Corporate Social Responsibility

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Stakeholder Management Capability

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A Stakeholder Approach to Corporate Social Responsibility

. Answer the following questions: 

• How does your selected company involve its stakeholders in decisions?
• What has been your experience? What do stakeholders report?
• How do the reports of the different stakeholder groups differ?
• How does the company manage opposing stakeholder interests?
• How do corporate values and vision affect its decisions?

Provide examples. Remember, you are to report on what the company says about itself, your experience, and the experience of its stakeholders. Cite at least two sources. 

For additional details, please refer to the Final Project Rubric document in the Assignment Guidelines and Rubrics section of the course.

 

Needs to be approxiamtely 6 paragraphs in length (one paragraph per question).

Will provide company name upon hand shake.

Stakeholder Management Capability:

A Discourse–Theoretical Approach Abe Zakhem

ABSTRACT. Since its inception, Stakeholder Manage-

ment Capability (SMC) has constituted a powerful

hermeneutic through which business organizations have

understood and leveraged stakeholder relationships. On

this model, achieving a high level of capability largely

depends on managerial ability to effectively bargain with

stakeholders and establish solidarity vis-à-vis the successful

negotiation, implementation, and execution of “win–

win” transactional exchanges. Against this account, it is

rightly pointed out that a transactional explanation of

stakeholder relationships, regarded by many as the bottom

line for stakeholder management, fails to provide mana-

gerial direction regarding how to resolve a variety of

normative stakeholder claims that resist commoditization.

In response to this issue, this paper has two overlapping

goals. It seeks to elaborate a discourse theoretical

approach to the problem by first drawing out Jurgen

Habermas’ theory of communicative action and delin-

eating the various types of rational discourse. Second, the

paper attempts to present concrete implications for SMC

relative to reshaping the contours of rational, process,

and transactional analysis in light of central discourse

theoretical conclusions.

KEY WORDS: critical theory, discourse ethics, stake-

holder management capability, stakeholder management

theory, communicative action

Introduction

Managerial stakeholder models often represent

attempts to understand and describe a wide variety of

business relationships as forms of transactional

exchange. In very general terms, transactional rela-

tionships involve the mutual and voluntary trade of

assets for gain. Now broadly construed, ‘‘assets’’

correspond to a wide range of tangible (e.g., capital

and labor) and intangible (e.g., goodwill and social

capital) interests and associated metrics. Since its ori-

ginal characterization (Freeman, 1984), the notion of

Stakeholder Management Capability (SMC) has

constituted one of the more influential and transac-

tional frameworks for understanding and leveraging

stakeholder relationships. Essentially, SMC involves

managerial analysis at rational, process, and transac-

tional levels. Corresponding to each level of analysis,

managers are charged with: 1) mapping stakeholders

and identifying their perceived stakes, 2) structuring

organizational processes to reflect and align organi-

zational and stakeholder goals and expectations, and

3) negotiating transactions or ‘‘bargains’’ with stake-

holders sufficient for ‘‘balancing’’ competing interests

and surfacing discontent. On this model, achieving a

high-level of capability, indeed, the very ‘‘bottom

line’’ for SMC, comes down to the success or failure

of transactional exchanges (Freeman, 1984, p.69).

Provided that managers execute ‘‘win–win’’

exchanges, SMC promises a powerful and useful

heuristic for effective strategic management (Carroll

and Bucholtz, 2006). Despite the optimism, this

strategic and largely instrumental approach has come

under fire. It is rightly pointed out that although a

transactional account of stakeholder relationships may

help to balance stakeholder currencies, SMC fails to

provide managerial direction regarding how to con-

ceptualize, address, and resolve normative interests

that resist commoditization. Adapting a common

example, normative demands for the end of ‘‘sweat-

shop’’ labor are often not leveraged as pleas for

balancing the transactional interests of ‘‘slave’’ labor

against the interests of the business organization.

Dr. Abe J. Zakhem works primarily in the areas of ethical theory

and business ethics. He has worked in private industry as a

senior management consultant and chief operating officer and

is currently an assistant professor at Seton Hall University.

Journal of Business Ethics (2008) 79:395–405 � Springer 2007
DOI 10.1007/s10551-007-9405-5

On the contrary, claims of this kind constitute

outright rejections of exploitive labor practices by

way of a universal appeal to non-transferable human

rights. Without much effort we can identify a wide

variety of similar claims (e.g., deeply held commu-

nity values and demands for corporate legitimacy)

that call for the recognition and enforcement of

deeply held and non-economic moral obligations.

To reduce such interests to the status of negotiable

assets seems both morally objectionable and too

simple a model for effectively capturing the complex

nature of normative conflict (Orts and Strudler,

2002, p.222). The problem is further exacerbated by

the fact that any single strategic initiative can serve

as a normative flash point for competing stakeholder

conceptions of that, which is good, right, and

legitimate.

Certainly, the normative and practical limitations

of a purely transactional orientation to stakeholder

management constitutes a recognized concern.

Within stakeholder literature, this concern has been

met with rather traditional and largely deontological

attempts to instill in managerial analysis a ‘‘moral

point of view’’ that is sufficient for integrating

conceptions of the good and the right (Evan and

Freeman, 1993). Expanding the debate, this paper

addresses normative SMC concerns from a dis-

course–theoretical perspective. Accordingly, the first

part of the paper outlines the central features of

Jürgen Habermas’ theory of communicative action,

discourse ethics, and political theory and sets up a

general framework for a discourse–theoretical

approach. Particular attention will be paid to

defining a ‘‘moral point of view’’ from a discourse

ethical perspective. The second part advances

previous applications of Habermasian critical theory

to stakeholder management by recasting the SMC

categories of rational, process, and transactional

analysis in light of central discourse–theoretical

principles. Finally, the third and final part summa-

rizes the following conclusions. First, that rational

stakeholder mapping should be regarded as a

dynamic and discursive process that is ultimately

driven towards mutual understanding and partici-

patory solidarity. Second, that overcoming gaps

between discourse and practice requires continued

process analysis at both strategic and operational

levels. Lastly, that the ‘‘bottom line’’ for SMC must

be determined from a ‘‘moral point

of view.’’

Communicative action and discourse

Echoing prominent social action theory, Habermas

supports the claim that social solidarity and order

require a basic level of norm regulated coordination

and conduct. Moving beyond traditional attempts to

account for the ‘‘binding’’ power of social norms,

Habermas advances the concept of communicative

practices. Properly defined, communicative practices

refer to those social interactions that are driven

towards dialogically motivating, sustaining, and

renewing intersubjective consensus and mutual

understanding (Habermas, 1984, p.17). In short,

Habermas explains that speakers of a language

express criticizable validity claims concerning how

social action ‘‘ought to be’’ structured. Speakers

further warrant that, if called upon, they will provide

publicly justified reasons and point to shared

convictions that support their contentions. Under-

standing the very conditions of validity, hearers

likewise commit to respond with counteracting

reasons in the event of disagreement and dispute.

Collectively, both parties commit to an intersub-

jective and consensual process of reasoning with

the illocutionary goal of achieving mutual

understanding. Habermas refers to this process as

‘‘communicative reasoning’’ (Habermas, 1984,

p.11). Within this framework, social norms ulti-

mately owe their ‘‘binding’’ force to the fact that

definitive obligations on the parts of speakers

and hearers are incurred in the collective pursuit of

rational and consensual agreement.

Although foundational, communicative practices

certainly do not account for or adequately explain all

of the mechanisms affecting social order and coor-

dination. In fact, communicative appeals are often

rejected in favor of dogmatically held worldviews

and perlocutionary aims and goals. Habermas uses

the category of ‘‘rational-purposive’’ action to

explain the mode of reasoning at work in such sit-

uations. As opposed to communicative reasoning and

action, rational-purposive reasoning is not oriented

towards mutual understanding and consent and tends

to assess situational significance relative to an agent’s

own ‘‘privately held’’ interests and standards of

choice. Although a necessary component of social

interaction and coordination, Habermas observes

that lifeworld orientations dominated by operation-

alized forms of rational-purposive reasoning tend to

396 Abe Zakhem

reduce meaningful action to ‘‘strategic action.’’

Strategic actions are thusly defined as attempts to

influence situations and the behavior of other social

agents with the intent of advancing individual ends

(Habermas, 1984).

The pervasive rationalization of strategic orienta-

tions, however, carries with it two interrelated

problems and one clear way out. First, Habermas

observes that the reduction of meaningful social

interaction to strategic considerations resoundingly

erodes the communicative ‘‘glue’’ that produces

mutual understanding and social solidarity. This

erosion in turn contributes to such social pathologies

as lifeworld fragmentation, legitimation crises, ano-

mie, alienation, and social dissonance (Habermas,

1987, p.143). Second, strategic actions tend to

devolve into the use and application of morally

questionable means, such as force, threats, violence,

or inducements to manipulate rational opponents.

For Habermas, the solution to this problem does not

rely on a simple denunciation of strategic actions. If

we desire to avoid the ill effects of strategic action,

then we first ought to harmonize our plans and

pursue our individual and private goals on the

condition of communicative agreement (Habermas,

1984, p.86). In other words, communicative agree-

ment and action must serve as the horizon against

which strategic actions are understood, evaluated,

and harmonized. When communicative bonds are

broken, which is often the case in modern, pluralistic

societies, we require a complementary process

through which the ‘‘fabric’’ of communicative

action is repaired (Smith, 2004, pp. 318–320).

In order to draw out such a process, recall Hab-

ermas’ theory of communicative action. As noted,

communicative action rests on expressed warrants

and commitments directed towards an intersubjec-

tive and dialogical pursuit of mutual understanding.

Distinct from motivating rational participants by way

of brute force or enticement, the rationality inherent

in communicative practices is ‘‘seen in the fact that a

communicatively achieved agreement must be based

in the end on reasons’’ (Habermas, 1984, p.17).

Further, all competent speakers of language are

aware of these conditions of validity and likewise

bear some level of communicative obligation. Thus

from the very beginning, communicative practices

point to a highly cognitive and ‘‘argumentative’’

form of conflict resolution. In this sense,

‘‘argumentation’’ does not refer to mere rhetorical

debate. On the contrary, ‘‘argumentation’’ marks a

reflective form of communicative action whereby

competent speakers can thematize and dispute

operative validity claims with the aim of achieving

mutual understanding (Habermas, 1984, p. 25). In

other words, Habermas regards the turn towards

argumentation as constituting a rational ‘‘court of

appeal’’ that makes it possible to reestablish com-

municative understanding in spite of participatory

disagreement (Habermas, 1984, p.17–18).

Habermas further explains that efforts to

argumentatively preserve communicative action in

the face of disagreement must meet certain dialogical

conditions. In general, these dialogical conditions

must collectively ensure that validity claims are the

objects of discussion and that discursive outputs

reflect an intersubjective and rationally motivated

agreement. Habermas specifies certain dialogical

conditions within the framework of the discourse

principle (D). In its most basic form, (D) states that

‘‘just those action norms are valid to which all

possibly affected persons could agree as participants

in rational discourses’’ (Habermas, 1996, p. 107). As

such, (D) is the point of view from which norms of

action can be impartially justified. Implied by (D),

the general requirements for rational discourse in-

clude: the exclusion of coercive forces and strategic

influences, truthfulness, freedom of access to infor-

mation, equal participatory rights, and reciprocal

role taking and ‘‘ideal role taking,’’ or the reciprocal

reversal and checking of participatory points of view.

As such, discourse creates the necessary space

whereby competent speakers disengage from probl-

ematized action contexts, isolate validity claims, and

reach a rationally and communicatively motivated

agreement (Habermas, 1996, pp.108–109).

