Will the real stakeholders please step forward?

Would you know a stakeholder if you saw one?

 

A few weeks ago now,  I had a remarkable conversation with Jamie Forman. Jamie is an attorney by profession, a philosopher by disposition, and a committed contributor to the community by substantiated reputation. You might ask what he’s doing talking to the likes of me.   I’ve learned to accept good fortune when it presents itself. 

 

Our conversation was wide-ranging, but included the core concepts, mission, and offerings of the Hill Center. When we turned to our consulting services, Jamie posed a most interesting question, which I want to expand upon and explore here. 

 

(One of these days, someone will comment on a posting – I’m poised and ready for that great moment – but in the meantime, I’ll keep writing, the digital equivalent of talking aloud to myself in a public place.)

 

I digress.

 

Today’s question concerns my use of the term “stakeholder.” When I use the term, I mean to refer to the groups with which an organization meaningfully engages. Typically, these include shareholders or owners, employees, customers, vendors, partners, and the communities in which the businesses exist. We might also competitors and the environment, though the latter is different in kind from the other candidates for stakeholder status. 

 

Forman raised the question of whether “stakeholder” should denote only those who have an acknowledged financial stake in the business. These include investors, creditors, employees, and just maybe customers or vendors. Forman suggested that we consider using “influence” as the framing concept and term – “influencers” and those who “are to be influenced” – in describing the broader set of constituencies.

 

There is a broader context for this discussion. In using the term stakeholder in this broader sense, I’m following a tradition first established by R. Edward Freeman in his book, Strategic Management, a Stakeholder Approach (1984), and expanded upon by other writers. Freeman’s approach has been criticized, in part, based on the argument that obligations to stakeholders cannot readily, and perhaps should not, be negotiated in the even-handed way that stakeholder advocates seem to suggest. Fiduciary responsibilities to shareholders, for example, are fundamentally different from contractual obligations to vendors or creditors, and are different still from moral obligations to serve community members or to protect the environment.

 

As semantic discussions go, the stakes (as it were) are fairly high.  In the Hill Center’s consulting work, we use the Self Assessment and Improvement Process (SAIP) as our primary analytical tool for assessing an organization’s degree of social responsibility. That tool is organized in terms of stakeholders per se. If the “stakeholder” term were to be confusing or unclear, I could certainly propose to the SAIP Institute, the developers and stewards of that tool, that we change the terminology, but I’m not sure that there is a better term. I have proposed crazier things to Dean Maines, President of the Institute, and he’s always been receptive to new ideas.   He even buys lunch, most of the time. I’m just not at all convinced that this is something that we ought to change.

 

Any suggestions out there? Should we use “stakeholder” to describe constituencies that are truly external to the firm, such as customers, vendors, or the community?

 

Beyond the semantic question on the table, I also want to clarify that I’m not suggesting that an organization has the same set of obligations to all of its stakeholders, or that there is uniformity among stakeholder relationships. Quite the contrary! The key to aligning business performance with social responsibility is to understand the nature of each relationship, and to implement ways to improve those relationships in ways that deliver measurable gains for the organization. Every relationship is distinctive and every situation, unique.

 

So, what do you think of when you hear “stakeholder?”