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Corporate and Stakeholder Responsibility: Making Business Ethics a Two-Way Conversation

Author(s): Jerry D. Goodstein and Andrew C. Wicks
Source: Business Ethics Quarterly, Vol. 17, No. 3 (Jul., 2007), pp. 375-398
Published by: Philosophy Documentation Center
Stable URL: http://www.jstor.org/stable/27673185
Accessed: 23-10-2015 04:08 UTC
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CORPORATEAND STAKEHOLDER RESPONSIBILITY:
MAKING BUSINESS ETHICS A TWO-WAYCONVERSATION
Jerry D. Goodstein and Andrew C. Wicks
Abstract: In this article we revisit the notion of stakeholder responsibil

ityas a way to highlight the role that stakeholders have in creating an
ethical business context.We argue formodifying the prevailing focus
on corporate responsibility to stakeholders, and giving more serious
attention to the importance of stakeholder responsibility?to firms,
and to other stakeholders who are part of the collective enterprise.
We elaborate why stakeholder responsibility matters, and suggest how
making stakeholder responsibility a central focus of academics and
practitioners can redefine the interactionbetween firmsand stakehold
ers and ultimately enhance business excellence.
We want to turn the tables in this article on the usual conversations academics
and practitioners have when it comes to the topic of business ethics. For a
long time we have been talking and writing about corporate responsibility?and
with good reason.[ Corporations have become themost powerful institutions on the
planet, the engines of human welfare and progress, so it only makes sense thatwe
talk about the responsibility that they (or their agents) have to other stakeholders.
But, as important as it is, this has become a one-way conversation, one thatmakes
business ethics focus primarily on corporate responsibility. It is time we make
business ethics a two-way conversation and startputting greater emphasis on stake
holder responsibility and the role stakeholders such as employees play within the
firm, and the role customers, investors, suppliers, and public and nongovernmental
organizations play, along with corporations, in fostering ethical business practices
and business excellence.2
To develop a richer understanding of stakeholder responsibility,we move through

a series of discussions thataddresses how we are defining stakeholder responsibility
and why we believe stakeholder responsibility matters for academics and practition
ers.We close our paper by presenting an agenda for integrating those ideas into
future research and managerial practice.
What isStakeholderResponsibility?
There has been a lack of attention to the fundamental question ofwhether stake
holders have moral responsibilities to firms, and, if so, what the nature of those
? 2007. Business Ethics Quarterly, Volume 17, Issue 3. ISSN 1052-150X. pp. 375-398
376 Business Ethics Quarterly
responsibilities is. That is not to say that the topic of stakeholder responsibility has
been completely ignored by business ethics writers. Bowie3 argued thatby virtue of
the reciprocal nature ofmoral relations, it is important to consider the obligations of
various stakeholders, to thefirm, and to each other.Without making explicit refer
ence to the notion of stakeholder responsibility, Bowie noted that a richer theory
of corporate social responsibility required a complementary focus on "determin
ing the appropriate reciprocal duties that exist among corporate stakeholders."4 A
series of articles and books was subsequently published that attempted to establish
a conceptual foundation for stakeholder responsibility.5 That work emphasized the
importance of having stakeholders assume responsibility for negative outcomes
associated with theirdemands, and emphasized active engagement of stakeholders
and firms, particularly in relation to environmental issues.6
The definition of responsibility thatwe are emphasizing in relation to stakeholder
firm and stakeholder-stakeholder relationships encompasses three different but
complementary conceptions of stakeholder responsibility: fulfilling responsibili
ties as a function of reciprocity (SR-R), fulfilling responsibilities as a function of
interdependence (SR-I), and fulfilling responsibilities as a function of accountability
(SR-A). We will discuss each of those conceptions of stakeholder responsibility in
greater detail below.
As Bowie7 points out, moral relations are reciprocal, and hence to the extent
that firms are responsible for fulfilling duties to stakeholders, stakeholders in turn
are responsible for fulfilling duties to firms. Our responsibilities identify things
thatwe should attend to,many of which arise out of the obligations we take on.8
But reciprocity goes beyond the fulfillment of duties. There is a responsibility to
others that emerges as a function of stakeholders reciprocating benefits received
from firms and other stakeholders.
Viewed from thatperspective, reciprocity and fairness become crucial underlying
principles central to a rich understanding of stakeholder responsibility.As Phillips ar
gues, there are principles of fairness that apply to firm-stakeholder relationships:
Whenever persons or groups of persons voluntarily accept the benefits of a
beneficial scheme of sacrifice or contribution
mutually co-operation requiring
on the parts of the participants and there exists the possibility of free-riding,
obligations of fairness are created among the participants in the co-operative

scheme in proportion to the benefits accepted."9
Phillips argues that thisprinciple of fairness significantly extends stakeholder theory

by providing a normative foundation for determining whether firmshave responsi
bilities to stakeholders (Does the firm receive benefits from the stakeholder?), and
which stakeholders firms should give primary attention to (How significant are the
benefits received from a particular stakeholder?).
Phillips's discussion and extension of Rawls's work emphasizes the importance
of reciprocity and fairness in identifying relevant responsibilities, not only forfirms,
but for stakeholders as well. Employees, customers, suppliers, investors, and other
stakeholders benefit in a variety of ways from their relationships with firms and
Making Business Ethics a Two-Way Conversation 377
each other. Employees gain in tangible (e.g., wages) and intangible ways (e.g., or
ganizational commitment) from their relationships with firms.Customers may come
to appreciate the high-quality products a firm offers, and value as well the service
employees provide in purchasing those products. In drawing attention to thebenefits
stakeholders gain from specific relationships with firms and other stakeholders,
considerations of fairness and reciprocity encourage among stakeholders an other
oriented perspective grounded in "the recognition of the aspirations and interests
of others to be realized by their joint activity."10Thus, to the extent that fairness
arguments like this one are successful in showing thatfirms have responsibilities to
firms, they also show that responsibility flows in the opposite direction as well.
A second way of conceiving stakeholder responsibility emerges from the inter
dependence between stakeholders and firms, as well as among stakeholders and the
broad society. Tracing the termback to itsLatin roots (responder?), responsibility
literally means to "pledge back" and involves a continuous commitment on the
part of agents to thewider good.11 In contrast to some of themore contemporary
notions of responsibility that focus on an externally imposed obligation, this
form emphasizes the idea of people and organizations sharing a common fate and
choosing to pledge things to each other so as to foster cooperation and enhance
thewelfare of society.
Fundamental to thisunderstanding of stakeholder responsibility is the recognition
of the firm as (among other things) a web of relationships among stakeholders.12
Within any relationship, parties have certain responsibilities to each other, particu
larly if their aim is to be mutually beneficial and sustainable over time.13
It is crucial to recognize that in interdependent relationships, responsibilities
between firms and stakeholders work both ways, rather than in one direction. In
deed, even in themore contractual and structured interpretation of the firm (e.g.,
as a nexus of contracts), responsibility is assumed and essential. In some cases
the responsibilities of stakeholders in those interdependent relationships aremade
explicit and formalized, for example, when firms employ supplier selection guide
lines in contracting with key suppliers for goods and services. In other instances,
the responsibilities of interdependent stakeholders and firms are reinforced through
more implicit norms based on trust,for example.
A thirdway of understanding responsibility in relation to stakeholders is con
nected to notions of accountability. Returning to theLatin root of "responsibility,"
among themost importantways stakeholders can honor their pledges is through
"making morally acceptable decisions and being held accountable for actions and
impacts."14As Goodin15 points out, a central issue in determining responsibility is
whether a person, firm, or stakeholder has "the capacity to produce consequences
thatmatter to another." That conception of responsibility as a function of account
ability, extends what itmeans to be a stakeholder beyond the traditional definition
of stakeholders as individuals, groups, or organizations potentially affected by the
actions and policies of an organization.16 Indeed, we claim that stakeholders are
not only the recipients of organizational actions, but also actors with the power to
impact others and responsibility for the implications of their actions (or lack of ac
tions) in relation tofirms and other stakeholders.17 In the same way that responsible
corporations are held accountable for acting with integrity and considering how
specific actions and policies might harm stakeholders, especially those who are in
highly dependent and potentially vulnerable positions,18 stakeholders bear reciprocal
responsibilities as well forholding themselves accountable for acting with integrity
and taking into account potential harms to firms and other stakeholders.19
Below we advance a series of arguments about why stakeholder responsibility
matters and suggest its promise for reinvigorating the discussion and practice of
business ethics.We will specify the particular meaning of stakeholder responsibil
ity (e.g., SR-R, SR-I, or SR-A), where appropriate in our discussion, to clarify the
different conceptions of stakeholder responsibility and how they relate to the overall
importance of this construct.
Why Does Stakeholder Responsibility Matter?
We present fivemajor arguments forwhy stakeholder responsibility matters and