Whereas (D) represents an ‘‘ideal’’ and ‘‘irreduc-

ible’’ order that is ‘‘built into’’ communicatively

structured forms of life in general, actual discourses

take on different forms and require different sorts of

discursive rules. Much of Habermas’ more recent

work in political theory and discourse ethics relies

on distinguishing the separate realms of pragmatic,

ethical, moral, and legitimacy based discourses

(Habermas, 1996; 1993; 1990). While each form of

discourse in some way reflects (D) and thus requires

the same basic sorts of discursive rules, operational-

ized discourses differ with respect to various features:

Stakeholder Management Capability 397

the discursive goals at hand, argumentative criteria,

the required level of preexisting and background

consensus, the scope of the validity claim in ques-

tion, and the status of discursive participants (Reed,

1999). In short, as the nature of the validity claim in

question changes, the contours of rational discourse

likewise change and imply different and more or less

stringent cognitive and procedural demands. In

order to draw out these distinctions, the following

sub-sections briefly explain the different forms of

discourse and clarify that which constitutes and gives

dialogical weight to reasoning from a ‘‘moral point

of view.’’

Pragmatic discourse

Pragmatic discourse centers on collectively deter-

mining the ‘‘best’’ way to achieve predetermined

ends, preferences, and goals. While engaged in

pragmatic discourse, participants advance various

strategic or technical recommendations and evaluate

possible courses of action in light of accepted

decision-making criteria. More often than not,

pragmatic strategies are assessed against a standard of

efficiency and direct participatory attention towards

the critical evaluation of empirical data (Habermas,

1996, p. 160). The selection of the particular

strategy would then provide a rational basis for

implementing certain situational definitions and

norms and providing a context for understanding

and interacting with others. It is critical to note that

a discursive assessment of pragmatic validity claims

requires a high-level of preexisting communicative

consensus relative to that which is determined to be

good, right, and legitimate. So, even as (D) ideally

requires the consideration of all possibly affected

persons, pragmatic discourse must draw on a pre-

viously achieved communicative consensus.

Accordingly, the outputs of pragmatic discourse

constitute ‘‘hypothetical’’ imperatives, ultimately

grounded in particular and historically and culturally

contingent social action situations. When this

shared level of meaning is called into question (i.e.,

the validity claims turn from pragmatic contesta-

tions to questions concerning the good, right, or

legitimate), the application of (D) takes a different

form as do the corresponding features of rational

discourse.

Ethical discourse

Distinct from pragmatic discourse, the goal of ethical

discourse is to collectively determine that which is

‘‘good’’ for an individual, community, or association.

As such, ethical discourse counts as one distinct realm

of normativity (Reed, 1999b). Engaging in ethical

discourse involves proffering arguments in the form of

‘‘clinical advice’’ with the intent of reaching a con-

sensus over guiding values or ‘‘deep preferences.’’ In

other words, ethical discourse engages participants in a

higher form of self-clarification and understanding by

which they become reflectively aware of deeper,

‘‘normative consonances in a common form of life’’

(Habermas, 1996, p. 160–161). Unlike pragmatic

claims, ethical arguments are assessed against a stan-

dard of authenticity and direct participatory attention

towards the critical evaluation of various forms of the

‘‘good’’ life. The selection of an authentic identity

would then provide a rationally motivated and eval-

uative basis for assessing certain pragmatic claims (e.g.,

organizational goals, aims, values, and pragmatic

argumentative criterion), determining situational def-

initions, and interacting and engaging with others.

Similar to strategic determinations regarding the

‘‘best’’ technical recommendations, it is important to

note that conceptions of the ‘‘good’’ are also groun-

ded in particular, non-generalizable life histories, the

validity claims therein constituting hypothetical or

conditional imperatives that are issued from and

evaluated against the backdrop of certain unpro-

blematic meaning structures. Within ethical discourse,

(D) is likewise indirectly applied as appealing to all

members sharing particular ‘‘traditions and strong

evaluations’’ (Habermas, 1996, p.108). Yet, when the

unproblematic meaning structures required for ethical

discourse are called into question, notably, on grounds

that particular ways of life are unjust or illegitimate, an

application of (D) makes additional demands.

Moral discourse

Distinct from both pragmatic and ethical discourse,

moral discourse is geared towards rationally and

collectively determining that which is right. As such,

moral questions constitute a second realm of norm-

ativity. Specifically, moral discourse involves the

redemption of maxims and norms relative to their

398 Abe Zakhem

compatibility with the maxims and norms of others

(Habermas, 1993, p.6). Towing a decidedly Kantian

line, Habermas argues that ‘‘only a maxim that can be

generalized from the perspective of all affected counts

as a norm that can command general assent and to that

extent is worthy of recognition, or, in other words, is

morally binding’’ (Habermas, 1993, p.8). For Hab-

ermas, however, if we expect to find a rationally

motivated and generally binding agreement, then we

must throw into relief those questions ‘‘that can be

resolved by an appeal to a generalizable interest; in

other words, questions of justice’’ (Habermas, 1993,

p.151). Parting with Kantian moral theory, considered

to permit a monological application of universality,

Habermas’ approach rests on the intersubjective and

dialogical determination of that which is just. So,

while moral discourse requires an application of the

principle of universalization (U), it is applied as a rule

of argumentation, stating that a norm is valid only if

all affected can accept the consequences and the side

effects its general observance can be anticipated to

have for the satisfaction of everyone’s interests (and

these consequences are preferred to those of known

alternative possibilities). Correspondingly, (D), as seen

from a ‘‘moral point of view’’, requires that only those

norms can claim to be valid that meet (or could meet)

with the approval of all affected in their capacity as

participants in a practical discourse (Habermas, 1993,

pp.65–66). Within this context, a ‘‘moral point of

view’’ involves separating out questions of justice and

then dialogically testing the validity of social norms

vis-à-vis (U). Distinct from pragmatic and ethical

discourse, the cognitive requirements of moral dis-

course requires an ‘‘idealizing’’ moment of univer-

sality that effectively distances participants from the

contexts of life in which their ‘‘particular identity’’ is

interwoven and as such proffers categorical action

norms (Habermas, 1993, p.12). Despite the possibility

of moral convergence, there remains the distinct

reality that in our complex, pluralistic, and fragmented

society conflict between that which is efficacious,

good, and are inevitable.

Legitimacy

Discourse regarding legitimacy constitutes a third

realm of normativity quite distinct from ethical and

moral orientations. Playing a largely integrative role,

legitimacy-based discourse aims at ensuring that

pragmatic, ethical, and moral discourses are supported

and that the outputs of which are reflected in larger

political and legislative institutions. Although a

complete explication and defense of Habermas’

political theory is well beyond the scope and intent of

this paper, the central argument is that legitimacy

ultimately derives from the communicative power of

citizens (Habermas, 1996, 151). As Darryl Reed

explains, ‘‘It is the exercise of communicative action

in public discourses (involving moral, ethical, and

pragmatic concerns) carried out through a web of

political institutions which generates the basis for

legitimate law’’ (Reed, 1999b, p.26). Understanding

legitimacy in this way, Habermas reconfigures (D) in

terms of a principle of democracy: ‘‘only those statues

may claim legitimacy that can meet with the assent of

all citizens in a discursive process of legislation.’’

(Habermas, 1996, p.110) This move carries with it

two general implications. First, there must be a system

of rights to ensure that (D) can take the shape of a

principle of democracy through the medium of law.

Primarily, these rights include various guarantees

(e.g., freedom of opinion and equal entitlement for

influencing political will formation) for securing and

balancing private and public autonomy. (Habermas,

1996, pp.128–129) Second, there must be defined

principles that serve to ‘‘steer administrative processes

and transform communicative power into adminis-

trative power’’ (Habermas, 1996, pp.168–176). These

principles include ensuring popular sovereignty,

political pluralism, equal protection under the law,

and the separation of state and society (Habermas,

1996, pp. 122–123). Whereas the previous forms of

rational discourse elicit either hypothetical or uni-

versal imperatives, the outputs of legitimacy-based

discourse reflect a dual nature. The dual faced nature

of legal validity is expressed in the fact that legal

norms enable the pursuit of self-interest while at the

same time stem from a discursive process that carries

the mark of communicative legitimacy (Habermas,

1996, p.31).

The priority of the right

As we have seen, Habermas’ discursive account aims

to elaborate communicative means for achieving

social solidarity and order, resolving conflict, and

Stakeholder Management Capability 399

regulating egoistic pursuits. Success in this endeavor

accordingly requires a rather complex array of

discourses situated at each of the previously

differentiated and operationalized levels. Despite the

importance of fostering all forms of discourses,

Habermas grants dialogical priority to moral

issues.

Earlier noted, a ‘‘moral point of view’’ constitutes

the privileged and idealized perspective from which

questions of justice can be rationally and impartially

tested. On what grounds does Habermas support a

theory of the right over the good? Well stated in

other more detailed commentaries (Rehg, 1994),

Habermas accepts as a ‘‘contemporary social fact’’

that our post-traditional world is marked by

numerous, fragmented, and conflicting conceptions

of the good life. Although perhaps compelling for a

particular form of life, ethical and other hypothetical

imperatives lack the intersubjective force necessary

for communicatively bridging the normative gap

between competing forms of life. For Habermas,

only norms that find universal assent can serve as a

foundation for normatively and communicatively

structured social interactions (Rehg, 1994, pp.94–

100). The dialogical priority of the right over the

good is explained as follows. If we want to build

solidarity and avoid the ill consequences of instru-

mental reasoning and strategic action, then we must

give first priority to rationally and communicatively

resolving questions of justice.

While moral discourse provides a fundamental

basis for universal agreement, the cognitive force

behind dialogically motivated moral validity claims is

weak and suffers from ‘‘unprecedented’’ cognitive,

motivational, and organizational demands (Haber-

mas, 1996, pp.114–118). Simply put, moral dis-

course requires complementary processes and

institutional forms for spreading ‘‘decontextualized’’

moral insight through complex, strategically driven,

and pluralistic forms of life. Habermas explains that

‘‘only those forms of life that meet universalist

moralities halfway…fulfill the conditions necessary to

reverse the abstractive achievements of decontextu-

alization and demotivation’’ (Habermas, 1990,

p.109). As we have seen, the formulation of legiti-

mate law and institutions represents a crucial com-

ponent in achieving this end. We must remember,

however, that Habermas understands legitimacy as

ultimately deriving its force from the communicative

power of citizens. Further, that this communicative

power must first be developed vis-à-vis robust public

discourses concerning that which is pragmatic, good,

and just. How exactly can we expect to meet

universalistic moralities half way? Following Rehg,

one should seek incorporate discourse–theoretical

intuitions in the decision-making procedures and

organizational processes of various types of institu-

tions (Rehg, 1994, 230). Accordingly, Section 2

attempts to meet this demand by drawing out dis-

course–theoretical implications for SMC rational,

process, and transactional analysis.

