J Bus Ethics (2012) 109:8396 DOI 10.

1007/s10551-012-1381-8

Stakeholder Management, Reciprocity and Stakeholder Responsibility

Yves Fassin

Published online: 27 June 2012 Springer Science+Business Media B.V. 2012

Abstract Stakeholder theory advocates that rms bear responsibility for the implications of their actions. However, while a rm affects or can affect stakeholders, stakeholders can also affect the corporation. Previous stakeholder theorising has neglected the reciprocal nature of responsibility. The question can be asked whetherin a spirit of reciprocity, loyalty and fairnessstakeholders should treat the corporation in a fair and responsible way. This study based on different denitions of stakeholders argues that various stakeholder attributes differ for different categories of stakeholders. This analysis presumes that the attribute of stakeholder reciprocity can probably be restricted to real stakeholders, labelled stakeowners: genuine stakeholders with a legitimate stake, the loyal partners who strive for mutual benets. Stakeowners own and deserve a stake in the rm. 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 corporate stakeholder responsibility. Keywords Stakeholder Stakeholder management Stakeholder theory Corporate social responsibility Business ethics Corporate governance Fairness Reciprocity Stakeowner

Introduction The stakeholder approach to corporations has led to attention spreading from the rm to all the constituencies
Y. Fassin (&) Vlerick Business School & Ghent University, Ghent, Belgium e-mail: yves.fassin@vlerick.com

of the rm, referred to as stakeholders (Freeman 1984). From a strategic perspective, stakeholder management urges corporations to consider the impact of their actions and decision making on the various stakeholders. From a normative view, a rm should take account of the deserved rights and expectations of its various constituencies. Stakeholder management, with its underlying business ethics component, focuses on the fair treatment, by the rm, of its various groups of stakeholders: especially of employees, customers and consumers and stockholders. However, besides these primary stakeholders, there are also important indirect stakeholders such as civil society and pressure groups who defend the interests of specic stakeholder groups. There are also regulators such as the law, ofcial institutions and control organisations; and nally the press and other media. The stakeholder approach has also focused on the need for corporations to inform transparently and through dialogue, especially in its approach to pressure groups. Strategic stakeholder management has indirectly been utilised as a great defender of corporate social responsibility and corporate governance. It strongly urges an ethical approach, based on respect and consideration. However, while the stakeholder approach starts from the premise that the rm needs to have consideration, respect and fair treatment for all stakeholders, and that a rm has obligation and duties, and responsibilities, to its stakeholders, little has been said about reciprocity in these relationships. Do stakeholders have obligations and duties to the rm and to other stakeholders? Do stakeholders have responsibilities to the rm? Is there stakeholder reciprocity in the sense of reciprocity of responsibility (Fassin 2008)? Does the status of being a stakeholder imply stakeholder responsibility? Does corporate responsibility imply stakeholder responsibility? Despite the interdependent relationship between

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stakeholders and the rm, stakeholder theorising to date has overlooked the reciprocal nature of responsibility. After a succinct review of the stakeholder literature, the article offers a concept of stakeholder reciprocity that builds on an analysis of the categorisations and denitions of stakeholders. Following a brief discussion on the notions of loyalty and responsibility, and inuence and power, a link with the concept of fairness is made. The analysis demonstrates how these stakeholder attributes differ for distinct categories of stakeholders. In concluding, it is posited that there is a need for consistency, and questions are raised over the feasibility of stakeholder reciprocity. If stakeholdership constitutes a long-term commitment, then it is probably restricted to a limited number of genuine, fair and loyal stakeholders. This overlooked domain of stakeholder responsibility may be the missing link in stakeholder theory.