the possibilities illuminated by shining the business ethics spotlight on both firms
and stakeholders.We draw on an array of examples to demonstrate how stakeholder
responsibility can be made practicable in ways thatmake employees, customers,
suppliers, investors, nongovernmental organizations, as well as corporations, true
stakeholders in creating great organizations and a more ethical business context.
A New Way to Characterize Business Ethics

In the same way thatdiscussions of corporate responsibility have brought together
the practices of business and ethics, stakeholder responsibility can give us another
conceptual vehicle to connect business and ethics.With a dual focus on corporate
and stakeholder responsibility, ethics gets built into the very fabric of relation
ships between stakeholders and firms, and both firms and stakeholders are held
accountable for their actions. Academics and practitioners have used the language
of corporate responsibility tomotivate firms tomake ethics an integral practice. The
language of stakeholder responsibility offers a way to speak directly to stakeholders
about the importance of the role they play in fostering an ethical business climate
and the costs associated with opportunistic stakeholder behavior.
Those costs are high. Employee theftand fraud was estimated at $600 billion
in 2002, approximately 6 percent of GDP.20 Although a large proportion of that
amount is due to white-collar crime, there is still a considerable amount of theft
and fraud occurring at lower levels in the organization. There are other kinds of
thefts,frauds, and abuses carried out by consumers and thepublic?cable television
theft,auto insurance fraud, and abuse of customer returnpolicies. The cost of those
forms of irresponsible stakeholder behavior runs into the billions of dollars and is
compounded by the intangible cost associated with corrupting the ethical context
of business. When firms act responsibly, and stakeholders act responsibly as well,
those tangible and intangible costs are reduced and there is less likelihood of seeing
thekinds of breakdowns in business ethics thatwe are seeing today.21
Further, stakeholder responsibility provides a theoretical umbrella that is dis
tinctive because it is framed fundamentally from the perspective of stakeholders,
rather than the firm. It is comprehensive in that it encompasses a wide range of
what happens in and around business and it underscores the idea that all parties
involved are motivated (as well as constrained by) moral duties. Although stake
holder responsibility overlaps with a range of different theories about organizations,
such as organizational citizenship behaviors, corporate social responsibility, ethics,
stakeholder theory,and others,22 ithas a distinct focus and orientation that is largely
absent from our conversations and the existing literature: it emphasizes the inter
action of stakeholders with other stakeholders and thefirm rather than vice versa.
Stakeholder responsibility can take insights from those theories and build on them
as part of a larger and more comprehensive way of thinking about organizations,
one that reminds academics and managers thatwe need to be spending as much
timeworrying about what stakeholders do and why as we do on what corporations
do. That stakeholder-based vantage point may be critical for how we look at and
think about business. To that extent, stakeholder responsibility offers an important
and useful reorientation.
From the standpoint of themanager, itmay also provide a powerful rhetorical
device to engage stakeholders and engender cooperative and practical solutions to
problems. We are all too familiar with the language of corporate responsibility and
how it is used, oftenwith good reason, forpersuading (or shaming) firms into taking
action. There has neither been widespread attention to the reverse notion, however,
nor is there a common language for expressing it. Stakeholder responsibility, with
its underlying emphasis on reciprocity, interdependence, and accountability, gives
us a way to articulate thatwhile corporations have responsibilities, they are not
alone. Stakeholders have moral duties as well, and managers can and should use
this language to forge richer relationships with a variety of stakeholders inside and
outside the firm. It can offer an invitation as well as an entreaty or implied threat,
to get stakeholders to come to the table and make things right.
Finally, stakeholder responsibility provides a normative benchmark for excel
lence, as well as for despicable conduct, in a practical setting. It can help us sort
out the better companies and stakeholders from the poorer ones and give us a
reference point forwhy we think so. At the same time,while it has an explicitly
normative dimension, stakeholder responsibility has a practical bent in that it is
focused on concrete behavior and actions. As a construct, ithelps us maintain the
tension between themore theoretical and normative interests of business ethicists
and the practical orientation ofmanagers. Stakeholder responsibility pushes us to
think about both simultaneously in the context of business, rather than fashioning
a theory from either business or ethics and then applying it to the other realm.
Explaining Moral Failures in Corporations
In termsof the second area we want tohighlight,we think stakeholder responsibil

itycan help us thinkmore critically and comprehensively about why organizational
failure happens?especially business ethics disasters of the
WorldCom, Enron, Par
malat, and Arthur Andersen variety.A focus on stakeholder responsibility reminds
us that in thinking about why those breakdowns occur, we need to startby looking
at the interactions among key stakeholders ifwe want to really understand what
happened and why. What is disturbing is how many of those scandals depended
on breakdowns in stakeholder responsibility across a wide variety of stakeholders,
firms, and systems. From the vantage point of stakeholder responsibility, companies
(and communities) work well because of a wide array of shared values and under
standings that allow us all to get along and live well.23 Especially in organizations,
we develop standard operating procedures, practices, and understandings of what
we are responsible for,which create checks against mistakes, abuses, shirking, and
other forms of opportunism.
We want to call that system of shared norms, understandings and practices, "re
gimes of responsibility"?formal and informal ways thatnetworks of individuals
work together (both within and across organizations) to get things done and avoid
ethical breakdowns. Those regimes of responsibility represent distributions of
responsibility that allow one tomap "who must account, how far and forwhat, to
whom."24Well designed regimes of responsibility are setup such thatresponsibilities
are fairlydivided, tasks are completed in an efficient and functional way, and people
fulfill their roles and avoid moral breakdowns. There are many different kinds of
regimes of responsibility. Some are more legalistic or contractual in nature (e.g.,
real estate transactions among parties, or employees hired on a specific contractual
basis) while other regimes of responsibility rely on explicit, but more normative
standards not formally grounded in law (e.g., expectations for suppliers that are
formalized in supplier codes of conduct, or professional codes of ethics thatdefine
the roles and responsibilities of professionals such as accountants or engineers). At
the other end of the spectrum of regimes of responsibility are those that are more
implicit in nature (e.g., the expectations employees have that are communicated
through the culture of an organization).
Taking the perspective of stakeholder responsibility pushes us to look at
organizational failure as a chance to scrutinize stakeholders and the regimes of
responsibility thatwere in place at the time of moral failure, so thatwe can see
where breakdowns occurred and how the irresponsible actions of stakeholders
contributed to the largermess thatwas made. If we look closely at Enron, it is
clear that breakdowns in stakeholder responsibility were deep, widespread, and
grew throughout the organization over time.25Massive fraud was perpetrated by
topmanagement at the company to the tune of several billion dollars.26 Lower-level
employees, following topmanagement's lead, knowingly manipulated energy prices
in California and openly joked about the practice with their peers. What ismore
striking is that they got away with it for so long. Engaging in that unethical and
illegal behavior required thatmany other stakeholders?whether accountants or

