Lesson of October 24 th 2014 STAKEHOLDER APPROCH STAKEHOLDER - PDF document

10/28/2014 Lesson of October 24 th 2014 STAKEHOLDER APPROCH • STAKEHOLDER MANAGEMENT: MANAGING FOR STAKEHOLDERS = PRODUCE VALUE FOR STAKEHOLDERS 1

10/28/2014 INTRODUCTION • OVER THE PAST THIRTY YEARS SCHOLARS OF VARIOUS DISCIPLINES (finance, management, accounting , philosophy and so on) ARE ELABORATING STAKEHOLDER THEORY/IES) INTRODUCTION • PAY ATTENTION TO HOW RELATIONSHIPS WITH VARIOUS CONSTITUENTS (NAMED STAKEHOLDERS AND NOT STOCKHOLDERS) ARE MANAGED IN ORDER TO CREATE VALUE FOR ALL STAKEHOLDERS 2

10/28/2014 INTRODUCTION • ACCORDING TO THE SO CALLED “DOMINANT” MODEL (CREATE VALUE FOR SHAREHOLDERS) A MANAGER HAS TO PURSUE A BENEFIT ONLY FOR SHAREHOLDERS, BENEFITS FOR OTHERS ARE INCIDENTAL LIMITS OF THE DOMINANT MODEL IN THE WORLD OF 21 th Century • 1) RESISTANT TO CHANGE • 2) NOT CONSISTENT WITH LAW • 3) FATAL IN BUSINESS WORLD OF THE 21 ST CENTURY 3

10/28/2014 IDEAS OF MANAGING FOR STAKEHOLDERS TO SOLVE SOME OF THE PROBLEMS OF THE DOMINANT MODEL • 1) MORE DIFFICULT TO IGNORE MATTER OF IDEAS • 2) EXECUTIVE HAS TO CREATE VALUE FOR STAKEHOLDER AS POSSIBLE • 3) NO STAKEHOLDER INTEREST IS VIABLE IN ISOLATION OF THE OTHER STAKEHOLDERS “STAKEHOLDER CAPITALISM” • “CAPITALISM IS ON THIS VIEW [NDA: STAKEHOLDER CAPITALISM] A SYSTEM OF SOCIAL COOPERATION AND COLLABORATION, RATHER THAN PRIMARILY A SYSTEM OF COMPETITION” 4

10/28/2014 THE DOMINANT STORY • A VERY SHORT HISTORY OF CAPITALISM : • 1) LITTLE FAMILY BUSINESS • 2) MANAGERIAL (LAISSEZ FAIRE) CAPITALISM • 3) SHAREHOLDER CAPITALISM • 4) BUREAUCRACY IN THE BIG CORPORATIONS • INCREASE SHAREHOLDERS VALUE • PROBLEMS: (stock option, shortermism (quarter over quarter increase): PUSH TO “INCREASE SHAREHOLDERS VALUE, SOMETIMES IN OPPOSITION TO ACCOUTING RULES AND LAW” RESISTANT TO CHANGE • 1) DO NOT TAKING ACCOUNT OF OTHER STAKEHOLDERS’ INTERESTS [NDA: ONLY INTEREST?] “AS IF THESE INTERESTS MUST CONFLICT WITH EACH OTHER” • 2) IF YOU HAVE BETTER FINANCIAL RESULT NO PROBLEM AT ALL • 3) THE ONLY REQUESTED CHANGE IS THAT ORIENTED TOWARDS SHAREHOLDERS VALUE 5

10/28/2014 RESISTANT TO CHANGE • IN TO-DAY’S WORLD THERE IS JUST TOO MUCH UNCERTAINTY AND COMPLEXITY TO RELY ON SUCH A SINGLE CRITERION • “SHAREHOLDER VALUE MAY NOT CAPTURE” THE GLOBAL DYNAMISM OF 21TH CENTURY” RESISTANT TO CHANGE • THE DOMINANT MODEL IS ABOUT THE STRICT AND NARROW ECONOMIC LOGIC OF MARKETS, AND THE “MANAGING FOR STAKEHOLDERS MODEL IS ABOUT HOW HUMAN BEINGS CREATE VALUE FOR EACH OTHER” 6

10/28/2014 NOT CONSISTENT WITH LAW • “THE LAW [USA, OF CORPORATIONS] HAS EVOLVED OVER THE YEARS TO GIVE DE FACTO STRANDING TO THE CLAIMS OF GROUPS OTHER THAN STOCKHOLDERS” • EXAMPLES: • Caveat emptor in part to caveat vendor • Employees: Equal pay Act (1963), age discrimination employment act 1967 • Pollution ‘s laws • Different regulations in various countries (India, China, US law) NOT CONSISTENT WITH BASIC ETHICS AND REFUSING OF SEPARATION THESIS • Dominant model could force not to respect the law (false accounting, not prudent managing of finance,…) • THE SEPARATION FALLACY: business decisions could be separated from ethics • Stakeholder is supporting this, on the contrary: • “any business decision has some ethical bases” • 7

10/28/2014 REFUSING SEPARATION THESIS • ACCORDING TO STAKEHOLDER MANAGEMENT, BUSINESS AND ETHICS ARE “WITHIN A COMPLEX SET OF STAKEHOLDER RELATIONSHIPS RATHER THAN TREATING ETHICS AS A SIDE CONSTRAINT ON MAKING PROFITS” (like in Friedman and others). MANAGING for STAKEHOLDERS • STAKEHOLDERS= GROUPS WHICH HAVE A STAKE IN THE ACTIVITIES THAT MAKE UP THE BUSINESS • TO UNDERSTAND BUSINESS IS TO KNOW HOW THESE RELATIONSHIPS WORK AND TO MANAGE THESE RELATIONS IN ORDER TO HAVE MORE VALUE FOR STAKEHOLDERS • [NDA]WHAT IS THIS VALUE? Only financial? And other, what is stake’ only interest? 8

10/28/2014 STAKEHOLDERS DEFINITION • FIGURE 1 AND READ PAGES 12 TILL 15 • Various definitions; we use: • EVERY GROUP THAT CAN BE CONDITIONED AND CAN CONDITION AN ORGANIZATION 9