Stakeholder Literature: Categorisations and Denitions of Stakeholders Stakeholder theory has mainly focused on corporate responsibility towards a rms stakeholders (Freeman 1984, 1999, 2004; Friedman and Miles 2006; Freeman et al. 2007). A rm has to take into account the needs of its various stakeholders and balance their divergent interests (Frooman 1999, p. 193). Most stakeholder scholars have adopted a largely corporate perspective on stakeholder theory (de Bakker and den Hond 2008; Savage et al. 1991); although a few articles have complemented the dominant view with the perspective of individual stakeholders and networks of stakeholders (Rowley 1997). Frooman (1999) introduced the concept of stakeholder inuence and power to the debate and proposed a model of stakeholder inuence strategies, later rened by Hendry (2005). While Savage et al. (1991) established a typology of strategies for assessing and managing organisational stakeholders, Mitchell et al. (1997) posited legitimacy, power and salience as the major stakeholder attributes. In their seminal article, Donaldson and Preston (1995) differentiated three genres of stakeholder theory: descriptive, instrumental and normative, while Freeman (1994) offered a narrative genre. The stakeholder literature offers many classications of stakeholders using various criteria: Most classical categorisations, based on priority, refer to primary versus secondary stakeholders (Clarkson 1995), or normative versus derivative stakeholders (Phillips 2003b). Primary stakeholders are those actors who enjoy a direct and contractually determined relationship with the company, whereas secondary stakeholders are actors at the boundaries of the rm who may be affected on by its actions but lack any contractual connection (Collier and Roberts 2001;

Carroll 1991). Phillips (2003a) distinguishes between normative stakeholders and derivative, dangerous and dormant stakeholders. Normative stakeholders are those stakeholders to whom the organisation has a moral obligation: an obligation of stakeholder fairness (Phillips 2003a). Derivative stakeholders are those groups or individuals who can either harm or benet the organisation, but to whom the organisation has no direct moral obligation as stakeholders, these include competitors, activists, terrorists and the media (Phillips et al. 2003), and also dangerous or dormant stakeholders such as blackmailers and thieves (Jensen 2002). These nal categories can affect a corporation but have no legitimate relationship with it (Mitchell et al. 1997; Savage et al. 1991; Phillips 2003a). Researchers have examined the vagueness in scope and other ambiguities of stakeholder theory. One can detect two basic views, depending on whether one adopts a narrow or a broad denition of a stakeholder (Mitchell et al. 1997; Orts and Strudler 2002; Phillips 2003b, p. 120; Hansen et al. 2004). Kaler (2002) distinguishes two fundamentally different views on the denition of a stakeholder: The claimant denition being any individual or group that maintains a stake in an organisation, a claim, a right or an interest and the inuencer denition those who can affect or can be affected by the rm (Freeman 1984, p. 46). The classical claimant denition has been expanded to an inuencer denition and, as a consequence, the list of stakeholders has been extended using pragmatic arguments from a strategic perspective. These two opposing visions of the stakeholder concept reect different issues and have their foundations in the differences between managerial and legal interpretations (Fassin 2009b). This dichotomy and a combinatory use of stakeholder denitions have increased the ambiguity and created a certain ambivalence (Kaler 2002). More recently, the political process of stakeholder inuence has been analysed from social movement theory and using institutional theory (Dahan 2005; den Hond and de Bakker 2007; King 2008; Zietsma and Winn 2008). These analyses focus on the inuence of groups variously referred to as secondary stakeholders : nongovernmental organisations (NGOs), civil society groups, activist groups, outsiders or social movements (de Bakker and den Hond 2008, p. 8). Some pressure groups, some confrontational activist groups, while having no organisationally dened links, dene and claim new stakes: They seek to have a voice in the corporations decision making and to participate in the public debate. Holzer (2008, p. 52) labels them accordingly as stakeseekers rather than stakeholders. Carrolls secondary stakeholders approximately coincide with the stakewatchers in the later terminology proposed by Fassin (2009b): Those stakeholders, such as pressure groups, who do not really have a stake themselves but who protect the interests of real stakeholders, often as

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proxies or intermediaries, as watchdogs who look after a stake with care, attention and scrutiny. They are diverse and include those who are not directly engaged in the organizations economic activities but are able to exert inuence or are affected by the organization (Savage et al. 1991, p. 62). Good examples are unions guarding the stakes of employees and workers; consumer associations defending the stake of consumers; investor associations protecting shareholders; and activists and NGOs watching out for the stake of the community and the environment. Stakekeepers is a term covering the independent monitors and regulators who have no stake in the rm but who impose external control, verication and regulations on the rm. Stakeholders who through their actions wilfully harm the rm are labelled stake impostors (Fassin 2009b). Stakeholder research has concentrated on the responsibilities of the rm to its various stakeholders, and the responsibility of these stakeholders seems to have been largely neglected. However, the stakeholder literature does indirectly and implicitly raise the issue of stakeholder responsibility in the discussion on the denition of who is a stakeholder and who is not.