investment banks or the thousands of lower-level employees who were complicit
in the harms being done to the shareholders, who in turn only saw great returns
and didn't ask hard questions about why?either actively or passively participated
in allowing the fraud to happen. Without thatperversion of reciprocity (SR-R) and
interdependence (SR-I) between Enron and its stakeholders ("I'll scratch your back
if you scratch mine"), and failure to hold themselves accountable (SR-A), both
individually and collectively, Enron might have either never happened or would
have been uncovered long ago. It tookmassive lapses in the system of stakeholder
responsibility within stakeholder networks and regimes of responsibility for these
events to unfold. All of this suggests that the existing elements of the regimes of
responsibility?that is, the threat of legal sanctions, professionalism, individual
integrity, organizational culture, interorganizational checks and balances?were
problematic and not robust.
Stakeholder responsibility tells us that a fruitful path for understanding why
Enron-like failures happen?whether one is an academic or amanager?is tofigure
out where the regimes of responsibility broke down. As these cases suggest, the
answer is complicated and messy. But spending time figuring out the answer will
be critical ifwe want to trulyunderstand and address the root causes of these ethi
cal breakdowns, rather than justmake personnel changes, generate some good PR,
and get back to business with the hope that itwon't happen again.
Making Organizational Moral Failure Rare

The thirdmain area we want to highlight builds off that last discussion point.
Stakeholder responsibility can help us in our thinking about how to create orga
nizations where ethical disasters and failures are rare. Particularly ifwe take the
time to understand the interlocking systems of stakeholder responsibility that exist
to prevent, detect, and address breakdowns within an organization, and why they
fail, we will be in a much better position to think about how they can be fixed or
changed. The law and market incentives certainly provide powerful ways to align
stakeholders' interestswith their legal and moral responsibilities, but they are ex
pensive, imperfect, and can send potentially dysfunctional signals about stakeholder
responsibility. Much of the current debate in themedia about corporate scandals
has focused on changing the system of corporate governance at the top?execu
tive compensation, board composition, and relationships with management, and
legislation tomake executives and corporate boards more accountable. We think
those are all worthwhile and important conversations to have and, if the changes
are done well, they can help make things better.
What these conversations and initiatives tend to obscure is that the situation is
much more complex, and thatgetting responsible behavior in corporations depends
on a wide array of stakeholder interactions and perceptions of what itmeans to act
responsibly. A critical place to look, particularly in light of the constitutive role they
play as stakeholders working within an organization, is to employees, including those
working within firms at the center of the corporate scandals. People like Cynthia
Cooper and Sherron Watkins are heroes partly because of how rare they are. How
is it that an employee of Enron could consider it a responsible act, let alone a good
thing for the company, toknowingly manipulate energy prices? Perhaps even more
disturbing, how is it that other employees and other stakeholders who know such
activity is going on elect to not use theirvoices?either within the firm or outside
it?if they face resistance from their superiors?27 If exit and blind loyalty to thefirm
are the only viable options to exercise stakeholder responsibility, we will continue
to see major problems with corporate corruption.28 Something about our notions of
loyalty and excellence has gone very wrong for this scene to unfold.
Improving how companies (and stakeholders) perform requires thatwe think
about rebuilding organizations?from the bottom up, the outside in, and from the
top down?and creating regimes of responsibility that are robust and durable. Each
of the three dimensions of stakeholder responsibility noted above?reciprocity,
interdependence, and accountability?have been integral to the success of one of
the best-known Internet-based companies in theworld, eBay.29 The vision of eBay
is to be theworld's largest online person-to-person trading community. The suc
cess of eBay is dependent on the ability of the company to create a kind of online
community among many of itskey stakeholders including employees, buyers, and
sellers. eBay has worked hard to develop a variety of practices that build com
munity and reinforce reciprocal responsibility among stakeholders (SR-R). There
are bulletin boards for eBay users to provide customer support to each other, chat
rooms, and newsletters as well.
A particularly important and relevant feature of the eBay community is the

Feedback Forum, where other users evaluate registered buyers and sellers. The
Feedback Forum provides users (buyers and sellers) with the ability to comment
on their experiences with another individual. A user profile is created that follows
the user everywhere on eBay, providing important benefits to both buyers and sell
ers who may interactwith thatuser. That practice facilitates mutual accountability
and trustwithin the eBay community and its value is dependent on eBay users
recognizing that they are part of an interdependent community and embracing that
responsibility. In that sense, eBay has been able to create regimes of responsibility
among users thathighlight their interdependence (SR-I) and theirmutual account
ability to prevent and weed out opportunism (SR-A).
Through the Feedback Forum and other practices, eBay sustains a community
that is robust and effectively draws upon its user base to assume responsibility for
protecting the site and other users.30 By drawing upon their energies and their loy
alty to the eBay community, the company has developed a powerful self-regulating
system that, with other forms of governance, allows an incredibly diverse and
dispersed set of users to buy and sellmost anything via the Internet.By participat
ing in the activities of thefirm and being attentive to the interests of the firm and
other stakeholders, stakeholders such as those at eBay find through their coopera
tive activity a sense of connection to shared purposes and values, inspiration, and
mutual responsibility. That, in turn,gives firms and stakeholders a reason to come

together and sustain their commitment to the business relationship beyond simple
financial gain.31
It is to such innovative regimes of responsibility where many stakeholders take
on different and complementary responsibilities thatwe ought to turnour attention
in thinking about running better organizations. Part of what is remarkable about
that regime of responsibility is that eBay got stakeholders to voluntarily take on
responsibility and be accountable, creating a highly efficient and low-cost way of
getting things done. Indeed, one can make the case that that regime of responsibil
ity is a key part of what has made eBay so successful in themarketplace, and so
need to better understand what factors help
difficult for its rivals to imitate.We
determine whether stakeholders act responsibly or not, and use thatknowledge to
come up with better approaches to designing, managing, and sustaining organiza
tions.We can learn a lot by looking at companies such as eBay and using them to
think about what works, what doesn't, and why. At the same time, there ismuch to
learn frommistakes and breakdowns infirm and stakeholder responsibilities, such
as the collapse of Enron.
Creating Organizational Excellence and Outstanding Performance

