Stakeholder Attributes

According to Cooper, Crowther and Davies (2001:47) when the Stakeholder Theory is used as a managerial tool, it is specifically concerned with identifying which stakeholders are more important. As a result, should receive a greater proportion of management attention. It is clear that different stakeholder groups can represent quite different and often conflicting needs and interests (Lerner & Fryxell, 1994:951). Mitchell and Agle (1997:178) identify urgency, legitimacy and power as the three key attributes of a stakeholder, arguing that in their various combinations, these attributes are indicators of the amount of management attention awarded to a given stakeholder.

The concept of power held by a stakeholder relates to the ability to bring about outcomes of desire or the ability of one actor within a social relationship to have another actor do something that they would not otherwise have done (Mitchell & Agle,1997:180). The power of stakeholders may arise from their ability to mobilise social and political forces as well as their ability to withdraw resources from the business. Such actions should be legitimate and it should be ascertained that stakeholders’ claims are proper, desirable or appropriate (Thorne, Ferrell & Ferrell, 1993:18).

Lastly, stakeholders exercise greater pressures on managers and businesses when they stress the urgency of their claims. Urgency is based on two characteristics; time

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sensitivity and importance of claim to the stakeholder (Thorne, et al., 1993:18). Mitchell and Agle (1997:181) suggest that different types of stakeholders can be identified, depending on their degree of power, legitimacy and urgency. Expanding on the idea that stakeholders have such attributes Mitchell, Agle and Wood (1997) generated a typology based on these stakeholder attributes which is shown in Figure 2.2 on the next page. The three attributes of legitimacy, power and urgency illustrate how stakeholders may be thought of and analysed in these key terms (Mitchell, Agle & Wood, 1997:853).

Figure 2.2: Classification of stakeholders

Source: Mitchell, Agle and Wood (1997)

As illustrated in Figure 2.2, according to this typology, if a stakeholder possesses only one of the three attributes, they are termed latent stakeholders and have low salience. Stakeholder salience is the degree to which managers give priority to competing stakeholder claims. Stakeholder salience will be moderate if the stakeholder possesses two of the three attributes and accordingly, such stakeholders are called expectant stakeholders. The salience of stakeholders definitively possessing all three attributes will be high where management perceive all three attributes to be present. Stakeholders can shift from one class to another as their prominence increases or decreases by obtaining or loosing certain attributes (Mitchell, Agle & Wood, 1997:855).

POWER

LEGITIMACY URGENCY

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Mitchell and Agle (1997:179) later examined the relationship between salience and the stakeholder attributes of power, legitimacy and urgency. The study analysed survey data of 80 CEOs of large United States firms and concluded that, in the minds of CEOs, the stakeholder attributes of power, legitimacy and urgency are individually and cumulatively related to stakeholder salience across all groups. Similarly, Welcomer, Cochran, Rands and Haggerty (2003) found that the degree of power possessed by individual stakeholders, positively affected the manner in which the firm interacted with those stakeholders. Although Carroll (1991) and Wood (1991) often refer to the responsibility of a business towards society, the real pioneer in the field of stakeholder responsibility is Freeman (1984) and from him, the third important approach to CSR stems. Subsequently the Stakeholder Theory developed by Freeman (1984) focuses on the interactions between firms and society. Over the years, the Stakeholder Theory has been recognised as an integral part of CSR by many authors (Harrison & Freeman, 1991; Klonoski, 1991; Clarkson, 1995; Dawkins & Lewis, 2003). It is argued that through effective stakeholder management, social and ethical issues can be resolved and the demands of society as well as the shareholders could be accounted for (Harrison & Freeman, 1991:488). Clarkson (1995:115) propounded that social and stakeholder issues, focusing not only on society per se, indicate that a difference between responsibilities towards society and towards stakeholders could exist. He differentiates between social and stakeholder issues, stating that social issues are furthered by local institutions and adopted in regulation and legislation, while stakeholder issues are not concerned with legislations and regulations per se.

Only, when this institutional interference is absent, Clarkson (1995:116) identifies the issue as a stakeholder issue. He clearly explains his idea using employee issues as an example. Employee safety and occupational health are major concerns in the United States and therefore such issues are important because they are legally required. Career planning and employee training programs are not required by law and are therefore stakeholder issues which a business can voluntarily assume (Clarkson, 1995:118). As with any theory, there are always different interpretations. However, congruence exists on the basic assumptions of the Stakeholder Theory. It is argued that every business has stakeholders who are able to influence a business’ performance

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and stakeholders that have a stake in the business’ performance. Or, put differently, businesses have relationships with stakeholders that affect and are affected by the business’ decisions (Jones & Wicks, 1999:221). Furthermore, top managers represent the business in these stakeholder interactions (Jones, 2005: 97). Due to the fact that the Stakeholder Theory is concerned with all parties that influence and are influenced by the business, it can automatically be linked to CSR (Klonoski, 1991:12). This leads to the discussion on CSR in South Africa in the next section.