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Friedman2002 PDF
Friedman2002 PDF
0022-2380
A L. F
University of Bristol
S M
Previous literature has led to a lack of appreciation of: the range of organiza-
tion/stakeholder relations that can occur; the extent to which such relations
change over time; as well as how and why such changes occur. In particular,
extremely negative and highly conflicting relations between organizations and
stakeholders have been ignored. Due to this lack of appreciation it is argued that
current attempts at integrating the separate strands of stakeholder theory to
achieve a convergent stakeholder theory are premature. A model is presented
which combines stakeholder theory with a realist theory of social change and
differentiation. This model is intended to highlight why it is important to distin-
guish different stakeholders. The model also enables an analysis of the organiza-
tion/stakeholder relationship, which is not exclusively from the organization
perspective and which is capable of illuminating why and how organization/stake-
holder relations change over time. The history of Greenpeace is used as an
example.
Stakeholder theory has burgeoned in recent years. Donaldson and Preston (1995,
p. 65) noted that a dozen books and more than 100 articles primarily concerned
with the stakeholder concept had appeared. Since then interest in stakeholder
theory has quickened, not only in the academic world (note the recent issue of The
Academy of Management Journal (1999, 42/5) devoted to it), but also in common par-
lance. References to stakeholders are commonplace in the media, particularly with
the current British government’s association of the term with their ‘big idea’
of the Third Way and their use of the term in specific policies, such as with the
recent introduction of stakeholder pensions (Halligan, 1998). As contributions to
the stakeholder concept have grown, they have also become diffuse. Integration of
separate methodological strands of stakeholder theory to achieve a ‘convergent
Address for reprints: Andrew Friedman, Management Research Centre, University of Bristol, 43 Wood-
land Road, Bristol BS8 1TT, UK. (a.l.friedman@bristol.ac.uk)
© Blackwell Publishers Ltd 2002. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK
and 350 Main Street, Malden, MA 02148, USA.
2 . . .
stakeholder theory’, has been identified by some as ‘the most interesting problem
in stakeholder theory today’ (Donaldson, 1999, p. 237; Jones and Wicks, 1999).
This refers to the integration of types of theories within the classification suggested
by Donaldson and Preston (1995) as normative, instrumental or descriptive.[1] In
relation to this we argue the following three points.
First, this integrating exercise is premature. Not enough work has been done
on the organization/stakeholder[2] relation itself in order to combine the different
strands of stakeholder theory into a single meaningful framework. This is due
to lack of work that distinguishes different types of stakeholders (Harrison and
Freeman, 1999, p. 480). In particular most contributors limit their discussion to
legitimate stakeholders, using different (often implicit) definitions of legitimacy,
without exploring what distinguishes legitimate from illegitimate ones.[3] In addi-
tion it is implicitly assumed that the boundary is obvious, clear-cut and stable,
thereby precluding exploration of the boundary and consideration of how certain
stakeholders may cross it (or even straddle it).
Mitchell et al. (1997) develop the idea that stakeholders become salient to man-
agers to the extent that those managers perceive them as possessing power, legiti-
macy and urgency. They note that each attribute is a variable rather than a steady
state, and they briefly discuss dynamism in stakeholder–manager relations (pp.
304–5). However their focus is on defining who or what are the stakeholders of
the firm, rather than the dynamics of the organization/stakeholder relation. Agle
et al. (1999) test the model with positive results. However they do not explore:
(1) why some stakeholders will be perceived as having more of the three attrib-
utes than others;
(2) how managers’ perceptions of stakeholders may change;
(3) differences in the way managers behave in relation to stakeholders perceived
as possessing widely different degrees of these attributes.