Implications for stakeholder management

capability

At the beginning of this paper we identified a per-

sistent and unresolved problem with the transactional

and largely instrumental foundation of SMC. In short,

treating all stakeholder interests as balanceable com-

modities was found to be morally objectionable and

thus unable to capture the complex nature of nor-

mative conflict. We now know that stakeholder

claims come in different varieties and carry with them

distinct cognitive demands. In many cases, stake-

holders and business organizations share similar values

(e.g., economic efficiency, return on investment, cost

minimization) and norms (e.g., principles of meri-

tocracy) sufficient for resolving disputes through

traditional, economic means (e.g., transactional bar-

gaining, negotiation, and exchange). At other times,

however, stakeholder claims are aimed at criticizing

the dominant perspective through which interests are

commonly understood and valuated. Such is the case

with the example of sweatshop labor presented in the

introduction. Stakeholder claims of this kind are

decidedly more ‘‘radical’’ in that they serve to chal-

lenge prevailing economic and exchange-based hori-

zons of understanding. How are managers to capture

and resolve these more radical normative contestations

without immediate recourse to transactional decision-

making models? Unfortunately, SMC fails to provide

managers with a coherent framework for answering

such questions. Attempts to address this concern by

simply asserting that managers ought to in some way

‘‘balance’’ competing conceptions of the good and the

right (Evan and Freeman, 1993) are at best left

wanting of further explanation and at worst guilty of

begging the question.

400 Abe Zakhem

A discourse–theoretical approach provides some

critical insight as to how to understand and move

beyond these difficulties. Essentially, in the face of

more radical normative conflict managers may

choose to adopt one of two general orientations.

Option 1: managers can take a strategic orientation

and endeavor to influence stakeholder relationships

in ways that advance ‘‘private’’ organizational

interests. Although at some level necessary for

conducting business, we found that when left

unchecked strategic action tends to denigrate into

the use of morally questionable means of influence

(e.g., coercion, inducement, or even violence).

Additionally, relationships that are largely strategic in

nature fail to produce the communicative ‘‘glue’’

necessary for a more robust form of mutual under-

standing and solidarity. Given that both of the

problems associated with strategic responses under-

cut the normative acceptability and practical utility

of SMC, we require another approach. Therefore,

Option 2: prior to applying strategic standards of

evaluation, managers ought to seek a communica-

tively driven normative consensus between stake-

holders regarding generalizable and shared interests.

In short, strategic interactions must first be based on

and in someway reflect an intersubjective and dia-

logical recognition of that which is good, right, and

legitimate, with special priority given to moral

issues.

Although there is ongoing philosophical debate

over many aspects of Habermas’ theory of commu-

nicative action and discourse, a brief review of the

business ethics literature suggests that theorists are

beginning to note distinct discourse–theoretical

advantages over more traditional management

approaches. On empirical grounds, a discourse–

theoretical approach is said to better describe the

nature of stakeholder relationships and draw out a

more accurate picture of pluralistic and seemingly

divergent stakeholder claims (Waxenberger and

Spence, 2003). On economic grounds, the com-

municative model is proving to be a compelling

model for determining and advancing organizational

aims and goals (Smith, 2004) and serving as a

mechanism for economic coordination (Kesting,

1998). Finally, normative advantages include the

ability for a discourse-theoretical approach to

systematically incorporate various forms of nor-

mative reasoning (e.g., virtue, deontological, and

consequentialist approaches), provide a more robust

account of social consent (Reed, 1999a), and gain a

deeper understanding of human rights and corporate

legitimacy (Van de Ven, 2005). Contributing to

these ends, the following sub-sections will advance

previous attempts to integrate Habermasian critical

theory with SMC (Jonker and Foster, 2002) and

rethink the traditional categories of rational, process,

and transactional analysis in light of central dis-

course–theoretical principles.

Rational level of analysis

The first step in enhancing stakeholder management

capability is to rationally ‘‘map’’ organization stake-

holder groups and define stakes of each. Regardless

of the specific analytical techniques involved,

applying a discourse–theoretical approach to stake-

holder mapping yields two primary conclusions.

First, the determination of who and what really

counts ought to be the result of operationalized

forms of discursive reasoning. Although this requires

a rather complex array of multi-leveled discourses,

some general suggestions are as follows. At an ethical

level, we could expect that managers rationally

appraise an organization’s mission, values, and cul-

ture and ultimately pose the question, ‘‘Who are we

and what would we like to become?’’ Since the

determination of organizational identity will neces-

sary cut across and impact various conceptions of the

good life, ethical discourses should be structured to

include participation from all stakeholders that are

part of larger business communities (e.g., employees,

shareholders, subcontractors, and local communi-

ties). At a moral level, discursive participants will

likely extend beyond the traditionally defined busi-

ness community (e.g., across industries and down

supply chains) and consist of all those groups im-

pacted by operative principles of justice, which may

include competitors. Within today’s business envi-

ronment, moral questions will likely focus on issues

of economic opportunity, fair trade and competi-

tion, fair labor practices and compensation, and fair

global development strategies, to name a few.

Regarding questions of legitimacy, organizations are

minimally required to support the formulation of

legitimate law, and where appropriate, actively

contribute to the communicative resolution of

Stakeholder Management Capability 401

competing pragmatic, ethical, and moral claims.

Given the globalized nature of business, organiza-

tions should also seek to structure or otherwise

reform governmental and non-governmental inter-

national institutions based on the discursive principle

of democracy. As scholars have already noted, this

may be accomplished by modeling international

governance bodies and organizational standards in

accordance with communicative principles (Steffek,

2003).

Second, a rational stakeholder map must represent

discursive outputs in their categorically differentiated

forms. By treating all stakeholder claims in the same

way, we noted that SMC arbitrary elides logical

differences between the types of validity claims and

thus misses opportunities for rational discourse and

mutual understanding. Accordingly, stakeholder

maps should now clearly lay out the various types of

pragmatic, ethical, moral, and legitimacy-based

claims and likewise specify the values, moral norms,

and legal norms upon which such claims are foun-

ded. In short, managers must understand stake-

holders as discursive claimants who leverage various

types of normative claims qua community member,

natural person, and citizen. This may make stake-

holder mapping a more complex and difficult

activity. Stakeholders claims, however, can no

longer be simply represented as extant interests that

are fully captured and strategically understood

through the lens of transactional exchange. On the

contrary, to reduce all stakeholder’s interests to

balanceable commodities myopically reduces mana-

gerial vision and analysis to only one, largely stra-

tegic, aspect of rational analysis. Additionally,

stakeholder salience must reflect rational analysis

from a moral point of view. Given the dialogical

priority of moral questions, managers should high-

light those claims that can be resolved in relation to a

universalizable interest. Accomplishing this task,

rational stakeholder maps should be structured to

throw into relief questions of justice, perhaps as

‘‘special characteristics,’’ or those features of stake-

holder interaction that indicate a requirement of

particular and continued attention.

This analysis only points in the direction of some

general applications of a discourse–theoretical

approach to rational stakeholder mapping. Indeed,

much work is still needed to develop specific

strategies that support discursive arrangements and

analytic techniques for mapping the complex world

of stakeholder interaction. This, of course, is no

small task. That which should become clear, how-

ever, is the determination of stakeholder identity and

salience is a now regarded as a dynamic and

discursive process that is ultimately driven towards

mutual understanding and participatory solidarity.

Further, this process will be narrowly or broadly

construed depending on the nature of the validity

claim in question and the level of required discursive

participation. In any event, rational mapping must

be designed to effectively move organizations out

from cloistered positions of strategic analysis and into

a more engaged and normatively structured societal

dialogues. This requirement seems perfectly consis-

tent with the spirit and intent of stakeholder man-

agement and the goals of rational mapping.

Process level of analysis

The second step in enhancing an organization’s

stakeholder management capability is to align busi-

ness processes with the normative outputs derived.

In line with a discourse-theoretical analysis, organi-

zational processes ought to be evaluated and

accordingly restructured in line with shared con-

ceptions of that which is good, right, and legitimate.

On the practical front, managers can certainly expect

that there will be definitive gaps between discur-

sively determined values, moral norms, and legal

norms and actual practice. A particular challenge for

bridging the gap between discourse and practice is

the fact that business organizations often reflect

deep-seated propensities for strategic action and re-

sist evening out unequal distributions of power. In

light of this apparent difficulty, pressing questions

come to the fore. How can managers effectively

integrate communicative and strategic actions? What

sorts of organizational process are required to meet

normative discourses half way? How can a moral

point of view take root in environments hostile to

universalistic moralities? Overcoming these chal-

lenges requires reconfiguring organizational process

at two complementary levels.

First, managers ought to bring stakeholders into

strategic decision-making processes. Freeman rec-

ognizes early on that a primary means for effec-

tively aligning interests is to include stakeholder

402 Abe Zakhem

participation at various levels of strategic planning.

(Freeman, 1983; Freeman, 1984, p.69). In this

way, stakeholders will set the strategic tone for a

business organization from the top down. In dis-

course–theoretical terms this implies that bridging

the gap between rational analysis and practice

requires stakeholder representation in a variety of

executive and operationalized forms of pragmatic

discourse. To this point, there has been a con-

siderable amount of research suggesting how this

can actually be accomplished. Jeffery Smith, for

example, cites several examples (e.g., at Saturn

Corporation) where organizations successfully link

the pursuit of strategic ends and communicatively

oriented actions (Smith, 2004). Other scholars

have developed communicative means for effective

environmental analysis, screening, and reporting

(Wiklund, 2005; Dayton, 2002), enterprise plan-

ning (Dillard and Yuthas, 2006), and strategic

development efforts in developing countries

(Reed, 2002). Bringing stakeholders into higher-

level strategic and pragmatic discourses, however,

is but one piece of the puzzle. Bridging the gap

between discourse and practice requires additional

process analysis.

Second, managers ought to analyze and design

management systems to ensure that an organization’s

day-to-day operations reflect and meet stakeholder

claims. Complementing efforts at the strategic plan-

ning level, stakeholders will also need to set the

operational tone of an organization from the bottom

up, so to speak. Unfortunately, as others have pointed

out, this aspect of process analysis, once prominent in

Freeman’s earlier writings, has since been unduly

neglected (Jonker and Foster 2002, p.190). Turning

our attention to this level of analysis from a discourse–

theoretical perspective yields valuable insight. In

particular, it means that management systems should

be in place to ensure that shared conceptions of the

good, right, and legitimate are communicatively re-

flected in an organization’s everyday operations.

Although there are many types of management

systems that could fit the bill, there are good reasons

for suggesting that modeling organizational ethics

programs along discourse–theoretical lines is a good

starting place. First, ethical programs have proven to

be effective and systematic means for positively

influencing organizational-ethical culture (Izraeli and

Schwartz, 1998). Second, the key components for an

effective ethics program are well defined in US fed-

eral law and flexible enough to apply to all types of

business organizations (Palmer and Zakhem, 2001).

Finally, there is a growing movement that suggests

that ethical programs should be designed and ulti-

mately evaluated from a ‘‘moral point of view’’

(Reynolds and Bowie, 2004).

Although we cannot apply discourse–theoretical

principles to all components of a robust ethical

program, several implications seem obvious. Ethical

codes of conduct, mission statements, and proce-

dures should appropriately reflect shared values,

moral norms, and legal norms. Such documentation

should be communicatively transmitted, understood

at all levels of the organization, and be open to

rational criticism and change. Ethical training pro-

grams should include means to develop communi-

cative competence and moral reasoning. Perhaps

most importantly, ethical audits should be conducted

to both monitor system performance and serve as a

catalyst for introducing a moral point of view into

company operations and routine processes (Garcı́a-

Marzá, 2005). In other words, ethical program

effectiveness and process capability should be audited

and evaluated, in large part, against the level of

communicatively and discursively achieved agree-

ment and solidarity. Furthermore, the results of

ethical audits should be publicly reported in a

manner consistent with communicative principles

(Yuthas et al., 2002).

Again, this analysis only points in the general

direction of how to analyze and structure organiza-

tional processes from a discourse–theoretical per-

spective. We should, however, come to the

realization that overcoming gaps between discourse

and practice requires continued process analysis at all

levels of the organization.