A focus on stakeholder responsibility opens up an exciting array of possibilities
for creating excellent organizations that are outstanding in realizing their objec
tives.Here the focus is less on the fear of dropping the ball or failing, and more on
what itmeans to run a great company. We think that stakeholder responsibility is
already an implicit part of how many companies think about and create outstanding
performance. More and more companies have towin over theminds and hearts of
key stakeholders if they are going to achieve excellence. They have to get stake
holders to become passionate about the organization and its practices if theywant
tokeep theirbest employees, generate quality products, maintain customer loyalty,
and get suppliers to help control costs and introduce innovation. All ofthat activity
entails that stakeholders do more thanmeet contractual duties or specific pay for
performance incentives. They need to feel a sense of commitment and loyalty to
themission and values of the firm.
It is important to note that their sense of responsibility must extend beyond the
general, big-picture mission and values and connect to particular tasks, practices,
and ways of cooperating with other stakeholders to achieve specific objectives. A
company that depends greatly on stakeholder responsibility for achieving its per
formance goals and meeting itsmission and core values is Starbucks. Starbucks
strives to developlong-term mutually beneficial relationships with its key stake
holders?employees, customers, suppliers, and alliance partners. In particular, the
elements of reciprocity, interdependence, and accountability play a significant role
at Starbucks in relation to the responsibilities of employees and suppliers.32
For Starbucks, realizing the company's mission requires getting employees
(partners) to embrace responsibility for creating the "Starbucks experience" among
customers, and formaking a difference in the community. The emphasis on building

the company by tapping into the passion and values of employees and stakeholders
comes across in the vision of theCEO, Howard Schultz. According to Schultz,
Starbucks, as it is today, is actually the child of two parents. One is the original
Starbucks, founded in 1971 ; a company passionately committed toworld-class

coffee and dedicated to educating its customers, one on one, about what great
coffee can be. The other is the vision and values I brought to the company:
the combination of competitive drive and a profound desire to make sure
everyone on the organization could win together. I wanted to blend coffee

with romance, to dare to achieve what others said was impossible, to defy
the odds with innovative and to do all this with and . . .
ideas, elegance style.
Ultimately, Starbucks can't flourish and win customers' hearts without the
passionate devotion of our employees. In business, that passion comes from
ownership, trust and loyalty. If you undermine any of those, employees will
view their work as just another job... . is our number-one
[Employee] passion
competitive advantage.33
An excellent example of how Starbucks extends that passion and sense of

stakeholder responsibility beyond employees is in its relationships with suppliers.34
Starbucks created in 2001 a Preferred Supplier Program with its coffee suppliers.
The guidelines for theprogram were refined in 2004 and the program was renamed
CA.F.E. (Coffee and Farmer Equity). Suppliers are rated in terms of how well they
fulfill their responsibilities inmeeting Starbucks's mission-driven guidelines in the
areas of environmental impacts, social conditions, and economic issues. Starbucks
has worked with a wide range of stakeholders?vendors, growers, NGOs?to
develop criteria that can be used for independent verification of those suppliers.
Suppliers thatactively take responsibility in termsof theiraccountability formeeting
theCA.F.E. practices (SR-A) are given purchase priority over other coffee suppliers
and they receive a price premium and better contract terms as well. In fiscal year
2005 Starbucks purchased 76.8 million pounds of coffee fromCA.F.E. certified
farmers, representing 24.6 percent of total coffee purchases.35
Finally, customers are invited to share in reinforcing Starbucks's cornmitment
to environmental responsibility. In order to encourage the use of organic garden
ing practices while avoiding waste, Starbucks provides customers with free coffee
grounds to use as compost. The company even offers economic incentives in the
form of price reductions to encourage customers to buy coffee in reusable mugs
rather than disposablecups (SR-R).
That passion, theirvalues, and stakeholder engagement have been integral to the
Starbucks brand and the firm's success, and are important reasons why employees,
as well as other stakeholders such as suppliers and customers, have aligned them
selves with the company. Stakeholder responsibility is fundamental to this type of
firm-stakeholder relationship. The allegiance of stakeholders to Starbucks's ideals,
itspractices, and itsproducts and services motivates the stakeholders to uphold and
protect the integrityof those very ideals, practices, products, and services (SR-A).
In that sense, taking responsibility iswhat makes someone a stakeholder.
Southwest Airlines is another highly regarded organization where stakeholders

play an important role in sustaining the passion and commitment that are central
to the company's success. For example, in a profile on Southwest Airlines, Gittell36
notes that employees see a strong responsibility (SR-R) to help Southwest Airlines
achieve itsgoals. That responsibility connects to the tangible and intangible benefits
employees receive fromworking within a culture that emphasizes mutual respect,
and thatallows employees to integrate theirwork and family lives.As one employee
explicitly noted, "I have a responsibility for a family, a house, and for this company.
The idea is to keep customers coming back. The goal is for you to come back and
fly on Southwest."37 Some of the customers at Southwest assume important respon
sibilities through their involvement in the employee selection process at Southwest.
Southwest invites some of itsmost senior frequent fliers to interview prospective
new employees.38 Creating an organization where people would want to take on the
responsibilities of being affiliated with the firm is integral to creating an outstand
ing business. The notion of stakeholders coming together tomake themselves and
each other better off also is fundamental to our idea of an ethical business context.
The mutual recognition of responsibilities between firms and stakeholders helps
to align self-interestwith the interests of others, and provides direction to channel
their energies in productive and sustainable ways.
While that focus on stakeholder responsibility is important for firms thatuse a
strategy of active stakeholder engagement, we would argue it is important for all
companies. Even forfirms that rely extensively on markets and arm's-length trans
actions, stakeholder responsibility is a relevant consideration and may be important
both at the system and individual firm level. At the system level, itmatters because
examples of stakeholder irresponsibility (i.e., breakdowns in SR-A), whether itbe
customer abuse of product returnpolicies, the rapid buying and selling of securities
("share-flipping") by investors,39or other systemwide practices, can be cases where
inefficiencies are created and the costs of doing business go up. For example, the
Recording IndustryAssociation ofAmerica had filed nearly 2,000 lawsuits byMarch
2004 associated with the illegal downloading of music, and a report by Forrester
Research indicated that the illegal downloading of music had reduced recording
industry revenues by at least $700 million.40
At the firm level, stakeholder responsibility matters in that even arm's-length
transactions require some level of trust.The example of eBay is of particular rel
evance here. Precisely because eBay 'sWeb site creates a viable market for reputation
and signaling information about past behavior, a large number of people are willing
to engage in cyberspace transactions with total strangers that theywould otherwise
never consider. By highlighting past stakeholder responsibility, and creating a com
munity of buyers and sellers that supports and rewards responsible behavior, and
punishes irresponsible behavior, eBay makes capitalism have far greater reach than
itwould otherwise. Ithelps provide an avenue to address challenges thatbusinesses
have long confronted with regard to how to "share the risks and rewards of their
activities."41 It also underscores how stakeholder responsibility plays a role in the
activity of all firms, even those thatdon't think about stakeholder responsibility as
a source of competitive advantage. Itmatters to how managers structure organiza
tions, deal with transaction costs, and think about creating value.
Conceptualizing and Working through Novel Business Challenges

