Csr and Stakeholders
Society exists because human beings do not live in isolation and businesses play a leadership role in shaping the society because it has an important influence over the distribution of resources of society. Since the businesses use the resources of the society to gain private profit, they have a moral obligation to repay the society. (Ryan, N. , Parker, R. , & Brown, K. 2003). Businesses have clearly identified this responsibility and have started taking up the challenge to legitimate its practices to society at large.
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This in the last decade has been commonly referred to as Corporate Social Responsibility – CSR (Crane, A. , Matten, D. , Spence, L. 2008). As Carroll (1979, cited in Carroll, 1991) states that, CSR included the idea that the corporation has not only economic and legal obligations, but ethical and discretionary (philanthropic) responsibilities as well. However, the definitions of the term CSR may depend on individual perceptions of responsibility that in turn relate to the bigger picture defining the role of the organisation in society (Crane and Matten 2004:439, cited in O’Riordan et al. 2008). Briefly as, O’Riordan J. and Fairbass J. (2008) state that the concept of CSR encompasses many dimensions of business activity ranging from the social (e. g. community programmes), to economic (e. g. employment) to the environmental (e. g. waste reduction). I am of the opinion that as a part of fulfilling CSR obligations, business managers have to engage with their stakeholders, an activity that may be defined as stakeholder dialogue to determine appropriate business behaviour and by doing so they are looking after the best interests of the business organisation.
In support of my above statement, I agree with what Murray and Vogel (1997:142, cited in O’Riordan et al. , 2008) have stated that stakeholders, acting both formally and informally, individually or collectively, are a key element in the firm’s external environment that can positively or negatively affect the organisation. The term ‘stakeholders’ is broad in scope and have been defined as all those with a ‘critical eye’ on corporate actors (Bowmann-Larsen and Wiggen 2004, cited in O’Riordan et al. 2008). Freeman (1984:52, cited in O’Riordan et al. , 2008) states that stakeholders are “Groups and individuals who can affect or are affected by, the achievement of an organisation’s mission”. However, I stand by Clarkson’s (1995) definition of stakeholders as stated in Crane and Matten (2010). Clarkson states that stakeholders “Have, or claim, ownership, rights, or interests in a corporation and its activities”.
I would like to draw here an example of the Ports of Auckland as an organisation where I face a tough challenge as a manger to identify to whom and for whom we as an organisation are responsible, and how much can that responsibility be extended. It is a challenge to manage the relationship between the business and its stakeholders as the issues are quite divergent and a lot of the time they can be quite conflicting when I try to understand the expectations between the various stakeholders (Clarkson, 1995).
I would like to use a very recent example whereby the Ports of Auckland played a significant part in the opening ceremony of the Rugby World Cup 2011. The challenge that I faced was to strike a balance between that of both the primary stakeholder group and the secondary stakeholder group. As a result of the fireworks display and a considerable part of the waterfront being cordoned off, all shipping activity was ceased from 1800 hours to 2359 hours. This had a direct impact on the primary stakeholder group such as the shipping lines and the trucking companies delivering containers on the wharfs.
This would directly impact the profitability of the organisation which in turn affects the share price of the company. As Clarkson (1995) rightfully points out that if any primary stakeholder group, such as customers or suppliers, become dissatisfied and withdraws from the corporate system, in whole or in part, the corporation will be seriously damaged or unable to continue as a going concern. The immediate threat in our case was that of managing the good will, image and reputation of the port company in front of our customers.
I agree with Clarkson’s (1995) statement that a corporation’s survival and continuous success depends upon the ability of its managers to create sufficient wealth, value, or satisfaction for those who belong to each stakeholder group, so that each group continues as a part of the corporation’s stakeholder system. Failure to retain the participation of a primary stakeholder group will result in the failure of that corporate system. The consequence in my case would be that of the port company’s immediate competitor using this as an opportunity to leverage some business on to their side.
The secondary stakeholder groups for the ports are the people of Auckland, Auckland Regional Council, media and special interest groups such as Greenpeace and Environmental protection groups. These groups are essentially not involved in the day to day operation of the port and are not important for the port company’s survival. However, the point to note is that even though these entities are not essential for the day to day operation of the port company, they have the capacity to mobilize public opinion in favour of, or in opposition to, the port company’s performance and existence.