Rationales for Stakeholder Identication in the Denitions Referring to the analysis of stakeholder denitions by Mitchell et al. (1997, pp. 860862, Table 2), and by Friedman and Miles (2006, pp. 58), especially to their sorting of rationales for stakeholder identication, several denitions were selected and classied in a slightly different way. Table 1 provides an overview of 18 selected stakeholder denitions, based on a gradation in the intensity of certain criteria in the groups of denitions: from claim, through dependence (one-way and reciprocal) and legitimate claim, to responsibility. As such, the rst group of denitions refers to the existence of a claim on the rm by the stakeholder as a criterion for their identication. The second series alludes to the companys dependence on stakeholders. The next step in the gradation stresses the reciprocal dependence. The next group of denitions introduces legitimacy and stakeholder interest. The nal step sees corporate responsibility developed and incorporated in some of the denitions.

Mutual Dependence Between Stakeholders and Reciprocity A number of problems in identifying stakeholders result from the intrinsic exibility of the associated theory (Fassin 2009b) and from the opposing positions adopted in

stakeholder denitions (Kaler 2002). There is some gradation in the intensity of criteria in the groups of denitions. Some denitions include the notion of reciprocity in the sense of mutual dependence between the rm and its stakeholders. However, while many stakeholder denitions, at least implicitly, include responsibility of the rm in the relationship, they do not imply any reciprocity. Stakeholders can affect or be affected: They can have power over the rm or can be dependent on it. The claimant and inuencer positions are not mutually exclusive: A stakeholder that affects, or that can be affected by, can also have a claim; and a stakeholder that has no claim can still affect or be affected (Kaler 2002; Fassin 2009b). Some secondary stakeholders, and also stakewatchers and stakeseekers, can inuence a company without having a stake, and not necessarily in striving for the good of the company, in fact quite the contrary. The present denitions do not insist on consideration, care for and respect of the stakeholder towards the corporation. In fact, present denitions of stakeholders remain mute on the salient issue of stakeholder reciprocity. The interactions between stakeholders operate in both directions. The mutual dependence between a stakeholder and the rm is expressed in graphical models by means of a bidirectional arrow (Crane and Matten 2004, p. 52). There is dependence, and reciprocity in inuence, as each can affect the other in terms of harms and benets. Furthermore, despite Evan and Freeman (1988, p. 101) also adding that an effect can operate through rights and duties, the questions can still be raised as to whether stakeholders have to treat the corporation in a fair and responsible way, and also whether they should also consider the impact of their actions on other stakeholders of the corporation. Stakeholder theory advocates that actions and decisions by corporations affect on others and, consequently, that rms must bear responsibility for the implications of their actions (or lack of action). While a rm affects or can affect stakeholders, stakeholders can also affect the corporation. However, despite the interdependency in the relationship between stakeholders and the rm, earlier stakeholder theorising has overlooked the reciprocal nature of responsibility. Stakeholder reciprocity, in the sense of reciprocity of responsibility of and towards stakeholders, seems to be a neglected area in stakeholder theory. Whereas stakeholders are widely seen as having rights, they may also have duties and obligations. Robins (2005) notes that it is very rare for CSR enthusiasts to discuss the responsibilities of stakeholders. Only recently have a number of articles raised the issue of inherent reciprocity in moral responsibilities in relationships between companies and stakeholders (Philips 2003b; Elms 2006; Bosse et al. 2009; Elms and Phillips 2009; Goodstein and Wicks 2007). The principle of stakeholder fairness developed by Phillips (see later discussion) recognises the obligations and duties of stakeholders.