Transactional level of analysis

The final step in enhancing and organization’s stake-

holder management capability is for managers to

establish and execute ‘‘win–win’’ transactional

exchanges with stakeholders. It is through transac-

tional processes that managers must, at some level,

engage stakeholders in an effort to surface discontent

and ‘‘balance’’ competing claims. In this arena it can

also be expected that both managers and stakeholders

Stakeholder Management Capability 403

will, and perhaps must, exert some level of strategic

influence. While transactional negotiation and ex-

change should continue to play a central role, it can no

longer be regarded as the ‘‘bottom line’’ for stake-

holder management. As Robert Phillips recognizes,

stakeholder relationships should have moral restric-

tions rather than being merely strategic in nature

(Phillips, 2003, p.38). From a discourse–theoretical

perspective, this means that transactional relationships

ought to be ultimately judged from a moral point of

view. In other words, transactional interactions must

first be based on and in someway reflect an intersub-

jective and dialogical recognition of that which is

right.

In the complex world of business, however,

establishing shared normative convictions through

discourse is likely to be an ongoing, fragile, and often

open-ended task of argumentation, learning, and

continual improvement. Accordingly, managers will

potentially need to conduct business and engage

stakeholders as transactional partners without nec-

essarily fully realizing moral consensus. In the

absence of communicatively established moral

norms, however, bargaining can still occur and at

least indirectly reflect a moral point of view. As

Habermas recognizes, bargaining processes are

appropriately tailed for situations in which social

power relations cannot be neutralized in the way

rational discourses presuppose. Whereas a rationally

motivated consensus rests on reasons that convince

all parties in the same way, compromised bargains

can be accepted by the different parties each for its

own different reasons. While transactional bargain-

ing cannot replace moral discourse, it can be regu-

lated from the standpoint of fairness. At a minimum,

this requires that all negotiating parties be provided

with ‘‘an equal opportunity to influence one another

during the actual bargaining, so that all the affected

interests can come into play and have equal changes

of prevailing.’’ (Habermas, 1996, pp. 165–167)

Whether directly or indirectly, the ‘‘bottom line’’

for stakeholder management must be determined

from a moral point of view.

Concluding remarks

In this paper we have articulated and analyzed a

persistent problem with SMC transactional analysis

and balancing. Recognizing the need to comple-

ment SMC analysis with a ‘‘moral point of view,’’

we parted company with traditional normative ap-

proaches and recast morality in terms of Habermas’

discourse–theoretical and ultimately communicative

perspective. This exegesis leads to several important

implications for SMC. First, that stakeholder map-

ping should be regarded as a dynamic and discursive

process and one that is ultimately driven towards

achieving mutual understanding. Second, that

overcoming gaps between discourse and practice

requires continued process analysis at both strategic

and operational levels. Lastly, that the ‘‘bottom line’’

for transactional involvement with stakeholders must

be determined from a moral point of view. While

this paper only provides a general framework for

adapting discourse–theoretical principles to SMC

analysis, the conclusions drawn will hopefully inform

more detailed research.

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Department of Philosophy,

Seton Hall University,

400 South Orange Avenue, Fahy Hall, South Orange,

NJ, 07042, U.S.A

E-mail: zakhemab@shu.edu

Stakeholder Management Capability 405

A Stakeholder Approach to Corporate

Social Responsibility: A Fresh Perspective

into Theory and Practice Dima Jamali

ABSTRACT. Stakeholder theory has gained currency in

the business and society literature in recent years in

light of its practicality from the perspective of managers

and scholars. In accounting for the recent ascendancy

of stakeholder theory, this article presents an overview

of two traditional conceptualizations of corporate

social responsibility (CSR) (Carroll: 1979, ‘A Three-

Dimensional Conceptual Model of Corporate Perfor-

mance’, The Academy of Management Review 4(4), 497–505

and Wood: 1991, ‘Corporate Social Performance

Revisited’, The Academy of Management Review 16(4),

691–717), highlighting their predominant inclination

toward providing static taxonomic CSR descriptions.

The article then makes the case for a stakeholder approach

to CSR, reviewing its rationale and outlining how it

has been integrated into recent empirical studies. In light

of this review, the article adopts a stakeholder frame

work

– the Ethical Performance Scorecard (EPS) proposed by

Spiller (2000, ‘Ethical Business and Investment: A Model

For Business and Society’, Journal of Business Ethics 27,

149–160) – to examine the CSR approach of a sample

of Lebanese and Syrian firms with an interest in

CSR and test relevant hypotheses derived from the

CSR/stakeholder literature. The findings are analyzed

and implications drawn regarding the usefulness of a

stakeholder approach to CSR.

KEY WORDS: corporate social responsibility (CSR),

stakeholder theory, Lebanese and Syrian context

Introduction

The topic of the social responsibilities of business has

been a subject of intense controversy and interest

over the past three decades. In part, this debate is an

outgrowth of the proliferation of different concep-

tualizations of corporate social responsibility (CSR).

The term CSR has indeed been defined in various

ways from the narrow economic perspective of

increasing shareholder wealth (Friedman, 1962), to

economic, legal, ethical and discretionary strands of

responsibility (Carroll, 1979) to good corporate

citizenship (Hemphill, 2004). These variations

stem in part from differing fundamental assumptions

about what CSR entails, varying from concep-

tions of minimal legal and economic obligations

and accountability to stockholders to broader

responsibilities to the wider social system in which a

corporation is embedded.

Resulting from these divergent fundamental

assumptions is a lingering skepticism in the field of

business and society, inviting Frankental (2001) to

argue for example that ‘‘CSR is a vague and

intangible term which can mean anything to any-

body, and therefore is effectively without meaning.’’

The confederation of British industry has similarly

argued that ‘‘CSR is highly subjective and therefore

does not allow for a universally applicable

definition.’’ Social responsibility has been variously

described as an elusive concept (Lee, 1987), a vague

and ill-defined concept (Preston and Post, 1975),

a concept with a variety of definitions (Votaw,

1973), a concept lacking theoretical integration and

empirical verification (DeFillipi, 1982; Post, 1978;

Preston, 1978), a concept lacking a dominant par-

adigm (Jones, 1983), and a concept susceptible to

subjective and value-laden judgments (Aupperle

et al., 1983).
Along the same lines, Clarkson (1995) has force-

fully argued that a fundamental problem in the field

of business and society has been the notable absence

of definitions of corporate social performance (CSP),

corporate social responsibility (CSR1) and corporate

social responsiveness (CSR2), and the lack of con-

sensus about the meaning of these terms from an

Journal of Business Ethics (2008) 82:213–231 � Springer 2008
DOI 10.1007/s10551-007-9572-4

operational or managerial viewpoint (Clarkson,

1995). He makes the case that CSP can be analyzed

more effectively by using a framework based on the

management of a corporation’s relationships with its

stakeholders than by using CSR models and meth-

odologies given that corporations are the nexus of a

complex web of stakeholder relationships and indeed

manage relationships with specific stakeholder

groups rather than with society at large.

Maignan et al. (2005) similarly find that senior

management and many marketers still struggle with

the notion of CSR. The crux of the problem

stems from the meaning of the word ‘social’ and

how it links to daily business activities. Indeed,

because of the level of abstraction of the word

‘social’, managers may have problems evaluating

how their own organization can contribute to the

well being of society as a whole (Clarkson, 1995;

Maignan et al., 2005). Indeed as suggested by

Clarkson (1995) ‘‘society is a level of analysis that

is more inclusive, more ambiguous and further up

the ladder of abstraction than a corporation itself.’’

Based on casual observation, the term society is

often used interchangeably with the community

stakeholder group in the business and society lit-

erature, raising a legitimate concern as to whether

the societal level of abstraction is indeed helpful or

justified.

Hence, there is clearly some merit to a stake-

holder approach to CSR, which will be further

probed and explored in this article. Indeed as pro-

posed by Maignan et al. (2005), even though

businesses in general are accountable toward society

at large, an individual business can be deemed

responsible only toward stakeholders, or the

definable agents with whom it interacts. The article

starts by presenting an overview of two popular

conceptualizations of CSR, highlighting their pre-

dominant inclination toward providing static taxo-

nomic CSR descriptions. The article then makes

the case for a stakeholder approach to CSR,

reviewing its inherent logic and outlining how it

has been integrated into recent empirical studies. In

light of this review, the article adopts a stakeholder

framework – the Ethical Performance Scorecard

(EPS) proposed by Spiller (2000) – to examine the

CSR approach of a number of Lebanese and Syrian

firms that are considered active in CSR. The

findings are presented and relevant implications

drawn regarding the usefulness of a stakeholder

CSR

approach.

Traditional CSR conceptualizations

Various CSR conceptualizations are on offer in the

literature. This section will shed briefly the light on

two robust CSR conceptualizations that are well-

grounded in the literature. The first is Carroll (1979)

four-part definition of CSR that was embedded into

a conceptual model of CSP. The other is the CSP

model by Wood (1991), which placed CSR into a

comprehensive framework, emphasizing principles

guiding responsibility behavior, processes of

responsiveness and outcomes of performance. The

purpose is to show that despite their groundbreaking

insights, the models on offer still qualify as taxo-

nomic, helping in turn accentuate or bring to light

the dynamism inherent in a stakeholder approach as

well as its practicality from a managerial perspective.

Carroll’s 1979/1991 conceptualization

In 1979, Carroll differentiated between four types of

CSR: economic, legal, ethical, and discretionary.

The first category that Carroll (1979) delineated is a

responsibility that is economic in nature, entailing,

for example, providing a return on investment to

owners and shareholders; creating jobs and fair pay

for workers; discovering new resources; promoting

technological advancement, innovation, and the

creation of new products and services. Business from

this perspective is the basic economic unit in society

and all its other roles are predicated on this funda-

mental assumption (Carroll, 1979).

The legal responsibility is the second part of the

definition and entails expectations of legal compli-

ance and playing by the ‘‘rules of the game.’’ From

this perspective, society expects business to fulfill its

economic mission within the framework of legal

requirements set forth by the societal legal system.

But, while regulations may successfully coerce firms

to respond to an issue, it is difficult to ensure that

they are applied equitably (Pratima, 2002). More-

over, regulations are reactive in nature, leaving little

opportunity for firms to be proactive. Laws, there-

fore, attempt to circumscribe the limits of tolerable

214 Dima Jamali

business behavior, but they neither define ethics nor

do they ‘‘legislate morality’’ (Solomon, 1994).

In essence, ethical responsibility overcomes the

limitation of law by creating an ethics ethos that

companies can live by (Solomon, 1994). It portrays

business as being moral, and doing what is right, just,

and fair. Therefore, ethical responsibility encom-

passes activities that are not necessarily codified into

law, but nevertheless are expected of business by

societal members such as respecting people, avoiding

social harm, and preventing social injury. Such

responsibility is mainly rooted in religious convic-

tions, humane principles and human rights com-

mitment (Novak, 1996). However, one limitation to

this type of responsibility is its blurry definition and

the consequent difficulty for business to concretely

deal with it (Carroll, 1979).

The final type of responsibility is where firms

have the widest scope of discretionary judgment and

choice, in terms of deciding on specific activities or

philanthropic contributions that are aimed at giving

back to society. The roots of this type of responsi-

bility lie in the belief that business and society are

intertwined in an organic way (Frederick, 1994).

Examples of such activities might include philan-

thropic contributions, conducting in-house training

programs for drug abusers, or attempts at increasing

literacy rates (Carroll, 1979). This type of responsi-

bility is the most controversial of all since its limits

are broad and its implications could conflict with the

economic and profit-making orientation of business

firms.