This was well demonstrated in the cases of the recall of Tylenol by Johnson & Johnson (favourable) and the Exxon Valdez oil spill (unfavourable) (Clarkson, 1995). I can say that we did a pretty good job in maintaining the fine balance between the primary and the secondary stakeholders by sending out customer advisories about two months before the event advising the customers of the close-out period so that they can tweak their shipping schedules accordingly. Further, the bigger customers were sent out invitations to attend the private function along with their families on Captain Cook wharf on the opening night.
The secondary stakeholders in my opinion were the hardest to please. The media was given special access to the event along with the coverage rights for the sounding of the conch from the Bean Rock lighthouse, the cranes and straddles display on Bledisloe wharf and even placing a media team on board the tugboats to cover the fireworks from the water. The port company’s marine department worked closely with the ARC to regulate the traffic on the water as there were quite a sizeable number of pleasure craft on water to witness the event.
The people were given free access to Queens’ wharf and the port company played a significant role in managing the event and providing a number of security staff to help out during the event. The ship calls for the wharfs adjoining the Queens wharf were moved to the other wharfs so that the people could have a clear view of the fireworks and the various activities that were to take place. The intention or motive in doing so was to prove that the Ports of Auckland is a good corporate citizen and that the people of Auckland and the Port Company can exist together in absolute harmony.
This is important for the Port Company’s image as a responsible corporate citizen which in turn proves the point that appropriate CSR/stakeholder dialogue has become a critical business activity (Clarkson, 1995). Carroll’s (1991) pyramid of corporate social responsibility portrays the four components of CSR where the basic building block is the economic performance, followed by the legal, ethical and lastly the philanthropic responsibility wherein the business is expected to contribute financial and human resources to the community and to improve the quality of life.
In this context, I firmly believe that the Ports did fulfil all the above four responsibilities when organising the event for the opening ceremony of the Rugby World Cup on the water front. The desire in trying to balance the stakeholder interests was the driving force behind such fundamental stakeholder strategies as “keeping score” (Freeman, 1984) but the actual balancing process was cognitive (at the individual level) or administrative (at the organisational level). It ultimately included behaviours that brought some kind of resolution to conflicting stakeholder needs or requests (Reynolds S. Schultz F. , Hekman D. , 2006). As a manager, I was motivated in balancing the stakeholders’ interests (Donaldson and Preston, 1995). This position that I had to undertake is not only supported by stakeholder theory but by other literatures, as well (Reynolds et al. , 2006). In giving each stakeholder their appropriate due, one can rely on Mitchell et al. ’s (1997, cited in Reynolds et al. , 2006) rationale whereby it is suggested that managers assess every relevant stakeholder and balance their interests according to the relative saliency of their claims.
So, as a manager if I would have only viewed the shareholders’ interests of a large organisation like ours as the most salient stakeholder then, that would have led to an unequal or lopsided relative saliency of the other relevant stakeholders (Reynolds et al. , 2006). It is of paramount importance that the interests of the various stakeholders of the Ports of Auckland are recognised and given their due respect. We are a city port and we have to work in harmony with the society around us and at the same time look after the interests of our shareholders in order to future proof ourselves. References
Carroll, A. B. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organisational Stakeholders. Business Horizons, July-August 1991. Clarkson, M. B. E. (1995). A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. Academy of Management Review, 20, 1, 92-117. Crane, A. ; Matten, D. (2010). Business ethics. Oxford: Oxford University Press. Crane, A. , Matten, D. , ; Spence, L. (2008). Corporate Social Responsibility: Readings and Cases in Global Context. (pp. 3-20). London: Routledge. Donaldson, T. , ; Preston, L. E. (1995).
The Stakeholder Theory of the corporation: Concepts, Evidence, and Implication. Academy of Management Review, 20, 1, 65-91. Reynolds, S. J. , Schultz, F. C. , Hekman, D. R. (2006). Stakeholder Theory and Managerial Decision-Making: Constraints and Implications of Balancing Stakeholder Interests. Journal of Business Ethics, 64, 385-301. Ryan, N. , Parker, R. , ; Brown, K. (2003). Government, Business and Society Frenchs Forest. NSW: Prentice Hall. O’Riordan, L. ; Fairbass, J. (2008). Corporate Social Responsibility (CSR) Models and Theories in Stakeholder Dialogue. Journal of Business Ethics, 83, 4, 745-758.