The fifth and final area where we see great potential for leveraging stakeholder
responsibility is in tackling business challenges in ways that rely increasingly
on corporations and stakeholders taking joint responsibility. More and more, the
demands on corporations are increasing, as are the expectations for their ability to
respond to stakeholder activism.42
Nongovernmental organizations (NGOs) have played a particularly important
role in recent years as activists who have taken responsibility for challenging un
ethical practices of corporations, whether in relation to bribery, sexual harassment,
supporting corrupt governments, product safety,harm to the environment, or labor
conditions. What is interesting is how a number of companies have opted to face
those challenges and use thenotion of stakeholder responsibility?either explicitly
or implicitly?to engage stakeholders and come up with cooperative solutions to
these novel challenges. We present a number of examples below.
The importance of interdependence and shared responsibility between firms
and stakeholders is evidenced in a recent collaboration between Hewlett-Packard
(HP) and Office Depot. Both companies have explicit commitments to a model of
business success that is grounded in corporate citizenship and an active engagement
with a wide range of stakeholders. A major area of focus forHP and Office Depot
is environmental stewardship.
Both companies recently developed a partnership tohelp address the issue of the
recycling of old electronic products (e-waste).43 HP and Office Depot recognized
their shared supply-chain roles and responsibilities in addressing e-waste?HP as
a manufacturer, and Office Depot as a retailer (SR-I). The CEOs of Office Depot
and HP understood that the problem of e-waste was too large and expensive for
them to tackle on their own. Rather than fix the problem themselves or wait for
the government to begin forcing them to do so, they decided to collaborate and
engage a range of stakeholders towork with them to begin addressing the problem
and develop a solution thatworked for all. Over an eight-week period extending
from July through early September 2004, Office Depot agreed to open up its 901
domestic stores for customer drop-offs of old electronic equipment (not necessar
ilyHP products). Many customers took advantage ofthat free program and rather
than throwing their old equipment away, they dropped them off at Office Depot.
Office Depot collected more than 325,000 products weighing more than 10.5 mil
lion pounds, including monitors, PCs, printers, scanners, cell phones, TVs, and a
host of other products (many notmanufactured by HP). Office Depot then shipped
those products toHP?the two companies shared the cost?which then recycled
those products at their national facilities in California and Tennessee. By building
on shared values and showing their own commitment to the issues, HP and Office
Depot were able to assume key mutual responsibilities and make a meaningful
dent in the problem.
The Rethink Initiative launched in January 2005, builds on those effortsby bring
ing together industry (e.g., HP, Intel, IBM, Apple), government (e.g., EPA), and
environmental organizations (e.g., Silicon Valley Toxics Coalition).44 The Rethink
Initiative is a collaborative undertaking among those stakeholders with the goal of
addressing the challenge of disposing of e-waste. eBay is coordinating providing
education and information about private, public, and not-for-profit recycling op
tions on itsWeb site to itsmember community (125 million computer users). What
is unique about that initiative is theway inwhich itdraws on multiple stakeholder
groups?corporations, government agencies, and NGOs?to create regimes of
responsibility for developing solutions to e-waste, rather than relying solely on the
efforts of any one of these stakeholder groups (SR-I).
The efforts of companies such as HP and Office Depot, as well as the orga
nizations involved in the Rethink Initiative, can be even more successful when
consumers recognize and uphold their shared responsibilities throughmaking the
effort to recycle old electronic products, rather than dumping them in the trash.
Consumers can play a major role in addressing the business challenge of e-waste
by actively seeking out and taking advantage of opportunities to recycle electronic
products.
Nike also faced challenges regarding labor issues. Initially,Nike was the subject
of intensemedia scrutiny and criticism from a wide array of groups for not doing
enough to ensure that factories where its products were made had decent working
conditions, paid decent wages, and did not utilize child labor.All of those charges
stung?not only for the bad publicity, harm to the brand, and potential lost sales,
but also for the pride and self-respect of many who worked at the firm and who
were as troubled as many of the protesters about the charges.
Though it took some time to take shape, Nike and several other companies de
veloped a voluntary initiative, theFair Labor Association (FLA), to tackle this novel
challenge and establish a viable regime of responsibility to enhance the account
ability of these organizations (SR-A). The FLA set standards thatNike embraced,
and which would meet the demands ofmost of its critics. FLA created a protocol
for inspecting factories and checking with them about working conditions. That
provided a considerable measure of transparency regarding what was going on in
factories, and it offered a mechanism to put pressure on factory owners to change
theirpractices to fall in line with FLA standards.
A key part of what has made this initiative successful and earned Nike the sup
port ofmany who were previously critics?including theWorld Resources Council,
one of its chief detractors?is itswillingness to engage a variety of stakeholders.
That engagement includes hiring and actively collaborating with those who were
critics of the company on the issue, and getting them to help fashion regimes of
responsibility that address the relevant problems in a constructive and proactive
fashion. The FLA, for example, has launched a special project inCentral America
to address workplace issues. That project is jointly funded by the FLA and U.S.
State Department, and brings together corporations (Nike, Adidas-Salomon, Eddie
Bauer, Gildan, Liz Claiborne, Phillips-Van Heusen, and Reebok), trade associations
in the region, and theministries of labor inGuatemala and Honduras, so that those
stakeholders share in the responsibility for developing guidelines regarding issues
such as workplace discrimination, harassment and abuse, and freedom of associa
tion, and formonitoring compliance with these guidelines (SR-A).45
Starbucks found itself in a similar position to Nike, challenged by NGOs
(specifically, Global Exchange), regarding the fairness of its practices with coffee
growers.46 Though initially Starbucks had contentious relationships with Global
Exchange around the issue of providing Fair-Trade coffee, the company was able to
work closely with other stakeholders such as Oxfam American, theOaxacan State
Coffee Producers Network, and theFord Foundation to develop a set of practices
and mutual responsibilities (CA.F.E. practices) that supports coffee farmers with
a fair price and ensures a supply of high-quality coffee.47
The experiences of Nike, HP and Home Depot, eBay, Starbucks, and their
stakeholders demonstrate how stakeholder responsibility can become a platform for
creating engagement, sharing responsibilities, generating novel forms of coopera
tion across a wide array of stakeholders, and findingmutually beneficial solutions
to issues thatmatter to all.
In table 1,we draw together each of thefive core arguments regarding why stake
holder responsibility matters, and we summarize thebroad implications that follow
from those core arguments and the examples we have included in our discussion.
We have argued for how a focus on stakeholder responsibility reorients how one
Table 1
Core Stakeholder Responsibility Arguments Practical Implications
Stakeholder responsibility provides a powerful re Firms and stakeholders share in the responsibility for
orientation in how to think and talk about business creating and sustaining an ethical business context.
ethics.
Stakeholder responsibility is useful in helping ex Stakeholder opportunism and/or indifference can

