StakeholderRelationManagement JudithDipodiputro.
Stakeholders Relationship
Management
Judith J. Dipodiputro
The state of things.
Stakeholder approach has been almost on everyone’s argument in Indonesia since the
1998 Reformasi. A phenomenal rise in interest although relatively few academic
treatments of the subject.
Recent events, most notably those related to natural resources management partnerships
between the Indonesian Government and private entities or to State Owned Enterprises, have
created a watershed in discourse of business ethics.
Widely publicized debates more often than not put forward the stakeholder theory as
argumentation in judgement about business ethics behind those corporations.
It is undeniable that business organizations in Indonesia have become more and more
powerful and pervade ever more significantly upon the lives of everyone not only in
Indonesia, but also on earth. This power and how it is wielded has increased concern and
debate, in terms of organizational ethics.
EVOLUTION
Know your Stakeholder. Know your Constituent.
The traditional view
• In the traditional view of the firm, which is the shareholder view, the
shareholders or stockholders are the owners of the company, and the
firm has a binding fiduciary duty to put their needs first, to increase
value for them.
Stanford Research Institute (1963)
• A stakeholder or stakeholders, as defined in its first usage in a 1963 internal
memorandum, are “those groups without whose support the
organization would cease to exist.”
R. Edward Freeman (1984)
• A corporate stakeholder can affect or be affected by the actions of a
business as a whole. The term has been broadened to include anyone who
has an interest in a matter : employees, customers, suppliers, financiers,
communities, governmental bodies, political groups, trade associations, and
trade unions.
• Even competitors are counted as stakeholders, their status being
derived from their capacity to affect the firm and its other morally
legitimate stakeholders.
Grimble and Wellard (1996).
• ”Depending on the importance and influence that a stakeholder
asserts upon an organization”.
Post, Preston, Sachs (2002)
•
A person, group or organization that has interest or concdern in an organization. Stakeholders
can affect or be affected by the organization’s actions, objectives and policies. Examples of key
stakeholders are creditors, directors, employees, government (and its agencies), owners
(shareholders), suppliers, unions, and the community from which the business draws its
resources.
•
Not all stakeholders are equal. A company’s customers are entitled to fair trading
practices but they are not entitled to the same consideration as the company’s employees.
•
The stakeholders in a corporation are the individuals and constituencies that contribute, either
voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore
its potential beneficiareis and/or risk bearers,”
Robert Allen Phillips (2003)
• Moral foundation.
• The principle of stakeholder fairness (Theory of Justice, John Rawls 1971) and
distinction between normatively and derivatively legitimate stakeholders.
• Real stakeholders, labelled stake-owners: genuine stakeholders with a
legitimate stake. The loyal partners for mutual benefits. Stake-owners
own and deserve a stake in the firm.
(Last decades of the 20th century)
First decades of the 21st Century Indonesia
• The word "stakeholder" has become more commonly used to mean a
person or organization that has a legitimate interest in a project or
entity. In discussing the decision-making process for institutions—including
large business corporations, government agencies, and non-profit
organizations—the concept has been broadened to include everyone with
an interest (or “stake”) in what the entity does.
To Listen or Not To Hede
Assertions on the importance of Stakeholders Relationships Management
Key Assertion 1
•
Value can be best created by trying to maximize joint outcomes.
Programs that satisfy both employees needs and stockholders needs are doubly
valuable because they satisfy two legitimate sets of stakeholders.
•
Evidence prove that such policy are not only additive but multiplicative. For
example by addressing customer wishes in addition to employee and stockholder
interests, both the latter benefit from sales increase.
Key Assertion 2
• Supporters also take issue with the preeminent role given to stockholders
by many business thinkers, especially in the past. The argument is that debt
holders, employees, and suppliers also make contributions and take risks
in creating a successful firm.
Key assertion 3
• These normative arguments would matter little if stockholders had
complete control in guiding the firm. However many believe that due to
certain kinds of boards of directors structures, top managers like CEOs are
most control of the firm.
Key Assertion 4
•
The greatest value of a company is its image and brand. By
attempting to fulfill the needs and wants of many different people ranging from
the local population and customers to their own employees and owners,
companies can prevent damage to their image and brand, prevent losing large
amounts of sales and disgruntled customers, and prevent costly legal expenses.
•
While the stakeholder view has an increased cost, many firms have decided that
the concept improves their image, increases sales, reduces the risks of liability for
corporate negligence, and makes them less likely to be targeted by pressure
groups, campaigning groups and NGOs.
License to Operate:
The Context.
Stakeholders, Stockholders, or Customers?