Second, in the well-discussed recent contribution by Jones and Wicks (1999), the
integration attempted was for the normative to dominate the instrumental. This
we believe to be inappropriate at this stage. For Jones and Wicks normative stake-
holder theory involves specifying the moral obligations stakeholder theory places
on managers. One strain of normative theory (the strain Jones and Wicks favour)
involves creating alternative narrative accounts of moral behaviour in a stake-
holder context. Advocates believe that representation of these alternative accounts
influences individual conceptions of what constitutes reasonable strategic action
and can thereby ‘make a difference’ in how managers think and act. Jones and
Wicks note the similarity of this approach to the interpretivist paradigm in orga-
nization studies which assumes people construct and sustain their own organiza-
tional realities. However, trying to develop a convergent stakeholder theory based
on normative cores at this stage lays stakeholder theory open to Gioia’s (1999) criti-
cism of naivety. Such criticism may be countered if descriptive stakeholder theory
was formulated in a manner that allowed a better understanding of the pragmatic
forces operating in the corporate world as they apply to particular organiza-
tion/stakeholder relations.
Third, stakeholder theory has been hampered by almost exclusive analysis of
stakeholders from the perspective of the organization. Freeman (1984) justified
consideration of stakeholders for their contribution to the strategic management
© Blackwell Publishers Ltd 2002
3
of firms. According to Jones and Wicks (1999, p. 206), one of the essential premises
of stakeholder theory is that it focuses on managerial decision-making. Generally
stakeholder theory has been approached from the point of view of business
ethics, corporate governance and/or corporate social performance. This puts the
organization at the centre of the analysis and discourages consideration of stake-
holders in their own right as well as discouraging balanced viewing of the orga-
nization/stakeholder relation. Two notable exceptions have been Hill and Jones
(1992) and Calton and Kurland (1995).
Hill and Jones (1992) develop an ‘agency-stakeholder model’. The firm is viewed
as a ‘nexus of contracts between resource holders (stakeholders)’. They consider
market processes at work in relation to these contracts by which institutional struc-
tures[4] evolve in order to monitor and enforce the terms of implicit contracts.
These institutional structures reduce transaction costs to the point where further
reductions in such costs are balanced by the costs of developing more complex
institutional structures to reduce them.
Calton and Kurland (1995) claim that their postmodern theory of ‘stakeholder
enabling’ decentres organizational discourse by replacing privileged managerial
monologues with multilateral stakeholder dialogues. We build on the idea of
decentring the discourses of stakeholder theory from organization management
in order to illuminate and understand stakeholder/organization relations. We
are less sanguine than Calton and Kurland (1995, p. 164) that our analysis will
‘empower the silent voices of marginal groups by deconstructing the hidden
meaning within the predominant organizational context, thus enabling multiple
stakeholder discourses’. Nor do we begin from the normative premise that ‘stake-
holders must have capacity to co-determine their own identity and destiny by exer-
cising the right of voice or exit in the process of organization discourse’ (p. 171).
It is argued here that previous literature has led to a lack of appreciation of
the range of organization/stakeholder relations that can occur. In particular,
extremely negative and highly conflicting relations between organizations and
stakeholders have been ignored or under-analysed. The extent to which organi-
zation/stakeholder relations can change over time, together with analysis of
how and why such changes occur, has also been neglected. We believe that our
model will contribute to the alleviation of these deficiencies and thereby strengthen
stakeholder theory. In addition, we believe our model is capable of illuminating
the organization/stakeholder relation from both stakeholder and organizational
perspectives. The model presented here is based on a realist theory of social
differentiation developed by Archer (1995, 1996).
Archer’s Model
Archer’s typology (see figure 1) is based on two distinctions. First, whether rela-
tionships are compatible or incompatible in terms of sets of ideas and material
Connections
Necessary Contingent
A B
Compatible Protectionist Opportunism
Sets of ideas and/or Defensive Opportunistic
structures of
material interests D C
Incompatible Concessionary Competition
Compromise Elimination
Figure 1. Institutional configurations with associated situational logics and strategic actions
Necessary Contingent
A B
Compatible Explicit/implicit recognized Implicit unrecognized
Defensive Opportunistic
D C
Incompatible Explicit/implicit recognized No contract
Compromise Elimination
Figure 2. Stakeholder configurations and associated contractual forms and strategic actions
(1) Explicit recognized contracts (written or verbal, can be via a third party).
(2) Implicit recognized contracts (recognized by parties involved and/or signifi-
cant others, such as governments or regulators or partners).