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86 Table 1 Sorting of rationales for stakeholder identication Stakeholder claim on the rm Have a stake in or claim on the rm (Evan and Freeman 1988, pp. 7576) Claimants who have contracts (Cornell and Shapiro 1987, p. 5) Company dependence on stakeholders

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Those groups without whose support the organization would cease to exist (Stanford memo 1963, cited in Freeman and Reed 1983, and in Freeman 1984) On which the organization is dependent for its continued survival (Freeman and Reed 1983, p. 91) Groups for which a rms decisions to act or not to act are responsible for their level of well-being (Langtry 1994) Reciprocal dependence Can affect or is affected by a business (Freeman and Gilbert 1988, p. 397) Can affect or is affected by the achievement of the organizations objectives (Freeman 1984, p. 46) Are or which could impact or be impacted by the rm/organization (Brenner 1993, p. 76, n.1) Are or might be inuenced by, or are or potentially are inuencers of some organization (Starik 1995, p. 90) a 1998) Any individual or entity who can be affected by an organisation or who may, in turn, bring inuence to bear (Wheeler and Silampa Need to supply critical resources or assets to the enterprise, must be affected by the fate of the enterprise, and amass sufcient power in organizations (Kochan and Rubinstein 2000, p. 373) Constituents, each contributing (voluntarily or involuntarily) to its [the corporations] performance, and each anticipating benets (or at least no uncompensated harms) as a result of the corporations activities (Post et al. 2002, p. 8) Legitimacy and stakeholder interest Persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity(Donaldson and Preston 1995, p. 85) Possessing one or more of three relationship attributes: power, legitimacy, and urgency (Mitchell et al. 1997, p. 853) Any individual or group that is the legitimate object of managerial attention (Phillips 2003a, b) Corporate responsibility Groups to whom the corporation is responsible (Alkhafaji 1989, p. 36) Benet from or are harmed by, and whose rights are violated or respected by corporate actions (Evan and Freeman 1988, p. 79) Groups to whom the company should be concerned or from whom they need loyalty (Campbell 1997)

Without making explicit reference to the notion of a stakeholder, Bowie (1991) argued that a richer theory for CSR required a complementary focus on determining the appropriate reciprocal duties that exist among corporate stakeholders (Goodstein and Wicks 2007, p. 376). Bowie (1991) based his argument on the reciprocal virtuous nature of moral relations. Others such as Frooman (1999) argued on the grounds of accountability: Stakeholders should assume reciprocal responsibility for negative outcomes associated with their demands and for potential harm to rms and other stakeholders. When Mitchell et al. (1997, p. 866) analyse power, dependency and reciprocity in relationships between a rm and its stakeholders, they see no implication of or necessity for a reciprocal impact. Goodstein and Wicks (2007, p. 379), on the other hand, do base their stakeholder responsibility perspective on reciprocity, interdependence and accountability.

Stakeholders Loyalty and Moral Responsibilities In further discussing the theme of stakeholder reciprocity, it is worth analysing stakeholder behaviour and actions,

and the ethical component in the relationship between stakeholders and the rm. The ethics of most direct or primary stakeholders are determined through their contractual agreement. This includes rights and obligations for each party, for the duration of the contract. However, beyond a legal contract, all partnerships also involve moral responsibilities such as the obligation to treat partners with respect and decency, including the right for correct information and the duty not to harm. A growing stakeholder literature also refers to the inherent reciprocity in moral responsibilities between rms and stakeholders (Elms and Phillips 2009; Goodstein and Wicks 2007; Phillips 2003b; Bosse et al. 2009). Moral responsibilities include loyalty, the rm and constant support or commitment to a person or organisation. Employees are expected to be loyal to the corporation and vice versa. Customers and suppliers have obligations and rights specied in their contracts. Genuine shareholders with a long-term perspective logically support the development of the company. Notwithstanding general principles applicable to all stakeholders, each individual stakeholder possesses an individual contractual relationship. Collaboration is for the long term, albeit temporary. It lasts for the length of the