ODA (1995)
• Any action taken by any organization or any group might affect those
people who are linked with them in the private sector. For examples these
are parents, children, customers, owners, employees, associates, partners,
contractors, and suppliers, people that are related or located nearby.
Primary Stakeholders
(Pemangku-kepentingan Utama)
Usually internal stakeholders, those that engage in economic
transactions with the business.
For example stockholders, customers, suppliers, creditors, and employees.
It also includes regulators such as government agencies, associations.
Secondary Stakeholders
(Pemangku-kepentingan Sekunder)
• Usually external stakeholders, are those who - although they do not
engage in direct economic exchange with the business - are affected
by or can affect its actions. (For example the general public, communities,
activist groups, business support groups, and the media)
Excluded Stakeholders
(Pemangku-kepentingan Kontekstual)
Those such as children or the disinterested public, originally as they had no
economic impact on business.
Anthropocentric perspective: general public may be recognized as
stakeholders, others remain excluded.
Meanwhile plants, animals or even geology is not given a voice as stakeholders
but often have an instrumental value in relation to human groups of
individuals.
The pressure game of
“Stakeholder Interest”
Managing the Thin-line between Legitimacy and Permissiveness
Legitimate Stakeholder
• Stipulated by laws as parties to the organization’s contractual existence.
Legitimacy Tools
• AMDAL:
•
•
•
•
•
•
•
•
Government Regulation No. 27/2012 replacing GR 27/1999. AMDAL has been applicable in Indonesia since 1982.
SO 26000 SR: “An individual or organization that has interest or concern on a decision related
to the activity of the organization.”
AA1000 Stakeholder Engagement Standards: Stakeholder Management standards are
”A group that can influence and/or be influenced by the activities, products or services and the
performance of the organization.”
UN Global Compact
The Triple Bottom-line
Local, Regional, National, International Laws and regulations
Jurisprudences
Signed documents (conventions, agreements, charters, Etc.)
Holly Books, but not automatically their interpretations.
Traps
• Anything that is abstract and/or not written, whether cultural,
anthropological, traditional, customary.
• Politics related stakeholders is the big trap.
• Unregulated interests? This puts in question your integrity!
In a Nutshell
Summary
The Bottomline
•
In order to effectively engage with a community of stakeholders, the organization's
management needs to be aware of the stakeholders, understand their wants and expectations,
understand their attitude (supportive, neutral or opposed), and be able to prioritize the
members of the overall community to focus the organization's scarce resources on the most
significant stakeholders.
•
The holders of each separate kind of interest in the entity's affairs are called a constituency, so
there may be a constituency of stockholders, a constituency of adjoining property owners, a
constituency of banks the entity owns money to.
•
Stakeholder reciprocity could be an innovative criterion in the corporate governance debate as
to who should be accorded representation on the board.
•
Corporate social responsibility should imply a corporate stakeholder responsibility
The state of mind
•
Communication is the key to the resolution of all problems
•
•
•
The Heart is the key in identifying core problems and rightful stakeholders.
•
Knowledge, data and logic is the key to finding the right solutions
Wisdom and commitment is the key to implementing those solutions by engaging
the rightful stakeholders.
The key attitude is to constantly have curiosity on to the context that surrounds
your activity or business, so that you understand the impact of your activities and
show commitment to do good.
CASE STUDIES
Exercise
•
•
•
•
•
•
•
•
•
•
Employees
Communities
Shareholders
Creditors
Investors
Government
Customers
Owners
Financiers
Manager
•
•
•
•
•
•
•
•
•
Suppliers
Labor Unions
Government regulatory
agencies
Government legislative
bodies
Government taxcollecting agencies
Industry trade groups
Professional
associations
Prospective employees
Prospective customers
•
•
•
•
•
•
•
•
•
•
NGOs and other advocacy
groups
Local communities
National communities
Public at Large (Global
Community)
Competitors
Schools
Future generations
Analysts and Media
Alumni (Ex-employees)
Research centers
The Government is
always right,
because upon
them depends the
sustainability of
human beings on
earth.
Therefore the
Government
should always be
right.
One can not know
what one has
never been, but
we know what we
want and how we
would do it.
We dont talk anymore.
Clash of
Civilizations (Samuel
Hunttington)
due to lack of
recording and
dissemination
mechanism of
common memory
Compassion.
We are all in this together
Injustice done by low education
Prejudice,
Arrogance,
Survival of
Nations
A construction of
thinking started in
400 BC (Socrates,
Plato, Aristotle),
currently (probably)
misunderstood
by many at this 21st
century, due to the
instant
mentality.
