Cambridge College: Business Stakeholders and Ethical Considerations

This presentation, delivered by Mahesh Senanayake, a visiting lecturer at Cambridge College of Business Management, explores the critical role of stakeholders in a business environment. The presentation covers key areas such as the business environment, environmental dimensions affecting industries, the difference between stockholders and stakeholders, various types of stakeholders, and the application of stakeholder theory. It delves into stakeholder management, analysis using Mendelow's Matrix, stakeholder dispute resolution, and the application of business ethics. The presentation emphasizes the importance of ethical principles and the creation of win-win scenarios for all stakeholders, highlighting the significance of stakeholder relationships for achieving competitive advantage and the common good. The content provides a comprehensive overview of stakeholder theory and its practical implications in business operations.

BY MAHESH SENANAYAKE
VISITING LECTURER
CAMBRIDGE COLLEGE OF BUSINESS MANAGEMENT

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Lesson 02
Stakeholders in a business & How
Business Ethics relates to
Stakeholders

Key Areas to Learn
 Business Environment
 Environmental Dimensions Affecting Industries, Organizations,
and Jobs
 Difference between Stockholder and Stakeholders
 Types of Stakeholders
 Stakeholder theory
 Stakeholder Management
 Stakeholder Analysis
 Mendelow’s Matrix
 Typology of Stakeholders
 Stakeholder Dispute Resolution
 Applied Business Ethics and Stakeholders
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Any business operates in an Environment
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Eg.
When economic activity is strong, unemployment rates
are low, and income levels rise.
The political environment is shaped by the amount of
government intervention in business affairs, the types of
laws it passes to regulate both domestic and foreign
businesses and the general political stability of a
government.
Demographics, or the study of people’s vital statistics,
are at the heart of many business decisions. Population,
Social factors - our attitudes, values, and lifestyles—
influence what, how, where, and when people purchase
products.

Environmental Dimensions Affecting Industries,
Organizations, and Jobs
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We must “think globally before acting
locally” in many situations. The macro- level
environmental forces affect the
performance and operation of industries,
organizations, and jobs

Who are the Stockholder and Stakeholders ?
Stakes
A stake is any interest, share or claim
that a group or individual has in the
outcome of a corporation’s policies,
procedures or actions toward others.
Stakes may be based on any type of
interest. The stakes of stakeholders are
not always obvious.
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Stockholder is an
individual or company
(including a corporation)
that legally owns one or
more shares of stocks in
joint stock company. They
are the owners of the
company
Stakeholder “Any
individual or group who can
affect or is affected by the
actions, decisions, policies,
practices, or goals of the
organization.”

Types of Stakeholders
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Primary Stakeholders
Secondary Stakeholders

Why use a Stakeholder Management Approach
for Business Ethics
Stakeholder theory - expands a narrow view of corporations from a
stockholder- only perspective to include the many stakeholders who are
also involved in how corporations envision the future, treat people and the
environment, and serve the common good for the many.
“A healthy company never loses sight of everyone involved in its success. Stakeholder
theory says that if it treats its employees badly, a company will eventually fail. If it forces its
projects on communities to detrimental effects, the same would likely happen.” - Dr. Freeman
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Stakeholder Theory is base on….
1) Identifying and prioritizing issues, threats, or opportunities.
2) Mapping who the stakeholders are.
3) Identifying their stakes, interests, and power sources.
4) Showing who the members of coalitions are or may become.
5) Showing what each stakeholder’s ethics are (and should be).
6) Developing collaborative strategies and dialogue from a “higher ground”
perspective to move plans and interactions to the desired closure for all parties.
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Stake holders theory replaces…..
Concept of ;
Mangers have a “duty” towards to Stockholders with Mangers have
a “fiduciary” relationship to Stakeholders.
Does This happen in Sri Lanka ?
DO Mangers have a say in how business are run ?
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Stakeholder Management
Stakeholder Management is based on
“ Ethical principles (trust, trustworthiness, and cooperativeness) that can result
in significant competitive advantage through stakeholder relationship
management.”
The stakeholder management approach takes into account…..
Nonmarket forces that affect organizations and individuals, such as moral,
political, legal and technological interests, as well as economic factors.
a) It maintain the relationship with stakeholders
b) Create positive relationships
c) Should be based on moral and ethical grounds
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Stakeholder Analysis
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Stake holder management enables researchers and practitioners to use analytical
concepts and methods for identifying, mapping, and evaluating corporate strategy
with stakeholders.
We refer to the use of this ‘instrumental approach’ in stakeholder theory as
“stakeholder analysis.”
THIS IS AIMED AT CREATING WIN WIN SCENARIOS FOR ALL STAKEHOLDERS
“win– win” means making moral decisions that benefit the common good of all
constituencies within the constraints of justice, fairness and economic interests.
Unfortunately, this does not always happen.

The Stakeholder Analysis
Is a series of steps aimed at……
1. Map stakeholder relationships.
2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s responsibilities.
4. Assess the nature of each stakeholder’s power.
5. Construct a framework of stakeholder moral responsibilities and
interests.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions
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Criticism : Stakeholder theory
1. Negates and weakens fiduciary duties that managers owe to stockholders
2. Weakens the influence and power of stakeholder groups
3. Weakens the firm
4. Changes the long- term character of the capitalist system
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QUICK EXCERSICE
A. Think of an organization and list down its Key / None key
Stakeholders and how can they influence the way the
organization carries out its activities ??
Well done………
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Stakeholder Power & Interest
Mendelow’s Matrix
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High power, highly interested people
(Manage Closely)
High power, less interested people
(Keep Satisfied)
Low power, highly interested people
(Keep Informed)
Low power, less interested people
(Monitor)

Typology of
Stakeholders
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Stakeholder Dispute Resolution
A. Integrative ( win-win / all gain approach )
B. Relational ( Dialogical /Negotiations/ Mediation)
C. Distributive/Power based (Value claiming Vs. Value creating )
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Applied Business Ethics and Stak
Businesses strive to pursue Ethics, Morals and Law.
Should not the stakeholders follow same ? How ?
a. Create and pursue ‘Win- Win’ situations
b. Making right decisions
c. Getting stakeholders to fall in line with the corporate culture, procedures,
operations, standards etc.
d. Educate Stakeholders Ex. Customers - on how to prudently invest
Suppliers - Inform the future forecasts of supplies needed
a. Business can achieve competitive advantage
b. Common good at large
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Thank you….
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