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contract with an employee, for a certain period with a customer, or until the shares are sold for the shareholder. Even the most loyal employee can decide to change job. Reciprocity of loyalty cannot be imposed for a whole lifetime. Employees can leave a company because they need a new challenge, without deserving to be accused of any disloyalty. Long-term customers can change supplier, because their needs have changed. Shareholders can decide to sell the company, or their shares in it, because they have other personal demands on their nances. Such personal individual actions do not constitute disloyal behaviour. Loyalty does not exclude interaction and dialectic*. Stakeholders have the right to defend their rights or legitimate expectations, preferably rst in dialogue, within the rules of the law and agreements. This can happen on an individual basis, and also through collective actions, for example, when employees go on strike, when customers launch a boycott action. However, sometimes, some employees, customers and shareholders do not behave loyally, and sometimes act unethically against the rm by harming it. When employees or their unions launch a strike without previous dialogue, or when an NGO launches a press attack for a cause where the rm has no responsibility, the loyalty relationship is ended, or is at least interrupted for a time. Despite such exceptions on the individual level, or exceptional collective circumstances, reciprocity of loyalty is a common characteristic of a number of important categories of primary stakeholders. However, with regard to shareholders or stockholders, often considered as the most important stakeholders in the dominant capitalist economic theories of the rm, a certain paradox is observed. Shareholders loyalty is taken for granted, and reciprocity is not even questioned. Indeed, family companies, and most SMEs, want to maintain their control and do not sell shares, except in the case of the founder-owner being succeeded. However, with stock market quoted companies, many shareholders are in fact not there for the long term. Rather surprisingly, the most important stakeholders, the shareholders who are the only ones who have been accorded legal rights in the governance structure, often fail to display stakeholder reciprocity. Company law awards equal voting rights to all shareholders at the time of the general assembly, irrespective of the length of their investment. Interestingly, corporate governance principles do not make a distinction between a long-term supportive investor and an opportunistic day trader or hedge fund owner. While the former shows commitment to the company, the latter have only a short-term nancial interest in the company, but no real stake or sense of responsibility and obligation. Besides such exceptions, there does seem to be a tacit general agreement to accept a certain level of reciprocity of loyalty and responsibility between the primary stakeholders and

the rm. Reciprocity is thus an important factor in building mutual trust. Corporations need to reciprocate the loyalty of their stakeholders. Most SMEs do apply stakeholder management: They try to retain employees, often with some more personal approaches than simply hiring and ring to reect the economic cycle. Long-term employment was also a key element in the growth strategy of Japanese companies in the second half of the twentieth century. It also used to be the standard policy of what were seen as great and excellent companies such as IBM and the major European banks. During the recent nancial crisis, most SMEs have kept their employees, as have larger family-controlled companies such as Nicolas Hayeks Swatch manufacturer, in adopting a long-term perspective. However, many multinationals that are obsessed with shareholder value have launched restructuring programmes when confronted with diminishing revenues, forgetting what they had sometimes tried to achieve with stakeholder management or promised in their corporate social responsibility discourses. Stakeholder theory has indeed played an important role in championing corporate responsibility: It has urged companies to take the demands of stakeholders other than shareholders seriously. Stakeholder management has developed ways to handle the different demands of internal and external stakeholders. Several authors (Frooman 1999; Harrison and Freeman 1999) have proposed strategies to cope with these demands; stakeholder engagement has been addressed through alignment, alliances, cooperation, etc. These strategies for rms are instrumental applications of stakeholder theory. They are instrumental responses of corporate social responsibility. Besides loyalty and moral responsibility, two important stakeholder attributes play a major role in stakeholder theory: inuence and power.

Stakeholder Inuence and Power Individual primary stakeholders may have a certain amount of inuence within the rm. When grouped together, their inuence may increase, especially if they have active representatives, such as unions for employees, or consumer associations and shareholder representatives. Stakewatchers and pressure groups, and stakeseekers, especially grassroots activist groups, seek to have a voice and to participate in the public debate. Their objective is to have things changed in line with the cause they advocate (human rights, the environment, etc.). They want to inuence public policy through regulation and legislation. NGOs push multinational corporations to conform to good practices and to become isomorphic with the local individual context (Doh and Teegen 2002).