Terima Kasih
Judith.Dipodiputro@gmail.com
+62 821 9964 2171
+62 813 2228 1000
Management
Judith J. Dipodiputro
The state of things.
Stakeholder approach has been almost on everyone’s argument in Indonesia since the
1998 Reformasi. A phenomenal rise in interest although relatively few academic
treatments of the subject.
Recent events, most notably those related to natural resources management partnerships
between the Indonesian Government and private entities or to State Owned Enterprises, have
created a watershed in discourse of business ethics.
Widely publicized debates more often than not put forward the stakeholder theory as
argumentation in judgement about business ethics behind those corporations.
It is undeniable that business organizations in Indonesia have become more and more
powerful and pervade ever more significantly upon the lives of everyone not only in
Indonesia, but also on earth. This power and how it is wielded has increased concern and
debate, in terms of organizational ethics.
EVOLUTION
Know your Stakeholder. Know your Constituent.
The traditional view
• In the traditional view of the firm, which is the shareholder view, the
shareholders or stockholders are the owners of the company, and the
firm has a binding fiduciary duty to put their needs first, to increase
value for them.
Stanford Research Institute (1963)
• A stakeholder or stakeholders, as defined in its first usage in a 1963 internal
memorandum, are “those groups without whose support the
organization would cease to exist.”
R. Edward Freeman (1984)
• A corporate stakeholder can affect or be affected by the actions of a
business as a whole. The term has been broadened to include anyone who
has an interest in a matter : employees, customers, suppliers, financiers,
communities, governmental bodies, political groups, trade associations, and
trade unions.
• Even competitors are counted as stakeholders, their status being
derived from their capacity to affect the firm and its other morally
legitimate stakeholders.
Grimble and Wellard (1996).
• ”Depending on the importance and influence that a stakeholder
asserts upon an organization”.
Post, Preston, Sachs (2002)
•
A person, group or organization that has interest or concdern in an organization. Stakeholders
can affect or be affected by the organization’s actions, objectives and policies. Examples of key
stakeholders are creditors, directors, employees, government (and its agencies), owners
(shareholders), suppliers, unions, and the community from which the business draws its
resources.
•
Not all stakeholders are equal. A company’s customers are entitled to fair trading
practices but they are not entitled to the same consideration as the company’s employees.
•
The stakeholders in a corporation are the individuals and constituencies that contribute, either
voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore
its potential beneficiareis and/or risk bearers,”
Robert Allen Phillips (2003)
• Moral foundation.
• The principle of stakeholder fairness (Theory of Justice, John Rawls 1971) and
distinction between normatively and derivatively legitimate stakeholders.
• Real stakeholders, labelled stake-owners: genuine stakeholders with a
legitimate stake. The loyal partners for mutual benefits. Stake-owners
own and deserve a stake in the firm.
(Last decades of the 20th century)
First decades of the 21st Century Indonesia
• The word "stakeholder" has become more commonly used to mean a
person or organization that has a legitimate interest in a project or
entity. In discussing the decision-making process for institutions—including
large business corporations, government agencies, and non-profit
organizations—the concept has been broadened to include everyone with
an interest (or “stake”) in what the entity does.
To Listen or Not To Hede
Assertions on the importance of Stakeholders Relationships Management
Key Assertion 1
•
Value can be best created by trying to maximize joint outcomes.
Programs that satisfy both employees needs and stockholders needs are doubly
valuable because they satisfy two legitimate sets of stakeholders.
•
Evidence prove that such policy are not only additive but multiplicative. For
example by addressing customer wishes in addition to employee and stockholder
interests, both the latter benefit from sales increase.
Key Assertion 2
• Supporters also take issue with the preeminent role given to stockholders
by many business thinkers, especially in the past. The argument is that debt
holders, employees, and suppliers also make contributions and take risks
in creating a successful firm.
Key assertion 3
• These normative arguments would matter little if stockholders had
complete control in guiding the firm. However many believe that due to
certain kinds of boards of directors structures, top managers like CEOs are
most control of the firm.
Key Assertion 4
•
The greatest value of a company is its image and brand. By
attempting to fulfill the needs and wants of many different people ranging from
the local population and customers to their own employees and owners,
companies can prevent damage to their image and brand, prevent losing large
amounts of sales and disgruntled customers, and prevent costly legal expenses.
•
While the stakeholder view has an increased cost, many firms have decided that
the concept improves their image, increases sales, reduces the risks of liability for
corporate negligence, and makes them less likely to be targeted by pressure
groups, campaigning groups and NGOs.
License to Operate:
The Context.
Stakeholders, Stockholders, or Customers?