Carroll (1991) revisited his four-part definition of

CSR and organized the notion of multiple corporate

social responsibilities in a pyramid construct (Fig-

ure 1). In this pyramid, economic responsibility is

the basic foundation and discretionary the apex. This

revised conceptualization implies that the four

responsibilities are additive or aggregative. From this

perspective, economic and legal responsibilities are

socially required (i.e., mandatory), ethical responsi-

bility is socially expected, while philanthropy is

socially desired (Windsor, 2001) and each of these

responsibilities comprises a basic component of the

total social responsibility of a business firm.

The other components of the CSP model origi-

nally proposed by Carroll (1979) entailed an iden-

tification of the social issues that business must

address and a specification of the philosophy of

responsiveness to the issues. Recognizing that social

issues may change over time depending on the

industry in which firms exist, an effective responsi-

bility performance entails a systematic attempt at

fleshing out the social issues that are of most

interest to the firm. A strategy or mode of respon-

siveness must also be identified, although this com-

ponent was vaguely addressed in Carroll’s (1979)

conceptualization, with a simple differentiation

between reactive, defensive, accommodative or

proactive responsiveness strategies.

Carroll’s (1979) conceptualization was useful and

timely, and represented a significant advance in CSR

research by specifying the different types or

dimensions of social responsibility. However, his

contribution qualifies primarily as taxonomic, out-

lining the range of responsibilities that managers are

expected to fulfill. Details and guidelines regarding

process and measurement however remain scant for

both managers and scholars. As per Clarkson (1995),

‘‘Carroll’s model in the form of a three dimensional

cube was complex and difficult to test. It did not

lend itself to the development of a methodology that

could be used in the field to collect, organize, and

evaluate corporate data.’’ Herein lies the caveat of

any taxonomic approach, which can be potentially

remedied with a more practical stakeholder

approach.

Wood 1991 conceptualization

In 1991, Wood revisited the CSP model and

introduced important refinements by going beyond

an identification of the different types of responsi-

bilities to examine issues relating to the principles

Discretionary Responsibility

Legal Responsibility

Economic Responsibility

Ethical Responsibility

Total Responsibility

Figure 1. A hierarchy of CSR (adapted from Carroll,

1991)

A Stakeholder Approach to Corporate Social Responsibility 215

motivating responsible behavior, the processes of

responsiveness and the outcomes of performance.

Her refined postulation, therefore, placed CSR into

a broader context than just a stand-alone definition,

and conceptualized CSP as the product of a business

firm’s particular configuration of principles of social

responsibility, processes of social responsiveness, as

well as observable outcomes as they relate to the

firm’s societal relationships (Table I).

The model offered by Wood (1991) constitutes a

significant advance in CSR research. A researcher

using the model would first consider the principles

that motivate a firm’s social responsibility actions at

three levels of analysis: institutional, organizational

and individual. Therefore, the motivation for a

firm’s social responsibility actions may stem from the

principle of legitimacy (institutional level), i.e., from

a desire to maintain credibility and legitimacy as a

responsible societal actor in a shared

environment.

Alternatively, the motivation could stem from an

organizational sense of public responsibility, partic-

ularly for outcomes related to the firm’s primary and

secondary areas of involvement. Finally, the moti-

vation could stem from the choices of individual

managers and their personal responsibility prefer-

ences and inclinations. There is also room for

interactivity among two or more of these principles

in motivating CSP.

Responsiveness according to Wood (1991) consti-

tutes an action dimension that is needed to com-

plement the normative and motivational component

of social responsibility. It is conceptualized as com-

prising three facets – environmental assessment,

stakeholder management and issues management,

which are effectively interlocked. Responsiveness is

rooted in knowledge about the external environ-

ment and in rigorous environmental scanning/anal-

ysis. This knowledge could then be used to devise

strategies for adapting to the environment or con-

versely changing it. Stakeholder management is an-

other tenet of responsiveness and can be investigated

by examining particular kinds of stakeholder man-

agement devices (e.g., employee newsletters, public

affairs officials, and corporate social reporting). Issues

management on the other hand entails an investi-

gation of the firm’s approach to devising and mon-

itoring responses to social issues.

The outcomes of corporate behavior are in turn of

direct and obvious interest in the assessment of CSP.

According to Wood’s CSP model, outcomes are

divided into three types: the social impacts of cor-

porate behavior, the programs companies use to

implement responsibility and the policies developed

by companies to handle social issues and stakeholder

interests. Whether corporate behavior is having

positive or negative impact should objectively be

assessed (positive impact as in the provision of jobs,

the creation of wealth or technological innovation

and negative impact as in toxic wastes or illegal

payments to politicians). The nature of programs

selected for investment of resources to achieve spe-

cific ends is also important as is the extent of the

integration of social issues and impacts within the

body of company policy.

Although Wood’s (1991) CSP model integrates

much of the earlier work into a coherent model for

assessing an organization’s corporate social perfor-

mance, it does not, according to Waddock (2004),

fully consider the significance of stakeholder im-

pacts. Stakeholder management is indeed accorded

only limited attention in discussion of responsiveness

processes. More fundamentally, Wood’s (1991)

model may suffer from a certain level of abstraction

from the perspective of practicing managers in view

of its scholarly language of principles of CSR and

processes of corporate social responsiveness. As

articulated by Meehan et al. (2006) ‘‘While Wood’s

1991 model represents a significant piece of schol-

arship, it nevertheless failed to address the needs of

practicing managers charged with implementing

CSR/CSP programs and crucially measuring their

impacts.’’

TABLE I

The CSP model (Wood, 1991)

Principles of CSR1

Institutional principle: legitimacy

Organizational principle: public responsibility

Individual principle: managerial discretion

Processes of CSR2

Environmental assessment

Stakeholder management

Issues management

Outcomes of corporate behavior

Social impacts

Social programs

Social policies

216 Dima Jamali

Both frameworks hence seem more oriented

toward advancing theory and research in the field

rather than influencing practice. The complex and

dynamic nature of the social environment faced by

most modern organizations, implying the need for

on-going stakeholder management, is also difficult

to capture with such taxonomic descriptions.

Inherent in a stakeholder approach or model is an

exchange perspective for social responsibility man-

agement, recognizing the changing/evolving needs

of different groups of stakeholders which need to be

continuously monitored and addressed in a fluid and

dynamic manner. The potential usefulness/added

value of a stakeholder approach will be further

explored in the next section.

A stakeholder approach to corporate social

responsibility (CSR)

Some of the central concepts associated with what is

known today as stakeholder theory began to gain

currency during the mid-1980s (Freeman, 1984;

Freeman and Reed, 1983). Freeman’s (1984) work

helped to re-conceptualize the nature of the firm to

encourage consideration of new external stake-

holders, beyond the traditional pool – shareholders,

customers, employees, and suppliers – legitimizing in

turn new forms of managerial understanding and

action (Jonker and Foster, 2002). Organizations

from this perspective are expected to manage

responsibly an extended web of stakeholder interests

across increasingly permeable organization bound-

aries and acknowledge a duty of care towards tra-

ditional interest groups as well as silent stakeholders

– such as local communities and the envi

ronment

(Simmons, 2004).

Stakeholder theory hence offered a new way to

organize thinking about organizational responsibili-

ties. By suggesting that the needs of shareholders

cannot be met without satisfying to some degree the

needs of other stakeholders, it turned attention to

considerations beyond direct profit maximization. In

other words, even when a firm seeks to serve its

shareholders as a primary concern, its success in

doing so is likely to be affected by other stake-

holders (Foster and Jonker, 2005; Hawkins, 2006).

Some even argue that an inclusive stakeholder

approach makes commercial sense, allowing the firm

to maximize shareholder wealth, while also

increasing total value added (Hawkins, 2006; Phillips

et al., 2003; Wallace, 2003).

By the end of the decade, many researchers were

using stakeholder ideas and terminology (Wood,

1991). Several authors have indeed favored a stake-

holder approach when examining CSR. In their

assessment of CSR and CSP in the context of a

sample of Italian SMEs, Longo et al. (2005) identi-

fied the demands of key stakeholders regarding the

creation of value by the business, resulting in a grid

of values (Table II), which associates each stake-

holder with value classes that satisfy their respective

expectations. These value classes have been derived

based on studies and models already covered in

existing literature, as well as on the basis of the

analysis of various social audit and sustainability

reports. Companies in their study are considered as

socially responsible if they demonstrate social

behavior satisfying the expectations of at least half of

the value classes identified for each stakeholder.

A similar approach was used by Abreu et al.

(2005) in their exploration of the CSR experience

and practice of enterprises in Portugal, whereby five

key stakeholders were identified, including con-

sumers, suppliers, the community, the government

and the environment. Internally, they also examined

workplace practices vis-a-vis employees. Their

TABLE II

The grid of values (Longo et al., 2005)

Stakeholder Expectations divided into value classes

Employees Health and safety at work

Development of workers’ skills

Wellbeing and satisfaction of worker

Quality of work

Social equity

Suppliers Partnership between ordering company

and supplier

Selection and analysis systems of suppliers

Customers Product quality

Safety of customer during use of product

Consumer protection

Transparency of consumer product infor-

mation

Community Creation of added value to the community

Environmental safety and production

A Stakeholder Approach to Corporate Social Responsibility 217

research suggests a clear inclination on the part of

firms operating in Portugal to attend to the external

dimension of CSR. Another study in the Spanish

context (Uhlaner et al., 2004) also utilized a stake-

holder approach, defining CSR effectiveness as the

ability to satisfy a wide range of constituents within/

outside the organization. Two categories of stake-

holders, economic and social, were identified with

the findings suggesting the salience of the economic

stakeholders – clients and employees – over the so-

cial ones including sports clubs, the church, and the

environment. The researchers confirm on the basis

of their study the utility of a stakeholder approach in

the context of CSR.

A stakeholder approach was also used by Papa-

solomou et al. (2005) in the context of Cypriot

businesses. Their rationale for using a stakeholder

approach is that stakeholders invariably affect or are

affected by business organizations and therefore can

be seen as imposing on them different responsibili-

ties. They identify six groups as key stakeholders

including employees, customers, investors, suppliers,

the community and the environment and delineate

relevant CSR actions vis-a-vis each cluster respec-

tively as illustrated in Table III. Their findings sug-

gest that Cypriot firms accord the most attention to

employees and consumers in their pursuit of CSR,

moderate attention to the community stakeholder,

TABLE III

CSR actions vis-a-vis key stakeholders (Papasolomou et al., 2005)

Stakeholder Actions vis-a-vis key stakeholders

Employees Provides a family friendly work environment

Engages in responsible human resource management

Provides an equitable reward and wage system for employees

Engages in open and flexible communication with employees

Invests in employee development

Encourages freedom of speech and promotes employee rights to speak up and report their concerns at

work

Provides child care support/paternity/maternity leave in addition to what is expected by law

Engages in employment diversity in hiring and promoting women, ethnic minorities and the physically

handicapped

Promotes a dignified and fair treatment of all employees

Consumers Respects the rights of consumers

Offers quality products and

services

Provides information that is truthful, honest and useful

Products and services provided are safe and fit with their intended use

Avoids false and misleading advertising

Discloses all substantial risks associated with product or service

Avoids sales promotions that are deceptive/manipulative

Avoids manipulating the availability of a product for purpose of exploitation

Avoids engagement in price fixing

Community Fosters reciprocal relationships between the corporation and community

Invests in communities in which corporation operates

Launches community development activities

Encourages employee participation in community projects

Investors Strives for a competitive return on investment

Engages in fair and honest business practices in relationships with shareholders

Suppliers Engages in fair trading transactions with suppliers

Environment Demonstrates a commitment to sustainable development

Demonstrates a commitment to the environment

218 Dima Jamali

and limited attention to suppliers, investors and the

environment.