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Strategy starts with a resource dependence analysis of a situation. In fact, stakeholder engagement starts from the analysis of the relative inuence and power of the rm and the stakeholder. Froomans (1999) inuence analysis of various categories of stakeholders concludes that real genuine stakeholders are dependent on the corporation and vice versa; and that the corporation is dependent on its employees and on its customers to realise its objectives. In comparison, stakewatchers as activists and NGOs are much more independent of the corporation. From a stakeholder perspective, Savage et al. (1991) developed a typology according to the stakeholders potential threat to the organisation and potential as a collaborator with the organisation; with the authors distinguishing supportive, non-supportive, marginal and mixed blessing stakeholders. In turn, the corporation has to develop appropriate responses for each category (Yaziji 2004). Oliver (1991) offers a valuable context for studying organisational responses to stakeholder pressures, ranging along a continuum from passive compliance to manipulation, with the suggested strategy depending on the balance of power. Given their access to the media and their role in the public debate, stakewatchers and activists may have a huge impact on the corporation, much more than the individual stakeholders they represent. Stakeseekers such as some aggressive activist groups leverage their claim through stakeholders stakeholders: They build on an evolution in the so-called chain of responsibility (Phillips and Caldwell 2005; Freeman et al. 2007). The notion of power has been studied as an important factor in the management of organisations (French and Raven 1959; Pfeffer 1981; Mintzberg 1983; Clegg et al. 2006). Curiously, most of the authoritative articles in the stakeholder literature do not develop these power issues but are based on a very soft and neutral interpretation of mutual inuence, rather than on power structures. They are optimistic and do not consider the downsides of power, with its abuse or misuse. In the relationship between stakeholders and the rm, power is not reciprocal (Mitchell et al. 1997, p. 877). Power is held through coercive, utilitarian or normative arguments; respectively based on the physical resources of force, violence or restraint, on material or nancial resources, or on intangible symbolic resources such as prestige, esteem, love and acceptance (Etzioni 1964; Mitchell et al. 1997, p. 875). These power resources are unequally divided among the stakeholders. Less powerful stakeholders may have to rely on the benevolence and voluntarism of the rms management to satisfy their demands. In many cases, stakeholders without direct power have to rely on the advocacy or guardianship of other, more powerful and more salient, stakeholders if they are to be heard. These advocacy stakewatchers include special interest groups and NGOs (Mitchell et al. 1997, p. 877) and

achieve greater stakeholder inuence through increasing the attributes of power, legitimacy and urgency. They indirectly increase their power through the acquisition of resources by forming alliances and through the bargaining dynamic (Doh and Teegen 2002); they build their legitimacy through this reputation and they are then able to set the agenda through the urgency they provoke through their actions (Spar and La Mure 2003; Jonker and Nijhof 2006; Doh and Guay 2006). While stakeholder inuence and power play a role in strategic stakeholder theory, another important notion contributes to the moral responsibility approach to stakeholder thinking: stakeholder fairness.

Reciprocity and Stakeholder Fairness The objective of stakeholder theory is to consider the needs of and the impacts on the various stakeholders of a corporation. This exercise is often complex, as it involves many very different stakeholders, including pressure groups and activists alongside the more traditional primary stakeholders. Stakeholder management is the balancing of conicting needs and demands. Cyert and March (1963, p. 27, 43) described organisations as coalitions of individuals and organised sub-coalitions with disparate demands, changing foci of attention and limited ability to attend to all problems simultaneously. Pressure groups, stakewatchers, and especially activists and NGOs, and the media all play special roles in this debate, forcing corporations to pay greater attention to certain stakeholders requests and to reporting and communication. Except for a few authors, the reverse notion of stakeholder reciprocity has been ignored. The reciprocity principle in social exchange theory (Gouldner 1960; Emerson 1962) provides an explanatory mechanism that predicts that a rms response will have strong inuences on subsequent stakeholder actions. In response to friendly actions, people are generally much more cooperative and tend to chter 2000; Bosse et al. 2009). On reciprocate (Fehr and Ga a macroeconomic level, Sen (1993, p. 48) argues that economic institutions operate on shared trust and mutual condence in the ethics of different parties; on a microlevel, Hosmer and Kiewitz (2005, p. 83) claim that morally correct management decisions engender trust, commitment and effort among stakeholders. They conclude that those positive feelings would in turn lead to cooperative and innovative behaviour of denite benet to the rm (Hosmer and Kiewitz 2005, p. 83). This cooperative attitude avoids free-riding by others and thus generates substantial benets for the organisation (Jones 1995). The strength of the reciprocity norm (Gouldner 1960) can explain interactions between a corporation and its

