line to the company. However, under stakeholder theory, CSR is said to intensify the problem of ethics when it is added to the financial commitments and responsibilities of a firm. While stakeholder theorists acknowledge a blend of financial and moral consequences to CSR, their emphasis is on value creation and trade through stakeholder relationships that necessitate trade-offs in the managerial issues faced by practitioners. The practical melding of CSR and stakeholder remains arguably embedded in the approach that CSR activities will result in financial gain.