The bulk of the studies encountered in the

literature and outlined above fall within the scope of

descriptive stakeholder theory, which seeks to

outline the views of participants of the mission/

objectives of their organization and its actions vis-a-vis

different stakeholders (Brickson, 2007). This meth-

odology can yield interesting insights particularly

that organizations are socially constructed and act in

accordance with shared perceptions (Brickson,

2007). There are also flavors in the literature of

assessments along the lines of instrumental or nor-

mative stakeholder theory. Instrumental stakeholder

theory assumes that the corporation is an instrument

for wealth creation with CSR conceived as a stra-

tegic tool to promote economic objectives (Garriga

and Mele, 2004). Normative stakeholder theory on

the other hand delineates philosophically based

moral obligations towards stakeholders (Brickson,

2007), focusing on the ethical requirements that

cement the relationship between business and soci-

ety (Garriga and Mele, 2004).

While the tenet of stakeholder theory is that all

stakeholders matter and that organizations should

integrate their responsibilities to the various stake-

holder constituencies, this balancing exercise has

proven difficult to enact in practice (Galbreath,

2006; Vos and Achterkamp, 2006). Rather than

producing every kind of social value for every

stakeholder, organizations find themselves

constrained in practice by limited resources and

bounded rationality, and thus tend to prioritize their

stakeholders according to instrumental and/or nor-

mative considerations. Such stakeholder classifica-

tion or prioritization usually draws on managerial

discretion, their specific instrumental or normative

inclinations as well as their assessment of relational

stakeholder attributes of power, legitimacy and

urgency (Mitchell et al., 1997), legitimizing in turn

the usefulness of a descriptive stakeholder theory or

methodology.

Overall, stakeholder theory in all its three veins or

branches brought to the fore a set of new insights for

CSR academics and practitioners. It accentuated the

notion that corporations must be viewed as operat-

ing at the center of a ‘‘network of interrelated

stakeholders that create, sustain and enhance value

creating capacity’’ (Post et al., 2002) challenging in

turn an exclusive focus on shareholders. The lan-

guage of stakeholder theory was also easier to grasp

by managers/practitioners as most organizations

understood and defined obligations and responsibil-

ities vis-a-vis their traditional stakeholders (Clarkson,

1995). Stakeholder theory seems also easier to

maneuver in collecting and analyzing CSR data as

evidenced by the proliferation of empirical studies

that have essentially integrated a stakeholder ap-

proach as outlined in the previous section. This

stream of research has also led to the delineation of

relevant stakeholder issues and associated measures of

impacts, which, with further refinement, can serve as

useful guidelines for managers in their pursuit of

CSR actions and interventions (Dav

enport, 2000).

The next section highlights how a stakeholder CSR

approach – the EPS proposed by Spiller (2000) – was

used to collect and analyze CSR data in the context

of a sample of Lebanese and Syrian firms, allowing in

turn to draw relevant implications regarding the

usefulness of a stakeholder CSR approach.

Research methodology

Research hypotheses

The research methodology is consistent with

descriptive stakeholder theory, which seeks to

outline participants’ views of what the business

organization is doing vis-a-vis its stakeholders, as

well as the mechanisms through which different

views come into being (Brickson, 2007). This

descriptive stakeholder methodology will be sup-

plemented in turn by reference to the two other

veins of stakeholder theory, namely instrumental

stakeholder theory and normative stakeholder

theory. In the framework of these three branches of

stakeholder theory, the following research hypoth-

eses are derived and tested after being presented here

in the context of the corresponding CSR literature

in which they are respectively anchored.

Hypothesis 1 (H1) Developing country firms pri-

oritize their stakeholders based primarily on

instrumental considerations.

H1 draws on a large body of literature that shows

unequivocally that stakeholder management is often

A Stakeholder Approach to Corporate Social Responsibility 219

conceived and approached instrumentally in relation

to its implications for the bottom line and firm per-

formance. Windsor argues in this respect that ’’a

leitmotiv of wealth creation progressively dominates

the managerial conception of responsibility’’

(Windsor, 2001). Firms tend to accord systematic

attention to primary stakeholder management in

anticipation of expected bottom line benefits. This

is also consistent with the view that firms priori-

tize their stakeholders and investments based on

stakeholder attributes of power, legitimacy and

urgency – or indirect instrumental considerations

(Mitchell et al., 1997). A wide range of empirical

studies in various contexts provide support for this

hypothesis (please see Uhlaner et al., 2004 and

Papasolomou et al., 2005 who highlight the salience

of the economic stakeholders in their respective

studies; de Madariaga and Valor, 2007 who report

differential firm attention across stakeholder groups

particularly in relation to customers, employees and

shareholders; Snider et al., 2003 who report that three

stakeholder groups stand out in their study as essential

to firm success namely customers, employees and

owners; and Galbreath, 2006 who makes the case for

an instrumental stakeholder management approach in

his empirical study). H1 is applicable globally and in

developing countries more specifically in view of the

scarcity of resources and the salience of resource

dependency theory in this particular context.

Hypothesis 2 (H2) Developing country firms are

according systematic attention to a limited range

of

stakeholders.

H2 is related to H1 and consistent with an instru-

mental stakeholder management process. In view of

limited resources and bounded rationality consider-

ations, firms identify or prioritize a small number of

what they consider to be core or focal stakeholders,

with their stakeholder management process revol-

ving around these key stakeholders. This hypothesis

is grounded in the literature, with Clarkson (1995)

differentiating between primary and secondary

stakeholders and highlighting the inclination of firms

to focus on primary stakeholders. It is also reflected

in the writings of Carroll and Buckhholtz (2003),

who make a distinction between core, strategic and

environmental stakeholders. There is ample empir-

ical evidence suggesting that firms channel their

stakeholder management efforts around specific

stakeholders, with Knox et al. (2005) arguing for

example that the majority of FTSE companies in

their sample focused on less than three stakeholders;

de Madariaga and Valor (2007) arguing that their

sampled Spanish companies focus on three core

stakeholders and Galbreath (2006) revealing through

his study the criticality of focusing on few primary

internal stakeholders. H2 is applicable globally and in

developing countries more specifically where man-

agerial resources and attention are stretched thin in

light of limited budgets, competing pressures and less

favorable contextual conditions.

Hypothesis 3 (H3) Instrumental stakeholder man-

agement inclinations are counter-balanced or

nuanced by normative flavors, particularly vis-a-vis

the community stakeholder.

H3 draws on a large body of literature that argues that

firms need to maintain credibility and legitimacy as

responsible societal actors in a shared environment.

This is consistent with Wood’s (1991) legitimacy

principle and Davis’ (1960) iron law of responsibility.

H3 is also grounded in integrative theories and the

integrative social contract theory specifically (please

see Donaldson, 1982 and Donaldson and Dunfee,

1994), which assume that an implicit social contract

exists between business and society, implying indirect

obligations of business toward society. It is also

anchored in the corporate citizenship postulation, a

new notion connoting a sense of belonging and

responsibility to a community (Matten et al., 2003).

Finally, it is anchored in normative stakeholder the-

ory which postulates that the interests of all stake-

holders are of intrinsic value and merit consideration

based on ethical motives and principles (Freeman and

Philips, 2002). Normative stakeholder interpretations

are frequently encountered in the literature, with

various empirical studies reporting on firms’ strong

sense of obligation to the community stakeholder

group whose freedom and well-being is affected by

their activities (see Jamali and Mirshak, 2007; Mar-

golis and Walsh, 2003; Papasolomou et al., 2005).

Hypothesis 4 (H4) Stakeholder management is

af

fected by the relational attributes of specific

stakeholders (power, legitimacy, urgency) as well

the pressures they can exert on corporations.

220 Dima Jamali

H4 draws on a large body of literature which argues

that managers will prioritize stakeholder claims

according to their relative power, legitimacy and

urgency. It is thus consistent with Mitchell’s et al.’s

(1997) theory of stakeholder identification and sal-

ience which proposes that the cumulative number of

the three attributes of power, legitimacy and urgency

contributes to a stakeholder’ s claim being salient

from the perception of management. More recently,

Neville et al. (2004) have argued that an increase in

the degree of any of the three attributes will result in

an increase in stakeholder salience. H4 is also

consistent with the issues management and crisis

management literatures. H4 is finally consistent with

institutional theory that emphasizes that institutions

and stakeholders in the firm’s external environment

place pressures on firms, molding responses ranging

from passive conformity to active compromise,

defiance or strategic manipulation (Oliver, 1991).

In this respect, it draws on the institutional

isomorphism body of theory, and coercive institu-

tionalism in specific, which argues that firms will be

coerced to respond to the pressures exerted by

institutionalized stakeholders and that a tendency to

homogenization can be detected when formal and

informal pressures come to bear on business firms via

stakeholder activism and emerging cultural expec-

tations (Shepard et al., 1997).

Hypothesis 5 (H5) Multinational corporations have

a more balanced stakeholder management pro-

cess, translating into attention to a wider range of

stakeholders.

H5 draws on a large body of literature that seems to

suggest that MNCs are diffusing their responsibility

practices across countries in which they set shop

(Hawkins, 2006). It is also grounded in the body of

literature that seems to suggest the increased

sophistication of MNCs in relation to CSR generally

and stakeholder management specifically (Snider

et al., 2003). With the advent of globalization,

MNCs have unprecedented access to markets and

lower production costs. They also have come under

intense scrutiny by stakeholders and are thus

expected to be increasingly more proficient at

identifying and reconciling multiple stakeholder

interests. It is frequently mentioned that MNCs are

making systematic efforts at nurturing a wide

spectrum of trust-based stakeholder relationships

grounded in their greater appreciation and sensiti-

zation to risks and repercussions associated with non-

responsible action and the competitive advantages of

responsible social action. Various empirical studies

provide support to this hypothesis, suggesting that

MNCs are more prone to establish real dialogue with

their stakeholders (Foster and Jonker, 2005) and to

tailor their corporate community involvement

activities in response to the preferences of societal

stakeholders (Brammer and Millington, 2003).

Research sample

The first step in the research entailed an identifica-

tion of potential companies in both Lebanon and

Syria with an interest in CSR who could take part in

the research. The companies were contacted first by

phone, and then a formal introductory letter high-

lighting the aims of the research and its queries was

sent to the companies, with the EPS form enclosed.

An in-depth interview was then scheduled and

conducted by the author and two graduate assistants

(one in each country) with the person(s) responsible

for CSR. The interviewees were all managers,

occupying top managerial positions in their respec-

tive organizations (e.g., heads of public relations or

communications units; marketing managers and

development regional directors).

The companies that finally confirmed their par-

ticipation spanned different industries, including

banking and financial services, Internet/multi-media

services, telecommunications, energy and petro-

chemicals, food and beverage, hospitality, tobacco,

pharmaceuticals and sales/distribution (Table IV).

From a targeted pool of 20 companies operating in

Lebanon, 14 confirmed their participation in the

study by March 2006. Similarly, from a targeted pool

of 13 companies operating in Syria, 8 confirmed

their participation by late March, 2006. Interest-

ingly, the sample comprised companies that are both

national and international. Such sample composition

is potentially interesting, allowing a comparison of

the extent to which the CSR practices of local

companies (Lebanese or Syrian) differ from their

international counterparts as well as the extent to

which local subsidiaries are influenced by the CSR

approach of their mother firms.

A Stakeholder Approach to Corporate Social Responsibility 221

Research tool and protocol

The EPS proposed by Spiller in 2000 was selected

for the primary component of this research.