plain moral failures in corporations, assigning blame be an important determinant of unethical business
to various stakeholders. behavior.
Stakeholder responsibility may prompt new think Firms and stakeholders can work together to create
ing about how to create organizations where moral regimes of responsibility that limitmoral failures
failures are rare. and promote ethical behavior.
Stakeholder responsibility can be a vehicle that Business success depends on developing firm and
aids our thinking about how we create organiza stakeholder relationships that foster both responsive
tions that are noted for excellence and outstanding ness and responsibility.
performance.
Stakeholder responsibility gives us a language for Firms can look to stakeholders as mutual partners in
determining how we can conceptualize and work striving for responsible business excellence.
through novel business challenges.
thinks and talks about business ethics. However, while it is important to "think" and
"talk" the language of stakeholder responsibility, as our examples above suggest,
it is through the practice of stakeholder responsibility and "walking the talk," that
firms and stakeholders truly create an ethical business context. That is ultimately a
responsibility that firms and stakeholders share.And while themajority of attention
in relation tomoral failures has been on corporations failing to fulfill their respon
sibilities to stakeholders and the broader society, we have tried to point out how
opportunistic and irresponsible behavior by stakeholders also undermines ethical
business practice. The final three core arguments we have developed complement
one another in highlighting the promise of emphasizing stakeholder responsibility,
through promoting the creation of regimes of responsibility that support ethical
behavior and fostering firm-stakeholder relationships that lead to ethical business
practices and business excellence.
Stakeholder Responsibility: Developing Theory, Research, and Practice
We have outlined five core arguments built around the stakeholder responsibility
concept and discussed them inways that should be of interest to both academics
and practitioners. Our hope is thatwork can proceed thatwill be interesting and
relevant to both academic and practitioner audiences, and will draw on the skills and
expertise of business ethicists, social scientists, and managers. We see thiswork as
an important extension of stakeholder theory thatmay help us speak more directly
to the sources of ethical failures and the constructive possibilities that lie within
business, as well as within business ethics and management theory.
Directing our attention first to the business ethics literature, scholars might con
sider the relationship between stakeholder rights and stakeholder responsibilities, and
how claims of stakeholder rights might give rise to associated responsibilities that
depend on the degree of reciprocity, interdependence, and accountability involved
in the relationship. Bowie raises a relevant example in his discussion of stakeholder
responsibility and thefirm-employee relationship.48Despite the legality of thepractice
of employment-at-will (which supports termination of employees without advance
notice), employees claim an importantright to receive advance notice and an expecta
tionof corporate responsibility in relation topolicies regarding employee termination.
That claim is framed in termsof theright tobe treatedwith respect and dignity, tohave
employee loyaltyhonored, and to acknowledge theburden employees bear when they
are terminatedwith littleadvance notice.When adopting a stakeholder responsibility
perspective, one can argue that employees have a responsibility as well to provide
advance notice to employers, especially from those employees who have benefited
(SR-R) from significant firm investments (e.g., training) and upon whom thefirm
might be especially dependent (SR-I). Similar arguments regarding the relationship
between stakeholder claims forrights and relevant responsibilities associated with
those rights could be extended to other critical stakeholders (e.g., suppliers, custom
ers), and represent a fruitfularea of attention for business ethics scholars.
The lens of stakeholder responsibility can also motivate empirical research that
looks at themyriad forces that shape individual and group behavior within orga
nizations and influence broader systems, or regimes of responsibility that support
responsible stakeholder behavior. Business is increasingly being conducted through
networks and alliances of firms and stakeholders. The literature on network theory
and organizational design (particularly around the idea of "fit")may be of particular
relevance to the development of regimes of responsibility. Researchers can draw
on network theory to examine in greater depth how relationships function and the
conditions under which stakeholders in various networks do (or do not) take on
certain responsibilities.49 That kind of research can provide a foundation for think
ing about how firmsmight design better systems and, in particular, adopt regimes
of responsibility that lay out specific forms of firm and stakeholder responsibilities
(e.g., contracts, norms), which appear optimal given the specific issue at hand.
We also need to examine the implications of when firms and stakeholders fulfill
critical mutual responsibilities. It is possible that the expression ofmutual respon
sibilities, and their ongoing fulfillment among stakeholders, may provide critical
resources to propel outstanding performance and enable key forms of cooperation
thatbenefit the firm.As critical stakeholders such as employees and suppliers, for
example, fulfill those responsibilities, does stakeholder commitment grow, and
in turnprovide a foundation for innovation and mutual adaptation in response to
environmental changes? Or, does such fulfillment end there, and not spill over into
the larger social network and the commitment of these stakeholders to each other
and their ongoing cooperation? Future research could develop specific theoretical
propositions linking an array of related theoryconstructs?for example, stakeholder
responsibility, network structure, trust,stakeholder commitment?and subject them
torigorous empirical testing. Such research could do a great deal tobring the claims
of this article under critical scrutiny as well as enable us to better understand how
stakeholder responsibility can be structured to foster outstanding performance.
Considerable research exists to give credence to the idea that stakeholder
responsibility matters to performance and to creating successful organizations.
Pfeffer's and Huselid's work on high performance management systems suggests
that the fulfillment ofmutual obligations and responsibilities reinforces norms of
reciprocity and is a powerful determinant of employee commitment and long-term
organizational performance.50 Research byWicks suggests thatTQM and various
quality initiatives are critically dependent on workers and suppliers taking on key
responsibilities that enable these new production systems to provide critical pro
ductivity and quality improvements.51 The literature on supply-chain management
offers additional support to the idea that it is through stakeholders cooperating?and
specifically taking on responsibilities that extend beyond specific contracts and
monetary incentives?that firms are able to create competitive advantage.52 Similar
support can be found in the research on trustin (and between) organizations as well
as the literature on employee empowerment.53 There aremany opportunities to see
the importance of this construct, but littlework thatbrings it all together to suggest
the power of stakeholder responsibility as a lens for thinking about organizations

and what makes them succeed or fail.Making these linkages more concrete and
putting them under the umbrella of stakeholder responsibility allows us to create
new research which can explore the connections among these literatures in a way
thatputs ethics at the center of the conversation (via stakeholder responsibility).
From the practitioner side, we need to look at best practices and benchmark
organizations that tend to have few legal and ethical problems, especially within
industries or locales wherein their peers tend to have significant problems. In
particular, we need to look at organizations that are noted for being exemplary
in taking theirmissions and values seriously and using them to shape operations
throughout the organization every day. How do those firms draw on theirmissions
and values to articulate and communicate stakeholder responsibilities in relation
to thefirm and its relationships with stakeholders? What practices and structures
help facilitate thatprocess of communication and facilitate stakeholders in uphold
ing critical responsibilities? How do those organizations work with stakeholders
to establish regimes of responsibility that build on the elements of stakeholder
responsibility?reciprocity, interdependence, and accountability?we have empha
sized throughout our paper? We have had an opportunity to speak with a variety of
executives as part of our research on stakeholder responsibility. Part of what has
been gratifying in our conversations with companies is how implicit the notion of
stakeholder responsibility is. Though many did not explicitly use the term responsi
bility, it is clear that the companies with whom we spoke were striving to create the
kind of stakeholder engagement and commitment that is captured in the language
of stakeholder responsibility. As we tried tomake such linkages more transparent
and systematic, we found thatmanagers were not only receptive to stakeholder re
sponsibility, but saw it as a useful way to recast and connect what theywere up to.
As this article has made explicit, there are a variety of ways inwhich the language
of stakeholder responsibility may do important work for companies?to clarify
expectations, to signal active concern and integrity, to foster ongoing cooperation
and mutual adaptation, and to serve as a device thatmay limit critical breakdowns
that could destroy corporate reputation.
A place for leadership and stakeholders tobegin in trying to put these ideas about
stakeholder responsibility into practice is to ask a series of basic questions related
to the firm and its stakeholders: What does itmean to be a responsible customer?
A responsible supplier? A responsible owner? In table 2, we suggest some broad
ways that stakeholders can demonstrate responsible behavior in relation to thefirm's
and other stakeholders' interests.
One way to see how such responsibilities might be brought together in a practical
context is to return to our discussion of HP and Office Depot. Those organizations
recognized their responsibilities as supply-chain partners for contributing to the
management of e-waste and initiated a partnership to collect and process e-waste. The
success ofthat endeavor was dependent on customers' recognizing their role in ad
Table 2
Stakeholders Responsibilities
Owners Exercise patient capital; be informed investors by utilizing the infor
mation provided by firms to investors; direct investment resources to
firms that act responsibly.
Employees Enact themission and values of the firm in daily behaviors; exercise
voice in responsible ways; reciprocate firm efforts to build trust and
commitment through contributing skills, knowledge, and flexibility.
Suppliers Go beyond basic requirements of codes of conduct and look for in

novative ways to enhance the goals and interests of thefirm and other
stakeholders in key areas such as the environment or human rights.
CustomersMake responsible product and service choices, rewarding firms that

are responsible corporate actors; avoid opportunistic behavior such
as consumer fraud and abuse of product returns; follow up with firms
thathave taken the responsibility to recall unsafe products.
Nongovernmental Work with firms in a spirit of cooperation and engagement; respect