(3) Implicit unrecognized contracts (not recognized by the parties involved, but
recognized by certain ‘sensitized’ others, such as academics, novelists and
activists). If the parties involved went through some process of sensitization
it is likely that recognition would follow.
(4) No contracts.
Necessary Contingent
A B
Compatible Shareholders The general public
Top management Companies connected through
Partners common trade associations/
initiatives
D C
Trade unions Some NGOs
Incompatible Low-level employees Aggrieved or criminal members
Government and their of the public
agencies
Customers
Lenders
Suppliers and other
creditors
Some NGOs
Figure 3. Stakeholder configurations and associated stakeholder types[10]
Phase 2
A number of contingent factors in the form of major environmental events
received wide media coverage during the 1980s: the discovery of a hole in the
ozone layer over Antarctica, 1984; evidence of acid rain damage in the mid 1980s;
Bhopal, 1984; Chernobyl, 1986; and Exxon Valdez, 1989. While the immediate
cause of some of these events could be clearly attributed to particular corpora-
tions, others could not be so easily attributed.
© Blackwell Publishers Ltd 2002
12 . . .
Necessary Contingent
A B
Compatible
D Present C
day
Incompatible
Phase 4
In 1985 the Greenpeace yacht The Rainbow Warrior was bombed. The vessel was
destroyed and a Greenpeace photographer killed. Extensive media coverage of
this, as well as connections drawn with regular reports of environmental disasters,
resulted in an approximate increase in membership of 400,000. With larger
budgets came larger projects and the need for management and financial skills
that are associated with mainstream business. Senior level management positions
were filled from commerce and industry. Thus the material conditions of Green-
peace changed. The new management envisaged new corporate strategies and a
new corporate image. In 1986 the ‘radical activists’ running Greenpeace (UK)
were asked to resign. Priorities changed: it was now important to get as much as
possible out of the ‘supporters’ pound’. Greenpeace had much more to lose if
actions went wrong or if corporations tried to sue. Consequently many traditional
‘actions’ were not permitted for fear of deteriorating funds. Radical supporters
felt that Greenpeace was compromising its grassroots beliefs by toning down
actions. As a result many left to join less compromised organizations such as
Earth First!
Realignment occurred during this period. In terms of our model depicted in
figure 4, the change involved both movement to the left and upwards: towards a
necessary incompatible configuration [D]. The new management of Greenpeace
were more business orientated compared to their predecessors, and therefore less
antagonistic towards corporations. They were aware of the advantages of public
© Blackwell Publishers Ltd 2002
13
relations and the corporate image that Greenpeace projected. International mem-
bership continued to rise, reaching nearly 5 million by 1990. From the corpora-
tions’ perspective Greenpeace could no longer be ignored: the media treated it as
mainstream news and public support had increased. Concurrently corporations
were becoming aware of the advantages of environmental sponsorship and asso-
ciations for their relations with other stakeholders. A less confrontational approach
to Greenpeace became evident in ‘greenwashing’ attempts to convince stakehold-
ers that environmental concerns were being addressed.
The resulting realignment meant that the parties were now more compatible,
both in terms of sets of ideas and material interests. Relationships were also
becoming less contingent, particularly where sponsorship deals were signed. The
structural shift identified here is one towards a position that includes marginal ele-
ments of the necessary incompatible relationship. The corporations/Greenpeace
relation became more necessary and more compatible. However, underlying char-
acteristics of the contingent incompatible structure remained. Both sides still did
not want to interact to the point of compromise, though a weak association was
recognized as beneficial to both: sponsorship money for Greenpeace and envi-
ronmental credibility for corporations. Nevertheless, typical sponsorship deals
involved minimal interaction between the two parties.
Phase 3
During the late 1980s/early 1990s an anti-green movement emerged in the US.
The ‘green backlash’ movement, which includes groups such as Wise Use and
Alliance for America, attempted to portray environmental groups as real threats to
society, jobs, and tradition (Rowell, 1996, p. 28). The key aim of this movement
was to show the ‘other side of environmentalism’ by discrediting it. It lobbied
against environmental legislation, which was potentially very costly for corpora-
tions. In 1990, $500 million was spent on corporate anti-environmental PR in the
US (Dowie, 1995, p. 85). Environmental groups were criticized for following a
problem-based approach, without any attention to possible solutions: tell the
whalers to stop whaling, regardless of the consequences for loss of livelihood, loss
of tradition, and loss of profits and associated taxes.
