How does globalization affect stakeholders' coalitions and salience?

Introduction

Generally speaking, stakeholders are individuals or groups that can affect or are affected by organizational goals, policies, and actions. That is, they are ranged into two main categories which are the primary and the secondary stakeholders. They might have three great relations with the organization depending on the heart of their interests and the way they are forming coalitions to impact the organization’s management. Stakeholders generally have three key attributes: power, legitimacy and urgency (Mitchell et al., 1997). Being in possession of one, two or all three attributes is crucial in defining the class of the stakeholder and the way coalition will be formed, power will be exerted, and the level of salience in dealing with the organization’s management. Indeed, there is no rigidity or stability in the way the stakeholders are classified and work among them and with the organization. Instead, there is a dynamic in the coalitions developed among groups, and also this dynamic determines the kind of power exerted on one or another area of the organization.

In addition, these coalitions might cause a low power stakeholder to shift from a level of power to another one, which will automatically redefine its salience upon the organization. That is, the manager needs to take into consideration the way coalitions are formed and the impact they might have on the organization’s strategic planning and key action toward the realization of the organizations immediate goals and future objectives defined in the vision statement. That means the importance of the stakeholders to create social image of the organization and to sustain its social responsibility should not be neglected by the management. But, how does globalization affect the coalition forming process and the dynamic among stakeholders’ salience?

Why do stakeholders build coalitions as a means of increasing salience?

The stakeholders approach to understanding the organization is based on a more integrative concept that enlarged the vision of the management’s vision, role, and responsibilities beyond the simple mission of maximize profit. That means, the corporate social responsibilities should be reinforced by integrating into the strategic business planning the main interests of the stakeholders. Since those interests might be as diverse as the stakeholders groups, management needs to maintain great communication with them, and understand the mobility in the relations among groups entering into a coalition in order to exert a greater influence over the organization. In the similar vein, the stakeholders’ salience is not static. It is redefined based on new interests and new coalitions. They are forming coalitions based sometimes on common interests, and other times on controversial topics.

Benjamin A. Neville, Simon J. Bell & Gregory J. Whitwell (2011) argue that the principle of urgency is not relevant as attribute for identifying stakeholders. Moreover, on their perspective, the moral legitimacy of the stakeholder’s claim generally increases or decreases the stakeholder salience depending on the way the claims are reflecting the public expectations and the community best interests as a whole. That being said, “salience of stakeholders will also vary as the degrees of the attributes vary” (Neville et al., 2011). Based on this approach, it is also crucial to redefine the stakeholders’ salience and legitimacy based on claim moral legitimacy in accordance to the public expectations and coalition forming process related to the organizational pursuit of well established goals.

On the other hand, Vanessa Magness (2007) has made an approach based on the “legitimacy perspective of stakeholder theory” developed by Gray et al., (1995). This concept introduced the dual roles of the public and the secondary stakeholders in a synergy that will build on or destroy the organizational social impact. Indeed, she recalled that the legitimacy perspective sustains the right of the corporation to exist is conferred by the society through a social contract, but only when the company’s value system is perceived to be congruent with the society’s once in which it operates (Dowling and Pfeffer, 1975); (Lindblom, 1994). The author pursues that “this right can be revoked if the company is thought to have breached any of the terms of its social contract (Deegan, 2002).”  As one of the stakeholders, customers could, for example, reduce demand for a company’s products if they think social rules and values have been broken. This principle of legitimacy as presented by Neville, Bell, and Whitwell (2011) which presents a very fine relation between legitimacy and salience.

Globalization and stakeholder coalition building capacity

Globalization is defined by Weber and Lawrence (2011) as “the increasing movement of goods, services, and capital across national borders. Globalization is a process, an ongoing series of interrelated events. Lawrence & Weber (2011, p.125) reveal that “international trade and financial flows integrating the world economy, leading to the spread of technology, culture, and politics.” Nowadays, with the globalization, the same organization might provide goods and services around the world. However, organization are also dealing with a wider variety of stakeholders that may display different interests depending on their geographical locations, cultural traits, regional regulations, and values in relation to their respective community’s expectations. For that reason, stakeholders are playing a key role in solidify the relationship developed by the organization with each community. This dynamic supposes the understanding of  local interests while keeping a general focus on the organization’s goals, vision, and values. Indeed, an organization should place the profit on the top of the stakeholders’ best interest. It should rather adjust the organization’s goals with the stakeholders’ values and interests.

Many areas that are well regulated in United States for example might have a lax of regulations in another business friendly country offering a cheaper labor in a competitive country in the context of opportunities linked to the globalization. As stated by Lawrence and Weber (2011, p. 133) “weak health and safety and environmental regulations- and lax enforcement of the laws that do exist- are a major draw for the companies that manufacture in factories in China’s industrial zones” might affect the way stakeholders are getting into coalition with other groups to influence the organization’s way of doing business.

Mitigation of stakeholder salience in order to achieve established corporate goals

It is critical to effective decision making that managers evaluate the effect of their decisions on key stakeholders, but also the different way coalition can be made among stakeholders to increase their legitimacy and their salience. One way a manager can determine the level of power a stakeholder might exert over the organization, and also the way the coalitions can be formed to increase salience of a specific group is to conduct a stakeholder analysis. This should be done by every organization. Using a matrix to efficiently analyze power level, interest, and coalition tendency, the manager will be able to track potential changes in the stakeholders’ legitimacy and salience. According to Weber and Lawrence “a wide range of studies have shown that companies that behave responsibly toward multiple stakeholder groups perform better financially, over the long run, than those that do not” (Weber & Lawrence, 2011).

Conclusion

Managing organizations in the context of globalization is a matter of taking into account the stakeholders’ interests and matching them with the organization goals. That is, an avenue of effective communication must be created between the organization and the stakeholders. In addition, the manager must be able to conduct stakeholders’ analysis to evaluate the power level and the potential coalitions forming that might happen depending on the mechanism of interests or controversial topics. In the context of globalization, many important controversial areas such as low labor cost, child labor, women paying less than men in the workplace, respect of the regulations, bribes, and many other regulations lax in foreign country must be watched over based on the stakeholders interest and values. If not, the management might face stakeholders’ strong salience through stronger coalition.

References:

Lawrence, A., & Weber, J. (2011). Business and society: Stakeholders, ethics, and public policy. (13 ed.). New York, NY: McGraw Hill.

Mitchell et al. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. The Academy of Management Review, (22)4, 853-886 Retrieved on February 28, 2013 from https://courses.washington.edu/ilis580/readings/Mitchell_et_al_1997.pdf

Neville et al. (2011). Stakeholder Salience Revisited: Refining, Redefining, and Refueling an Underdeveloped Conceptual Tool. Journal of Business Ethics (2011) 102:357–378, DOI 10.1007/s10551-011-0818-9

Magness, V. (2007).Who are the stakeholders now? An empirical examination of the Mitchell, Agle, and Wood Theory of Stakeholder salience. Journal of Business Ethics, (2008), 83:177–192, DOI 10.1007/s10551-007-9610-2

Leontes Dorzilme