ODA (1995)
• Any action taken by any organization or any group might affect those
people who are linked with them in the private sector. For examples these
are parents, children, customers, owners, employees, associates, partners,
contractors, and suppliers, people that are related or located nearby.
Primary Stakeholders
(Pemangku-kepentingan Utama)
Usually internal stakeholders, those that engage in economic
transactions with the business.
For example stockholders, customers, suppliers, creditors, and employees.
It also includes regulators such as government agencies, associations.
Secondary Stakeholders
(Pemangku-kepentingan Sekunder)
• Usually external stakeholders, are those who - although they do not
engage in direct economic exchange with the business - are affected
by or can affect its actions. (For example the general public, communities,
activist groups, business support groups, and the media)
Excluded Stakeholders
(Pemangku-kepentingan Kontekstual)
Those such as children or the disinterested public, originally as they had no
economic impact on business.
Anthropocentric perspective: general public may be recognized as
stakeholders, others remain excluded.
Meanwhile plants, animals or even geology is not given a voice as stakeholders
but often have an instrumental value in relation to human groups of
individuals.
The pressure game of
“Stakeholder Interest”
Managing the Thin-line between Legitimacy and Permissiveness
Legitimate Stakeholder
• Stipulated by laws as parties to the organization’s contractual existence.
Legitimacy Tools
• AMDAL:
•
•
•
•
•
•
•
•
Government Regulation No. 27/2012 replacing GR 27/1999. AMDAL has been applicable in Indonesia since 1982.
SO 26000 SR: “An individual or organization that has interest or concern on a decision related
to the activity of the organization.”
AA1000 Stakeholder Engagement Standards: Stakeholder Management standards are
”A group that can influence and/or be influenced by the activities, products or services and the
performance of the organization.”
UN Global Compact
The Triple Bottom-line
Local, Regional, National, International Laws and regulations
Jurisprudences
Signed documents (conventions, agreements, charters, Etc.)
Holly Books, but not automatically their interpretations.
Traps
• Anything that is abstract and/or not written, whether cultural,
anthropological, traditional, customary.
• Politics related stakeholders is the big trap.
• Unregulated interests? This puts in question your integrity!
In a Nutshell
Summary
The Bottomline
•
In order to effectively engage with a community of stakeholders, the organization's
management needs to be aware of the stakeholders, understand their wants and expectations,
understand their attitude (supportive, neutral or opposed), and be able to prioritize the
members of the overall community to focus the organization's scarce resources on the most
significant stakeholders.
•
The holders of each separate kind of interest in the entity's affairs are called a constituency, so
there may be a constituency of stockholders, a constituency of adjoining property owners, a
constituency of banks the entity owns money to.
•
Stakeholder reciprocity could be an innovative criterion in the corporate governance debate as
to who should be accorded representation on the board.
•
Corporate social responsibility should imply a corporate stakeholder responsibility
The state of mind
•
Communication is the key to the resolution of all problems
•
•
•
The Heart is the key in identifying core problems and rightful stakeholders.
•
Knowledge, data and logic is the key to finding the right solutions
Wisdom and commitment is the key to implementing those solutions by engaging
the rightful stakeholders.
The key attitude is to constantly have curiosity on to the context that surrounds
your activity or business, so that you understand the impact of your activities and
show commitment to do good.
CASE STUDIES
Exercise
•
•
•
•
•
•
•
•
•
•
Employees
Communities
Shareholders
Creditors
Investors
Government
Customers
Owners
Financiers
Manager
•
•
•
•
•
•
•
•
•
Suppliers
Labor Unions
Government regulatory
agencies
Government legislative
bodies
Government taxcollecting agencies
Industry trade groups
Professional
associations
Prospective employees
Prospective customers
•
•
•
•
•
•
•
•
•
•
NGOs and other advocacy
groups
Local communities
National communities
Public at Large (Global
Community)
Competitors
Schools
Future generations
Analysts and Media
Alumni (Ex-employees)
Research centers
The Government is
always right,
because upon
them depends the
sustainability of
human beings on
earth.
Therefore the
Government
should always be
right.
One can not know
what one has
never been, but
we know what we
want and how we
would do it.
We dont talk anymore.
Clash of
Civilizations (Samuel
Hunttington)
due to lack of
recording and
dissemination
mechanism of
common memory
Compassion.
We are all in this together
Injustice done by low education
Prejudice,
Arrogance,
Survival of
Nations
A construction of
thinking started in
400 BC (Socrates,
Plato, Aristotle),
currently (probably)
misunderstood
by many at this 21st
century, due to the
instant
mentality.
Terima Kasih
Judith.Dipodiputro@gmail.com
+62 821 9964 2171
+62 813 2228 1000