Organizations the interests and needs of thefirm and other stakeholders potentially
influenced by NGO actions.
dressing thebroad responsibility of addressing e-waste and taking responsibility for

delivering their electronic equipment to theHP and Office Depot drop-off sites.
That regime of responsibility can be expanded to other stakeholders. One might
look to the current shareholders ofHP and Office Depot, as well as other potential
investors, who can exercise their responsibilities through investing in those orga
nizations (and others that are undertaking similar sustainability initiatives). NGOs
with a particular emphasis on environmental issues can publicly praise and point to
those kinds of efforts asmodels ofwhat firms and stakeholders can do to address the
problem of e-waste in society. That way of fulfilling responsibility runs counter to a
more adversarial approach takenby some NGOs and avoids thekind of opportunistic
behavior Argenti54 points out, "While itmay seem counterintuitive, truly socially
responsible companies are actually more likely tobe attacked by activistNGOs than
those that are not. . . . Some NGOs will use a socially responsible company as a
platform for its own message." A stakeholder responsibility perspective challenges
NGOs not only to hold firms and stakeholders accountable, but also to hold them
selves accountable for their actions in relation to those firms and stakeholders.
Future research might take up such questions of stakeholder responsibility sys
tematically?for example, using Phillips's notion of fairness, one might derive a
set of responsibilities for each stakeholder group. Other theories such as Goodin's
principle of vulnerability may also enable us to craftdifferentaccounts of stakeholder
responsibility that can serve as useful foundations for linking this broad construct
back tomore specific behaviors and expectations. At thepractitioner level, the focus
would be reflecting on theparticular kinds of responsibilities a given firmwants or
needs given its unique challenges and theways itwants to do business. While the
work of academic authors may provide a useful backdrop, practitioners will want
to think through the specific ways inwhich stakeholders need tobehave in order for
a firm to create outstanding performance and avoid critical breakdowns. They will
need to get down to specific regimes of responsibility that fit their company and
context?as, for example, eBay developed some unique regimes of responsibility to
engage their stakeholders and create a highly complex and efficientbusiness model.
Clearly the role thata given stakeholder (e.g., an employee) plays forStarbucks may
be very different than the role the stakeholder plays forWal-Mart, and the kinds
of responsibilities an employee, for example, may need to take on will also likely
vary across context.
organizational
Once managers have confronted those questions and determined relevant re
sponsibilities, theywill need to translate those responsibilities into expectations for
stakeholders, taking into account differences in stakeholder relationships and the
degree of reciprocity, interdependence, and accountability within those relationships.
A place tobegin is to look at thefirm's existing practices formanaging stakeholder
relationships. Waddock55 has identified a variety of different best practices for
managing stakeholder relationships, for example, providing investors with timely
and transparent information, implementing high-performance human resource
management (HRM) systems thatbuild employee trust, loyalty, and commitment,
and building customer relationships through enhancing the quality of products and
services and avoiding taking advantage of customers. In providing investors with
that information, firms can discuss the importance of shareholder responsibility
and accountability (SR-A) in regard to carefully reading that information and un
derstanding the goals and values of the organization and its strategies for achieving
performance. Firms that extend trust to their customers and offer a "no questions
asked" policy regarding store returnsmight communicate how much they depend
on the integrity of customers to sustain that practice by fair and honest customer
behavior (SR-A).
An example of a company utilizing itsHRM system to emphasize the impor
tance of employee responsibilities for ethical behavior is Citigroup. On March 1,
2005, Citigroup launched a corporatewide initiative to address ethics issues that
had undermined the reputation of Citigroup. Citigroup CEO Chuck Prince empha
sized the interdependence between Citigroup, its employees, and its stakeholders
(SR-I), and the importance of leadership and employee accountability (SR-A), in
asking the 260,000 employees within Citigroup "to spend some time reflecting on
our company, its history, the great legacy handed down to us and on our shared
responsibilities to build on this legacy."56As part of that initiative, employees were
shown a twenty-five-minute documentary and asked to "attest that they have seen
the film and understand the shared responsibilities ... to our clients, each other,
and to our franchise."57 In addition, 30,000 managers and all employees were sent
on "annual franchise training" and spent a full day reviewing what they could do
to live up to their "shared responsibilities."58 That initiative by Citigroup, meant
to be revisited each year, highlights the importance ofmanagers (and researchers)
thinking about the connections across ethics, strategy,human resource management,
and operations (among others), and developing regimes of responsibility that allow
the firm to excel.
The key is to determine whether those practices serve as effective vehicles for
communicating those responsibilities to stakeholders and motivating stakeholders
to act responsibly inmeeting the interests of firms and other stakeholders. In the
same way that stakeholders have made their expectations a critical foundation for
corporate responsibility, firms have to communicate their expectations regarding
responsible behavior to stakeholders. There may be a variety of ways formanagers
to reward stakeholders for fulfilling responsibilities, such as providing incentives
for customers to recycle products, renewing contracts with exemplary suppliers,
and making employee enactment of thefirm's values a component of performance
evaluations and rewards.
Although those effortswill takemanagerial time and the devotion of resources,

there are potentially great rewards for firms. Fostering stakeholder responsibility
can lead to greater trustand a stronger foundation of shared values and purposes
between firms and stakeholders, leading to greater stakeholder commitment. That
focus on commitment and responsibility is especially relevant in the currentbusiness
environment. As firms shift toward closer relationships with fewer stakeholders and
flatten corporate hierarchies by pushing responsibility (and specifically decision
making authority) toward stakeholders on the front lines, and as public pressure
for greater corporate responsibility intensifies, both commitment and responsibility
become potentially critical variables for corporate success. In such an environment,
firmsmust rely even more on stakeholders to give theirbest efforts,beyond specific
inducements and financial incentives.And iffirms are invested in relationships with
stakeholders (rather than just arm's-length transactions), then commitment and
responsibility become key leverage points for both enabling key firm capabilities
(e.g., outstanding service, complex coordination, efficient problem-solving) and
avoiding firm and stakeholder opportunism.
This is an agenda thatcalls on business ethicists,managers, and social scientists to
work together.Business ethicists can signal the importance and relevance of empha
sizing stakeholder responsibilities.59 Practitioners can contribute theirknowledge and
experience inmanaging firm-stakeholder relationships.60Organizational researchers
can contribute their research-based knowledge regarding how responsibilities are
institutionalized through various mechanisms and processes.61
Moving ahead with the stakeholder responsibility agenda will require academ
ics, in particular business ethicists and management researchers, to communicate
directly to audiences outside the academy and outside firm boundaries?customers,
suppliers, investors, NGOs, and others. In arguing forwhy and how stakeholder
responsibility matters, academics will need to find ways to reach stakeholders so
they are aware of the role theyplay in fostering business ethics. That will not be easy.
Academics are used to communicating primarily to other academics and manage
rial audiences?through academic journals, classroom settings,workshops, and so
on. Although those settingsmay be important channels for delivering themessage
of stakeholder responsibility, academics will have to look to alternative forums,
for example, organizations and professional associations that are pursuing related
work?investors (Investor Responsibility Research Center), customers (consumer

responsibility groups), suppliers (various associations), employees (Society for
Human Resource Management), and NGOs.
As academics and practitioners work together tobetter understand the dynamics
of life in organizations from the standpoint of key stakeholders?particularly how it
is that stakeholders distance themselves from responsibility, how existing regimes
of responsibility break down, and how we can benchmark and design better systems
of responsibility among stakeholders?we will be in a better position to combat
business corruption. Without some vibrant notion of stakeholder responsibility,
business doesn't work. It is in forms of corporate and stakeholder cooperation where
all parties pursue their interests and commitments and fulfill their responsibilities
to each other thatwe will find outstanding performance and notions of business
excellence that deserve our attention. By developing robust notions of stakeholder
responsibility and efficient and intelligent systems that reinforce such notions of
responsibility, we will be thatmuch closer to creating excellent companies and
excellent markets. In the end, ethics will become everybody's business.
Notes
We appreciate the financial support of the Batten Institute, the Darden School, University of
Virginia, in developing these ideas. We also thank BEQ Associate Editor Norm Bowie and the
three anonymous BEQ reviewers for their helpful comments and suggestions, as well as Shawn
Berman, Ming-Jer Chen, Rob Phillips, Dave Whetten, and faculty in the Department of Business
atWashington State University, Vancouver, who provided important feedback on earlier drafts
of this paper.
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1997), 11, 138.

