A THEORY OF STAKEHOLDER IDENTIFICATION AND

SALIENCE

PRESENTED BY: GROUP 3 SEC B

ANKIT AGGARWAL 13P063 GAUTAM MAHESH

13P081MONIKA KHETAN

13P088GOPESH NAKRA

13P104SATYAJIT TRIPATHY

13P109SUYASH NIGOTIA

13P116

Stakeholder Theory Overview

This article of Stakeholder theory deals with two prominent concepts:

Identifying who the stakeholders are Salience of the various Stakeholder classes and

their claims to the organization Who is a Stakeholder?

“Any group or individual who can affect or is affected by the achievement of the organization’s objectives” ~ Freeman

Stakeholders

Defining Stakeholders - Broad Vs Narrow View

Narrow viewConcerned with only the risk factor and includes:

Voluntary Stakeholders & Involuntary Stakeholders

Broad ViewTakes into account all those groups who can affect or are affected by the achievement of the organization’s objectives.

who can affect the organization – Influencers who are affected by the organization – Claimants

Stakeholder Attributes

1. Power A relationship among social actors, in which A

can get B to do something which B would not have otherwise done

Categorization of power – Coercive, Utilitarian & Normative

2. LegitimacySocially accepted and expected structures or behavior under a socially constructed system of norms, values, beliefs and definitions

LEGITIMACY

INDIVIDUAL ORGANIZATIONAL SOCEITAL

Stakeholder Attributes

3. UrgencyExists when 2 conditions are met –

When a relationship or claim is of a time-sensitive nature

When it is critical to the stakeholder

Stakeholder Classes

Dormant

Discretionary

Demanding

Power

Legitimacy

Urgency

DominantDangerous

Depend

ent

Definitive

Stakeholder Classes

Class 1 - Latent Stakeholders• One Attribute & Low Salience• Managers may choose to do nothing • Consists of – Dormant,

Demanding and Discretionary shareholders

Dormant Stakeholders

• Possess power to impose their will but little or no interaction as they lack legitimacy or urgency

• Examples – Those who have a loaded gun, those who can spend a lot of money

Dormant

Discretionary

Demanding

Power

Urgency Legitimacy

Class 1 - Latent Stakeholders (Continued)

Discretionary Stakeholders• Likely to be recipients of corporate

philanthropy• Examples – Beneficiaries of charity,

Non-profit organizations such as schools & hospitals

Demanding Stakeholders• Those with urgent claims but no legitimacy or power• Irritants for management but not worth considering• Examples – People with unjustified grudges, serial

complainers

Dormant

Discretionar

y

Demanding

Power

Urgency

Legitimacy

Class 2 - Expectant Stakeholders

• 2 Attributes & Moderate Salience• Active rather than Passive• Consists of – Dominant, Dependent

and Dangerous Stakeholders

Dominant Stakeholders Many theories position them as the

only stakeholders of an organisation Possess Power + Legitimacy Examples – Board of Directors, Public relations

Class 2 - Expectant Stakeholders (Continued)

Dangerous Stakeholders• Those with powerful and urgent

claims and can be coercive and possibly violent

Dependent Stakeholders• Stakeholders who are dependent

on other bodies to carry out their will, because they lack the power to

enforce their stake• Examples – Residents & animals impacted by

incidents like Oil Spill, Mining etc.

Class 3 - Definitive Stakeholders

• Often dominant stakeholders with an urgent issue

• Dependent groups with powerful legal support

• Examples – Democratic legitimacy achieved by a ‘Dangerous’ nationalist party by winning national elections

DYNAMISM in RELATIONS

A stakeholder can increase/decrease their salience by acquiring or losing one of the attributes: power, legitimacy or urgency

Example: When SEBI/IRDA receives a complaint, it moves from being a expectant to a definitive stakeholder

Non-stakehold

erLatent Expectan

t Definitive

POWER-DYNAMISM MATRIX

Stakeholders in groups A & B:

Are the easiest to deal with

Stakeholders in group C:

Are important because they are powerful. But low dynamism means their reaction is predictable and expectations can be managed

Stakeholders in group D: Are important because thy are powerful. But low dynamism means their reaction is predictable and expectations can be managed

Dynamism

Power

Low High

Low Fewer Problems

(A)

Unpredictable but Manageable (B)

High Powerful but Predictable (C)

Greatest Danger or Opportunities (D)

British Petroleum

Shareholder-driven company(bottom-line)

Attempted to gain higher stock values through higher profits at the expense of safety concerns

Deepwater Horizon Oil Spill

• Biggest hit for BP and its public relations that had a direct impact on its share prices

• Killed 11 people and injured many others

• Environmental Disaster: ignited public antagonism

• Most importantly, it was not the first disaster linked to the BP brand.

Date: 20th April, 2010

Place: Gulf of Mexico

Stakeholders of BP Identified Government(federal and state) Employees(current and the ones killed) Shareholders(majority and minority) Environmentalists Businesses along the coast(Tourism,

Seafood) Coastal Residents Customers

Stakeholders and their Classes for BP

Stakeholders Attributes Power Legitimacy Urgency

Shareholder class

Government Definitive

Employees Expectant (Dependent)

Shareholders Expectant (Dominant)

Environmentalists Expectant (Dangerous)

Businesses along the coast

Expectant (Dependent)

Coastal Residents Expectant(Dependent)

Customers Latent (Discretionary)

* * *- * ** * -* - *- * *- * *- * -

What the company did?

Undermined the extent of the damage Denied various claims made by

researchers Use of unethical practices No empathy with those affected

No consistency between the image it was trying to portray and what it really was!

What BP should have done?

1. Be more alert to the significance of the company’s identity in the minds of the public

2. React quickly

3. Be present on the ground to build an emotional connect with those affected

4. Balance legal/economic language with emotional/empathic tones in their public statements

5. Acknowledged the company’s moral responsibility before dealing with legal liabilities

6. Put the interests of the company’s shareholders and managers after those of the environment and the communities affected by the spill

References

http://citizenpolity.com/2010/09/07/defining-shareholders-stakeholders/

http://www.lawyersandsettlements.com/blog/bp-oil-spill-fallout-whos-affected-03758.html

http://www.nytimes.com/2010/07/13/business/energy-environment/13bprisk.html?_r=2&src=twt&twt=nytimes&

http://taprootcreative.com/2011/04/lessons-in-crisis-communication-an-analysis-of-bp%E2%80%99s-response-to-the-gulf-oil-disaster/

Questions