According to Spiller (2000), the EPS extends the

Balanced Scorecard focus on satisfying shareholders

and customers to take account of the other primary

stakeholders comprising employees, suppliers, the

community and the environment. While the EPS

accords attention to the vision and purpose of the

firm and its ethical principles, the primary focus of

this diagnostic tool is on the company’s practices

vis-a-vis primary stakeholders. These have been

categorized in terms of the six main stakeholder

groups and considered in terms of an inventory of

60 best practices that the author compiled based on

an extensive review of international case studies and

investment analysis (Table V).

According to Spiller (2000), the EPS can be

prepared at varying levels of depth. It can simply be

an account of publicly available information vis-a-vis

key stakeholder issues. Quantitative measures can be

considered from the level of donations disclosed in

the company’s accounts to financial results as well as

qualitative assessments such as stakeholder percep-

tions of company performance included in media

reports, or through additional consultation with

stakeholders. Company involvement is, however,

key in terms of provision of relevant information,

as well as opportunity for discussion and justification

TABLE IV

Sample profile

Company name Type of industry Line of business

Lebanese sample

Company A
*

Financial services International banking and investment

Company B Banking and financial services Commercial, retail and investment banking

Company C
*

Banking and financial services International banking and investment

Company D Banking and financial services Banking services

Company E Insurance Financial protection and insurance

Company F Internet services Regional internet services/connections

Company G
*

Multimedia services Provider of news and financial information

Company H Food and beverage Casual dining and fast food restaurant

Company I
*

Food and beverage Global food service retailer

Company J
*

Hospitality Accommodation and recreational activities

Company K
*

Hospitality Accommodation and recreational activities

Company L
*

Tobacco Distribution and sales of tobacco products

Company M
*

Pharmaceuticals Development, manufacturing and marketing

of leading prescription medicines

Company N Sales and distribution Sales and distribution of consumer products

(personal care, cosmetics and perfumery)

Syrian Sample

Company O Telecommunications GSM telephone lines and pre-paid cards

Company P Telecommunications GSM telephone lines and pre-paid cards

Company Q Management information systems Information and computer technology

services

Company R Energy and petrochemicals Oil/natural gas exploration and production

Company S Energy and petrochemicals Oil/natural gas exploration and production

Company T Metal and contracting Metals and contracting services

Company U Food and beverage Manufacturing and distribution of soft drinks

Company V Food and beverage Manufacturing of consumer packaged biscuits

and beverage products

* Subsidiaries of International Corporations

222 Dima Jamali

TABLE V

The EPS (Spiller, 2000)

Stakeholder Key business practices

Community Generous financial donations

Innovative giving

Support for education and job training programs

Direct involvement in community projects and affairs

Community volunteer programs

Support for the local community

Campaigning for environmental and social change

An employee-led approach to philanthropy

Efficient and effective community activity

Disclosure of environmental and social performance

Environment Environmental policies, organization and management

Materials policy of reduction, reuse and recycling

Monitoring, minimizing and taking responsibility for releases to the envi-

ronment

Waste management

Energy conservation

Effective emergency response

Public dialogue and disclosure

Product stewardship

Environmental requirements for suppliers

Environmental audits

Employees Fair remuneration

Effective communication

Learning and development opportunities

Fulfilling work

A healthy and safe work environment

Equal employment opportunities

Job security

Competent leadership

Community spirit

Social mission integration

Customers Industry-leading quality program

Value for money

Truthful promotion

Full product disclosure

Leadership in research and development

Minimal packaging

Rapid and respectful responses to customer comments/concerns

Customer dialogue

Safe products

Environmentally and socially responsible product composition

A Stakeholder Approach to Corporate Social Responsibility 223

of areas of strength and concern from the perspective

of practicing managers. It is precisely such discus-

sions with managers relating to different conceptions

of the stakeholder management process relative to

specific stakeholder issues and the ability to gauge

variations in prioritization in light of instrumental vs

normative managerial inclinations and changing

societal expectations that help account for the

superiority and dynamism of a stakeholder approach

to CSR over more taxonomic models.

As illustrated in Table V, the terminology used in

the EPS is simple. The interview entailed a discus-

sion with the manager concerned of the relevant

practices across stakeholder groups as per Table V.

Numeric ratings to assess each of the 60 practices

were then respectively reflected upon and decided

by the managers interviewed, with a major strength

recorded as 2, a strength as 1, no strengths/concerns

as 0, a concern as )1 and a major concern as )2,
allowing in turn to obtain as per Spiller (2000) an

overall quantitative EPS score – with the EPS scores

ranging between 120 where each of the 60 practices

is a major strength and )120 where each of the 60
practices is a major concern. The interviews were

tape recorded with the ratings as dictated by the

managers noted down by the researcher and dis-

cussion of specific ratings often dwelled upon in the

context of the interview in way of further clarifi-

cation.

It should be noted that, while the EPS may

provide interesting insights in the context of an

exploratory research study, this approach is not

without its caveats or limitations. One such limita-

tion stems from the equal initial weighting of all 60

issues as reflected in the 5-point scale across issues

which could at the outset be contested based on

TABLE V

continued

Stakeholder Key business practices

Suppliers Develop and maintain long-term purchasing relationships

Clear expectations

Pay fair prices and bills according to terms agreed upon

Fair and competent handling of conflicts and disputes

Reliable anticipated purchasing requirements

Encouragement to provide innovative suggestions

Assist suppliers to improve their environmental/social performance

Utilize local suppliers

Sourcing from minority-owned suppliers

Inclusion of environmental/social criteria in the suppliers’ selection

Shareholders Good rate of long term return to shareholders

Disseminate comprehensive and clear information

Encourage staff ownership of shares

Develop and build relationships with shareholders

Clear dividend policy and payment of appropriate dividends

Corporate governance issues are well managed

Access to company’s directors and senior managers

Annual reports provide a picture of company’s performance

Clear long-term business strategy

Open communication with financial community

224 Dima Jamali

subjective value judgments or normative inclina-

tions. More fundamentally, however, is that the total

EPS score calculated may be construed to reflect

aggregative assumptions about the social impact or

social performance of the firm, a concept that is also

highly contestable (please see Norman and Mac-

Donald, 2004). The EPS scores are thus used in the

context of this study to conjure basic trends in

relation to stakeholder management practices and

not to provide an aggregative weighing of the

overall social performance of the firm.

The EPS methodology was nevertheless deemed

useful for various reasons. First, it reflected a simple

and comprehensive illustration of a stakeholder

approach to CSR. The EPS provides in this respect a

valuable tool for operationalizing the stakeholder

approach to CSR. Second, it provides an opportu-

nity for gauging the practices of a company vis-a-vis

its key stakeholders and allows a comparative

benchmark assessment of the patterns of firm per-

formance vis-a-vis different stakeholders relative to

other firms. This is particularly true when the EPS

scores derived are supplemented by discussions with

managers to gauge their assumptions, inclinations

and changing perspectives with regard to various

stakeholders and stakeholder issues.

Research findings

The EPS ratings for each of the case study companies

are presented in Tables VI and VII. These ratings

are not intended as a definitive statement of the

performance of the companies vis-a-vis core stake-

holders, but simply report the findings compiled

based on the interviews conducted. The EPS results

reflect the pioneering work of Company A, which

stands out for its successful balancing of the interests

and concerns of all six stakeholder groups. It also

reflects the consistent efforts of Company L at

managing successfully the spectrum of stakeholder

relationships. A question arises here as to whether

the legitimacy of CSR practices can and should be

questioned because of the nature of the industry in

question (e.g. tobacco).

As illustrated in Table VI, the EPS scores for the

companies operating in Lebanon (both national and

international) have ranged from a low of 40 to a high

of 114, with an average EPS score of 73. The pur-

pose here is not to consider the EPS scores as

reflective of aggregate social performance, but rather

to gauge stakeholder management patterns vis-a-vis

the different stakeholders. Companies operating

in Lebanon seem to be according the most attention

TABLE VI

Ethical performance scores – Lebanese sample

Company Name

Community Environment Employees Customers Suppliers Shareholders Total EPS

Company A
*

14 20 20 20 20 20 114

Company B 2 )2 14 13 7 16 50
Company C

*
9 13 15 14 6 13 70

Company D 12 )5 8 13 7 9 44
Company E 10 )9 16 16 13 20 66
Company F 5 0 17 18 4 6 50

Company G
*

3 0 12 9 6 10 40

Company H 13 7 20 20 17 18 95

Company I
*

9 12 18 19 17 15 90

Company J
*

15 4 18 16 14 16 83

Company K
*

10 4 18 12 5 12 61

Company L
*

10 18 20 18 18 19 103

Company M
*

10 2 20 18 14 16 80

Company N 13 12 17 10 11 13 76

Lebanese sample averages 10 5 17 16 11 15 73

* Subsidiaries of International Corporations

A Stakeholder Approach to Corporate Social Responsibility 225

to the traditional stakeholders, namely employees,

customers and shareholders, respectively, and only

limited attention to the silent stakeholders, including

the community and the environment. This is pos-

sibly because ‘silent stakeholders’ tend to be less

easily identifiable and less coherent in articulating

demands and hence relegated to lower priority in a

developing country context.

Results for the Syrian sample are comparable,

with consistently lower EPS scores across all stake-

holder groups (Table VII). The highest EPS score

for the Syrian sample is 98 and the lowest is 30, with

an average EPS score of 60. Similar to the Lebanese

sample, the weakest performance is in the environ-

mental dimension, followed by the community

dimension or in other words vis-a-vis the silent

stakeholder groups. The highest consideration is

accorded on the other hand to what Uhlaner et al.

(2004) refer to as the economic stakeholders, namely

customers and employees. It is clear from both tables

that stakeholders are accorded systematic attention

when they represent rational and/or economic

motives for the firm.

A comparative assessment of the EPS scores of

Lebanese and Syrian firms is shown in Table VIII.

When excluding the subsidiaries of international

corporations that may have potentially skewed the

EPS scores of the Lebanese sample, we notice that

the CSR performance of Lebanese and Syrian

companies vis-a-vis key stakeholders are comparable,

with Lebanese companies exhibiting a slightly

better performance vis-a-vis organizational and eco-

nomic stakeholders (e.g. employees, customers and

shareholders) but worse performance vis-a-vis the

environment. Overall, the findings suggest the

salience of an instrumental stakeholder approach in

developing countries (i.e. firms addressing stake-

holder interests that most directly affect performance).

Discussion of findings

An investigation into the application of the

stakeholder approach in the Lebanese and Syrian

contexts suggests a number of interesting findings

and insights. This section will dwell on the findings

TABLE VIII

A comparative benchmark – Lebanese vs Syrian samples

Community Environment Employees Customers Suppliers Shareholders Total EPS

Lebanese sample (including *) 10 5 17 16 11 15 73

Syrian sample 9 4 13 13 10 10 60

Lebanese sample (excluding *) 9 1 15 15 10 14 64

Syrian sample 9 4 13 13 10 10 60
* Subsidiaries of International Corporations

TABLE VII

Ethical performance scores – Syrian sample

Company Name Community Environment Employees Customers Suppliers Shareholders Total EPS

Company O 13 1 17 13 11 17 72

Company P 18 10 18 18 14 20 98

Company Q 10 )2 20 17 17 4 66
Company R 12 6 16 6 7 13 60

Company S )1 14 8 9 0 0 30
Company T 11 9 4 9 10 5 48

Company U 6 12 15 19 13 10 75

Company V 5 )16 6 16 10 9 30
Syrian sample averages 9 4 13 13 10 10 60

226 Dima Jamali

obtained in more detail in relation to the hypotheses

derived from the literature. An articulation and

explanation of the main findings will be supple-

mented as appropriate by the opinions and perspec-

tives of the managers interviewed, which have been

recorded and compiled during the interviews and

can add much value here in terms of highlighting

relevant nuances. The identities of the respective

managers however will be kept anonymous.