34. Elliot J. Schr?ge, "Promoting International Worker Rights Through Private Voluntary
Initiatives: Public Relations or Public Policy?" Report to U.S. Department of State on behalf of
The University of Iowa Center for Human Rights, January 2004.
35. http://www.starbucks.com/aboutus/FY05_CSR_Products.pdf.
36. Jody H. Gittell, The Southwest Airlines Way (New York: McGraw-Hill, 2003).
37. Ibid., 119.
38. We thank the BEQ reviewer who brought this practice of Southwest Airlines to our
attention.
39. Jim Collins, Good to Great (New York: HarperCollins, Inc., 2001).
40. Norman E. Bowie, andWrongs : Intellectual
"Digital Rights Property in the Information
Age," Visiting Professorship in Business Ethics and Information Technology, Center for Business
Ethics, Bentley College, March 29, 2004.
41. JohnMicklethwait and Adrian Woolridge, The Company (New York: Modern Library,
2003.)
43. Information and data on theHP and Home Depot collaboration were provided by Tyler
Elm, Director of Environmental Affairs for Home Depot during discussions held in October and
November 2004.
44. http://www.rethink.ebay.com.
45. http://www.fairlabor.org/2005report/special projects/index/html.
46. Paul A. Argenti, "Collaborating with Activists: How Starbucks Works with NGO's,"
CaliforniaManagement Review 47(1) (Fall 2004): 91-116.

47. Ibid.
48. Bowie, "New Directions"; Patricia H. Werhane, Persons, Rights, and Corporations
(Englewood Cliffs, N.J.: Prentice Hall, 1985.)

49. Guatam Ahuja, "Collaborative Networks, Structural Holes, and Innovation: A Longitu
dinal Study," Administrative Science Quarterly 45(3) (2000): 425-56; Steve Farkas, Ann Duffet,
Jean Johnson, and Beth Syat, "A Few Bad Apples: An Exploratory Look atWhat Typical Americans
Think About Business Today," Report for The Kettering Foundation
Ethics from Public Agenda,
(January 2004); and Sumatra Ghoshal, "Social Capital, Intellectual Capital, and
Janine^Nahapiet
Organizational Advantage,"Ac???femv ofManagement Review 23(2) (1998): 242-66; Timothy
J. Rowley, "Managing Beyond Network Ties: A Network Theory of Stakeholder Influences,"
Academy ofManagement Review 22(4) (1997): 887-910.
50. Mark A. Huselid, "The Impact of Human Resource Practices on Turnover, Productivity,
and Corporate Financial Performance," Academy ofManagement Journal 38(3) (1995): 635-72;
Jeffrey Pfeffer, The Human Equation (Cambridge, Mass.: Harvard University Press, 1998).
51. Andrew C. Wicks, "The Value Dynamics of Total Quality Management: Ethics and the
Foundation of TQM," Business Ethics Quarterly 11(3) (2001): 501-36.
52. Edward W. Davis and Robert E. Spekman, The Extended Enterprise:Gaining Competi
tiveAdvantage Through Collaborative Supply Chains (Upper Saddle River, N.J.: Financial Times
Prentice Hall, 2004).
53. Two recent journalspecial issues were devoted to the topic of trust. See Academy of
Management Review 20(3) (1998); and Organization Science 14(1) (2003). On employee em
powerment see Wicks, "Value Dynamics."
54. Argenti, "Collaborating with Activists," 36.
56. Jill Treanor, "Citigroup Chief Preaches Ethics in the Counting House," The Guardian
Unlimited (February17,2005).
57. Ibid.
58. Ibid.
59. Bowie, "Digital Rights and Wrongs."
60. Waddock, Bodell, and Graves, "Responsibility"; Waddock and Bodell, "Managing
Responsibility."
61. W. Richard Scott, Institutions and Organizations (2nd edition) (Thousand Oaks, Calif. :
Sage Publications, 2000).

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Corporate and Stakeholder Responsibility: Making Business Ethics a Two-Way Conversation

You may need to log in to JSTOR to access the linked references.

Jerry D. Goodstein and Andrew C. Wicks

Abstract: In this article we revisit the notion of stakeholder responsibil

To develop a richer understanding of stakeholder responsibility,we move through

obligations of fairness are created among the participants in the co-operative

Phillips argues that thisprinciple of fairness significantly extends stakeholder theory

Why Does Stakeholder Responsibility Matter?

We present fivemajor arguments forwhy stakeholder responsibility matters and

A New Way to Characterize Business Ethics

Explaining Moral Failures in Corporations

In termsof the second area we want tohighlight,we think stakeholder responsibil

illegal behavior required thatmany other stakeholders?whether accountants or

Making Organizational Moral Failure Rare

A particularly important and relevant feature of the eBay community is the

mutual responsibility. That, in turn,gives firms and stakeholders a reason to come

Creating Organizational Excellence and Outstanding Performance

customers, and formaking a difference in the community. The emphasis on building

Starbucks, founded in 1971 ; a company passionately committed toworld-class

everyone on the organization could win together. I wanted to blend coffee

passionate devotion of our employees. In business, that passion comes from

An excellent example of how Starbucks extends that passion and sense of

Southwest Airlines is another highly regarded organization where stakeholders

Conceptualizing and Working through Novel Business Challenges

Core Stakeholder Responsibility Arguments Practical Implications

Stakeholder responsibility is useful in helping ex Stakeholder opportunism and/or indifference can

Stakeholder Responsibility: Developing Theory, Research, and Practice

the power of stakeholder responsibility as a lens for thinking about organizations

Suppliers Go beyond basic requirements of codes of conduct and look for in

CustomersMake responsible product and service choices, rewarding firms that

Nongovernmental Work with firms in a spirit of cooperation and engagement; respect

dressing thebroad responsibility of addressing e-waste and taking responsibility for

Although those effortswill takemanagerial time and the devotion of resources,

work?investors (Investor Responsibility Research Center), customers (consumer

1. R. Edward Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman,

16(2) (May 2002): 132-48; SandraWaddock and Charles Bodwell, "ManagingResponsibility:

Thinking, vol. 2 (Sheffield, UK: Greenleaf Publishing, 2003).

(July-August 1991): 56-65.

velopment," 217-31; Anne T. Lawrence, "The Drivers of Stakeholder Engagement: Reflections

Thinking, vol. 2, ed. Andrioff et ah, 128-44.

8. R. A. Duff, Concise Routledge Encyclopedia of Philosophy (London: Routledge,

Quarterly7(1) (1997): 51-66, 57.

Quarterly4(4) (1994): 475-97.

19. Jeff Frooman, "Stakeholder Influence Strategies," Academy ofManagement Review

24(2) (1999): 191-205.

21. Jerald Greenberg, "Employee Theft as a Reaction to Underpayment The

25. Sherron S. Watkins, "Ethical Conflicts at Enron: Moral Responsibility in Corporate

Capitalism," California Management Review 45(4) (Summer 2003): 6-19.

Identity," Academy ofManagement Review 25(1) (2000): 43-62.

1997), 11, 138.

CaliforniaManagement Review 47(1) (Fall 2004): 91-116.

(Englewood Cliffs, N.J.: Prentice Hall, 1985.)

powerment see Wicks, "Value Dynamics."

54. Argenti, "Collaborating with Activists," 36.

55. Waddock, Leading Corporate Citizens.

59. Bowie, "Digital Rights and Wrongs."