Greenpeace members were labelled ‘environmental terrorists’ (Rowell, 1996, p.
150), accused of ‘blackmail’ and ‘ignorance of environmental and social issues’
(Hunter, 1994) and ‘threatening customers, using strong arm tactics, intimidation
and unreasonable attack’ (MacMillan Bloedel, 1994). This is a clear case of
‘de-humanizing’ Greenpeace. By focusing on the problem-based approach tradi-
tionally associated with environmentalists, the backlash movement was highly
successful in spreading the view that elimination of Greenpeace was the only solu-
tion: alignment was not an option. One direct effect has been a fall in US mem-
bership of Greenpeace by almost 81 per cent, from 1,845,272 in 1991 to 355,835
in 1998 (Greenpeace, 1999).
In the spring of 1995 the backlash movement came to the UK with the publi-
cation of three books in one month (Beckerman, 1995; North, 1995; Ridley, 1995).
The confrontation between Greenpeace and Shell (UK) over the disposal of the
Brent-Spar offshore oil installation also occurred in 1995. Greenpeace activists
occupied the oil installation (on and off ) from 30 April to 20 June. This received
extensive media coverage, particularly on television, and encouraged a boycott of
Shell’s petrol stations in Germany, Denmark and the Netherlands, as well as the
© Blackwell Publishers Ltd 2002
14 . . .
passing of a resolution against Shell’s plans in the European Parliament. Although
Greenpeace achieved a victory, in that Shell abandoned its off-shore disposal
of the oil rig, they came off badly in the press (Lawson, 1995; Routledge, 1995;
Tsoukas, 1999; Vidal, 1995, p. 512). Views expressed in the British press contrasted
considerably with press coverage of Greenpeace a decade earlier. From 1995 to
1998 UK membership fell by 30 per cent, to just under 200,000 (Greenpeace,
1999).
The green backlash led to a reversal of the trend towards a necessary and
increasingly compatible configuration between Greenpeace and corporations. The
new position is not as extreme as in Phase 1. This is because Greenpeace became
more mainstream in ideas and its material interests altered. Corporations could
not ignore it to the extent that they used to, as Shell (UK) discovered over the
Brent Spa disposal, or MacMillan Bloedel over the clear cutting of the Canadian
forests. There is too much at stake for both parties. Furthermore, although the
backlash has been widespread, it has not been universal, thus limiting the extent
of its effect.
Phase 4
The disasters of the 1980s set in motion government actions, which have led to a
set of institutions that mediate between errant corporations and deep ecologists.
In 1991 the Rio Conference introduced the idea of sustainable development with
an emphasis on finding workable solutions. This has led to increased sensitivity to
environmental issues among governments as well as the general public. The effects
of Rio started to filter through to industry in the mid-1990s in several ways. This
has had a major effect on corporate/NGO relations. Ethical investments, by which
corporations are screened on a number of ethical and environmental issues, have
been one of the fastest growing sectors in both the UK and US.[14] The pressure
for corporations not only to look good environmentally, but also to act in a
suitable manner is increasing.[15] This has also impacted on supply chains. As a
consequence strategic alliances between corporations and selected NGOs are
emerging. Both parties have something to gain from this relation. NGOs are real-
izing the key role that corporations can play in forging workable solutions and cor-
porations gain instant, verifiable green credentials.
Greenpeace has broadened out to work closely with other groups, and has
started to put forward a solution-based approach to actions. In September 1996
Greenpeace held its first tailor-made conference for corporations. Examples of
alliances Greenpeace has forged with corporations include:
We argue that the weakness of stakeholder theory lies in the underspecification of
the organization/stakeholder relation itself. The stakeholder model presented here
is intended to allow a clearer understanding of:
[1] According to Donaldson and Preston (1995, pp. 65–7) stakeholder theory is descrip-
tive in that it describes ‘what the corporation is’; that is, as a constellation of coop-
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