Hypothesis 1 (H1) Developing country firms pri-
oritize their stakeholders based primarily on
instrumental considerations.

Our findings suggest that Lebanese and Syrian firms

seem to prioritize their stakeholders based on

instrumental considerations as reflected in the

higher EPS scores in relation to organizational and

economic stakeholders, namely employees, cus-

tomers and shareholders respectively (Tables VI and

VII). Discussions with managers from both contexts

suggest that they indeed tend to selectively address

stakeholder issues for instrumental reasons. One of

the managers dwelled on this point ‘‘our primary

mandate is to serve customers who in turn significantly

influence the performance of our business. Firms exist in

the first place to meet the needs of their customers.’’

Another manager highlighted the critical impor-

tance of good employee management in the sense

that ‘‘productivity gains resulting from enlightened em-

ployee management policies yield substantial performance

advantages over non responsible firms.’’ A similar view

was expressed by another manager noting that ‘‘how

employees are treated affects firm performance.’’A Leba-

nese manager summed it up nicely, ’’firms have to

manage stakeholder relationships strategically in order to

meet performance objectives.In the context of scarce re-

sources, we must ask if any specific stakeholder relation-

ship has the potential to generate advantages that

positively affect the bottom line.’’ Based on these two

sets of data H1 is ac

cepted.

Hypothesis 2 (H2) Developing country firms are
according systematic attention to a limited range

of stakeholders.

Our findings suggest that Lebanese and Syrian firms

seem to be according systematic attention to a lim-

ited number of stakeholders as reflected in the dif-

ferential higher EPS scores in relation to three core

stakeholders namely employees, customers and

shareholders respectively. This is true for both

samples (Tables VI and VII) but is more clearly

accentuated in relation to the EPS scores of the

Lebanese sample. Discussions with managers in turn

reinforce these observations. One of the managers

expressed the view that despite the need to balance

the interests of different stakeholders, ‘‘competitive

pressures and traditional accounting systems tend to keep all

eyes focused on the short-term and key stakeholder rela-

tionships.’’ In an attempt to justify the limited

attention accorded to suppliers for example, one of

our managers expressed the view that ‘‘we do not have

the resources to ensure that appropriate controls are in place

to monitor our entire supply chain. Attention to a few key

stakeholders is thus dictated by practical considerations and

priorities.’’ Another manager pointed out that ‘‘our

objective is to attend to the needs of our customers and

employees, with highest priority placed on the profitable

creation and maintenance of superior customer value.’’ The

two sets of data suggest that H1 and H2 are indeed

related, and that H2 in turn is also accepted.

Hypothesis 3 (H3) Instrumental stakeholder man-
agement inclinations are counter-balanced or

nuanced by normative flavors, particularly vis-a-

vis the community stakeholder.

There is limited room to gauge whether H3 is

supported by looking at the EPS scores in Tables VI

and VII. The only relevant observation in this re-

spect is that the community stakeholder group has

received systematically higher EPS scores than the

environment stakeholder in both samples. But this

alone does not take us very far in way of evaluating

H3. Discussions with managers on the other hand

helped unveil interesting nuances in support of H3.

According to one of the managers, ’’we have an

obligation to assist the less fortunate community segments

and constituencies. This is a responsibility of which we are

conscious at all times.’’ Another manager expressed the

view that ‘‘firms should seek to alleviate local problems

and improve the quality of life of the local community.’’ A

more progressive view was expressed by another

manager who articulated that ’’business prosperity is

linked to the well-being of the local community.’’These

views are consistent with integrative social contract

theory and with the corporate citizenship postula-

tion, but more importantly seem to reflect norma-

A Stakeholder Approach to Corporate Social Responsibility 227

tive flavors and inclinations vis-a-vis the community

stakeholder group specifically and hence H3 is ac-

cepted.

Hypothesis 4 (H4) Stakeholder management is af-

fected by the relational attributes of specific
stakeholders (power, legitimacy, urgency) as well

as the pressures they can exert on corporations.

H4 is difficult to assess systematically in light of the

EPS scores obtained and the fact that our data was

derived through interviews with managers without

equal consideration of stakeholder claims and per-

spectives. Nonetheless, it is safe to infer that our

managers consider the employees, customers,

shareholder and supplier stakeholder groups fol-

lowed by the community stakeholder group to wield

more power/legitimacy based on instrumental and

normative considerations. More importantly in the

context of our findings is the inferred limited pres-

sures exerted by institutions and institutionalized

stakeholders for environmental issues as can be

detected in the lowest EPS scores in relation to the

environmental stakeholder group in both samples

(Tables VI and VII). This is further supported by

discussions with managers, one of whom suggested

that ‘‘given more pressing priorities, our stakeholders are

least concerned about improvements in corporate environ-

mental performance.’’ Another manager expressed the

view that ‘‘there is not enough pressure on corporations to

assume fuller responsibility for their environmental impacts

and NGOs/environmental activist groups are virtually

dormant.’’One of the managers noted that ‘‘the

importance of corporate environmental performance is sim-

ply not appreciated in this neck of the world.’’ Given that

the environment is a silent stakeholder, environ-

mental issues tend to be channeled through coercive

institutional pressures, which is clearly not the case

in Syria and Lebanon and hence the relegation of the

environment to the lowest priority in both

contexts.

Based on the above analysis, H4 is also accepted.

Hypothesis 5 (H5) Multinational corporations have
a more balanced stakeholder management pro-
cess, translating into attention to a wider range of
stakeholders.

Findings from the Lebanese context suggest that

multinational companies (MNCs) have transplanted

with them a strong sense of responsibility, given that

as illustrated in Table VI, the EPS scores of the

subsidiaries of international corporations which have

been included in the sample are better than those of

their local counterparts.
1

The EPS scores obtained

suggest that MNCs and their subsidiaries are making

systematic efforts at managing the spectrum of

stakeholder relationships. Discussions with MNC

managers support this view. One of the most

progressive managers of an MNC noted in this

respect that ’’it is essential to nurture a wide spectrum of

trust-based stakeholder relationships, which can serve as a

source of opportunity and competitive advantage. Positive

stakeholder relationships are associated with the on-going

participation of stakeholders with the firm, thus increasing

its stability and expanding its overall capacity, effectiveness

and consistency of response.’’ Another MNC manager

expressed the view that ‘‘balancing stakeholder

relationships is the only way to protect the firm against

constant environmental volatility and ultimate erosion of

financial benefits.’’While the stakeholder management

approach of MNCs seem also anchored in instru-

mental motivations, the EPS scores obtained suggest

that MNCs have a more balanced stakeholder

management process and are according attention to a

wider range of stakeholders and thus H5 is accepted.

Concluding remarks

The recent ascendancy of stakeholder theory is

grounded in the belief that firm–stakeholder rela-

tionships are the essential assets that managers must

manage (Post et al., 2002). While CSR aims to

define what responsibilities business ought to fulfill,

the stakeholder concept addresses the issue of whom

business is or should be accountable to (Kakabadse

et al., 2005). Both concepts are closely inter-related.

However, while the CSR concept still suffers from a

level of abstraction, the stakeholder approach offers a

practical alternative for assessing the performance of

firms vis-a-vis key stakeholder groups and hence also

indirectly gauging their CSP.

Indeed, although the literature has made progress

in terms of theoretical development, Clarkson’s

(1995) concern that the business and society field has

been hampered by the absence of widely accepted

definitions of core concepts remains a valid criticism

(Doh and Guay, 2006). This lack of clarity/

consensus has inhibited empirical testing of the

228 Dima Jamali

traditional business and society theories and trans-

lated into a relative paucity of systematic assessments

of the societal impacts of business operations

(Davenport, 2000). Clarkson’s (1995) integration of

the concepts of stakeholders and CSP thus consti-

tuted an advance in this respect, providing an

alternative theoretical lens, and making it easier for

research to accrue.

Stakeholder theory has accordingly witnessed a

new resurgence and ascendancy in the context of

CSR research. Brenner and Chochran postulated as

early as 1991 that stakeholder theory holds the

promise of becoming the theoretical centerpiece in a

field that is searching for workable paradigms. Doh

and Guay (2006) similarly find the adoption of a

stakeholder model as a potentially appropriate and

insightful theoretical lens, given its ability to

systematically identify social stakeholder issues, and

establish specific measures of performance. An

organization’s stakeholder management data can thus

be gathered and compared to other firms within and

across industries, making social auditing for internal

and external use both practical and possible (Dav-

enport, 2000).

Along these lines, this article has tried to make the

case for a stakeholder approach to CSR, by arguing

(1) that stakeholder theory in all its three veins or

branches can bring to the fore a set of new insights for

CSR academics and practitioners; (2) that the lan-

guage of stakeholder theory is easy to grasp by man-

agers as most firms understand and define obligations

and responsibilities vis-a-vis their traditional stake-

holders; and (3) that stakeholder theory seems easier

to maneuver in collecting and analyzing CSR data as

evidenced by the proliferation of empirical studies

that have essentially integrated a stakeholder approach

to CSR. It thus increasingly represents a concrete

alternative to traditional taxonomic models on offer.

Our empirical excursion in the Lebanese and

Syrian contexts has shown on the other hand how

stakeholder theory can be used to draw and test

new hypotheses, and to derive insights into general

CSR patterns/motivations. We have noted in this

respect the continued preoccupation of firms with

traditional core stakeholders (e.g., employees, cus-

tomers and shareholders) and the salience of an

instrumental stakeholder management approach

based on a narrow definition/understanding of

CSR, with the integration of some normative fla-

vors, vis-a-vis the community stakeholder. We

have also noted that stakeholder management is

affected by the relational attributes of stakeholders

and the pressures they can exert on corporations,

while also noting the increased proficiency of

MNCs in balancing a broader range of stakeholder

interests.

While no over-generalizations can be drawn from

our findings, particularly in relation to the latter two

hypotheses (H4 and H5), the study is generally

indicative of the possibilities and range of issues that

can be explored within the context a stakeholder

approach to CSR. The EPS methodology adopted

in turn has its own limitations, but these have been

noted and circumvented through using this tool for

gauging stakeholder management patterns (and not

as an aggregate measure of CSP) and by supple-

menting the data obtained through interviews with

managers. Our empirical study shows that stake-

holder methodology offers clear benefits in way of

deriving intuitive insights particularly in the context

of fleshing out specific stakeholder issues in the

context of familiar language that was easy to grasp

and relate to by managers.

This research allows in turn the delineation of

relevant suggestions for future research. There is a

need for more research along these lines within the

context of a stakeholder approach or framework.

Variations to the EPS can be considered and other

ways of classifying stakeholders (e.g., core vs. stra-

tegic vs. environmental) and differential weightings

of stakeholder issues which could yield equally

interesting insights. Research comparing the patterns

of stakeholder management of local companies and

international firms or subsidiaries is also very infor-

mative and can help build momentum towards

improved global practices. Finally more research

illuminating the patterns of stakeholder management

and CSR in developing countries is also very much

needed in view of the paucity of studies in such

contexts.

Note

1
With the exception of Reuters, which could be ac-

counted for in light of the nature of the industry (news

provider) and the relatively small size of the subsidiary

firm (comprising only 25 employees).

A Stakeholder Approach to Corporate Social Responsibility 229

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A Stakeholder Approach to Corporate Social Responsibility 231