Strategic Stakeholder Management
The view regarding Strategic Stakeholder Management, described by Berman, Wicks, Kotha, Jones using earlier work of Edward Freeman is an Instrumental Approach. (Academy of Management Journal; Oct99, Vol. 42 Issue 5).
Instrumental approaches towards stakeholder theory hold that:
To maximize shareholder value over an uncertain time frame, managers ought to pay attention to key stakeholder relationships.
Firms have a stake in the behavior of their stakeholders. Prudent management
of firms' operating environments, including relationships with their stakeholders,
is a part of proper management in general. Therefore good stakeholder management
has clear instrumental value for the firms.
A fundamental assumption of this type of model is that the ultimate objective
of corporate decisions is marketplace success. Firms view their stakeholders
as part of an environment that must be managed in order to assure revenues,
profits, and ultimately, to provide returns to shareholders. Attention to
stakeholder issues may help a firm avoid decisions that might prompt stakeholders
to undercut or thwart its objectives. This possibility arises because stakeholders
can control resources that can facilitate or enhance the implementation of
corporate decisions (Pfeifer & Salancik, 1978); in short, Stakeholder Management
is a means to reach an end; something what you have to do so that you can
achieve something else. The end, or the ultimate result, is generally not
the welfare of stakeholders. Instead, the firm's goal is the advancement of
the interests of only one stakeholder group: its shareholders. Employing the
terminology used by Donaldson and Preston (1995) and Quinn and Jones (1995),
we see the concern of the firm for stakeholder relationships as instrumental
and contingent on the value of those relationships to corporate financial
success. Quinn and Jones stated: "Instrumental [strategic] ethics enters the
picture as an addendum to the rule of wealth maximization for the manager-agent
to follow" (1995: 25).
Two variants of the Strategic Stakeholder Management approach are the direct effects model and the moderation model. In the direct effects model, the attitudes and the actions of managers toward stakeholders (their stakeholder orientation) are perceived as having a direct effect on firm financial performance, independent of the corporate strategy. In the moderation model, the managerial orientation toward stakeholders does impact the corporate strategy by moderating the relationship between strategy and financial performance.
Compare with Strategic Stakeholder Management: Intrinsic Stakeholder Commitment | Normative Approach of Stakeholder Theory | Shareholder Value Perspective | Stakeholder Value Perspective | Stakeholder Analysis | Stakeholder Mapping | Value Based Management | Strategic Intent | Moral Purpose
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