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various stakeholders (Mattingly and Greening 2002, p. 268). A rms responses to stakeholders initial actions create social pressures for the stakeholder to reciprocate the type of response in subsequent interactions with the rm (Mattingly and Greening 2002, p. 275). The sometimes aggressive reactions of unfairly attacked companies through unfair rumours against the attacking NGOs illustrate this principle. Philips (1997, 2003b) relates the existence of reciprocal moral obligations between a rm and its stakeholders in Rawlss (1971) principles of fair play, and labels this the principle of stakeholder fairness (Elms and Phillips 2009). Adam (1965) denes fairness as the degree to which an individualin casu a stakeholderperceives an equivalence between his input and the outcome of that input. Fairness in business also implies honest and correct treatment of all business partners. This means that the terms of agreements between business partners or other stakeholders should be fair. Business needs an environment of trust to remain viable over the long term. Fairness towards all stakeholders will help to build this mutual trust. Fairness presupposes equity in transactions (Goodwin and Ross 1992). Whenever person or groups voluntary accept the benets of a mutually benecial scheme of co-operation requiring sacrice or contribution on the parts of the participants, obligations of fairness are created among the participants in proportion to the benets accepted (Phillips 2003b, p. 6). Phillipss emphasis on the reciprocity of relationships between rms and stakeholders suggests a similar logic for the moral legitimacy of rms (Elms and Phillips 2009, p. 407). Firms derive a moral legitimacy from recognising their responsibilities to morally legitimate stakeholders (Elms and Phillips 2009). In this view, stakeholders are considered more as partners for the achievement of mutual benets (Phillips 1997, p. 64). Phillipss principle of stakeholder fairness suggests a reciprocal link between responsibility and moral legitimacy. Reciprocity cannot be imposed, but is based on mutual loyalty. By treating other stakeholders fairly, stakeholder management indirectly expects reciprocity. Phillipss argument for a principle of stakeholder fairness is based on Rawlss principle of fair play as a moral foundation of stakeholder theory. Given that Rawls considered the concept of reciprocity to be central to his own work, it is logical that obligations of fair play are reciprocal. Fairness and reciprocity lead to trust being established between partners. Where a rm has an obligation to a stakeholder group, the stakeholder group also has an obligation to the rmalthough the strength and content of the obligations may vary, and insofar as mutual benets are present. The mere ability to affect an organisation creates no moral obligation on the part of the organisation and its managers. Many grassroots activist groups are overtly

hostile and confrontational towards targeted organisations. Although activists can, as derivative stakeholders, affect the organisation, they generally do not merit the additional moral consideration because of normative stakeholders (Phillips 2003b, pp. 85, 9293, 148, 153). This discussion demonstrates that the application of the principle of stakeholder fairness to the different categories of stakeholders forcefully varies.

Stakeholders, Stakewatchers, Stakekeepers and Stakeseekers Combining Fassins categorisation with Holzers concept of a stakekeeper, we come to four stakeholder categories. Based on the nature of their legitimacy, the four distinct categories are rstly real or genuine stakeholders, the internal constituents who have a real stake in the company; then stakewatchers, mainly pressure groups that inuence the rm; stakekeepers, mainly regulators who impose external control and regulations on the rm; and nally stakeseekers, who seek to have a voice in a corporations decision making (Holzer 2008). To avoid further denitional confusion with the use of the generic term of stakeholder for one of the four subcategories, we propose to rene Fassins terminology and to name those real genuine stakeholders stakeowners, stakeholders who own and deserve a stake. The four categories have different bases for their legitimacy. Stakeowners have a legitimate claim on the rm, whereas stakewatchers as pressure groups possess only an indirect claim, and stakekeepers as regulators have no claim. Stakeseekers, unlike stakewatchers who derive their legitimacy from the stakeowners they represent, seek to have a voice in the public debate and pretend to have a claim on the rm whereas, in reality, their legitimacy is self-proclaimed. Adding the stakeseeker category to the analysis of Fassin (2009b, p. 121, Table II), we can illustrate the differences between the four categories when confronted with the legitimacy and power elements of the typology by Mitchell et al. (1997). In Table 2, the comparison is expanded with the criteria of dependence, loyalty, responsibility, fairness and reciprocity. The four categories above have substantially different proles. Various attributes change for the different categories of stakeholders. For the stakeowners, possessing a legitimate claim, power and inuence are reciprocal; the rm has a responsibility to them. The rm has little power over and no responsibility for stakewatchers, as indirect stakeholders, whose legitimacy is derivative (Phillips 2003b, p. 120). The legitimacy of the claim of stakekeepers as regulators has a mixed origin. They have considerable power over the rm, while the rm has little inuence over

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90 Table 2 Typology of the categories Category Attribute Legitimacy Dependence Inuence Power dominance Loyalty Responsibility Fairness Reciprocity Normative Mutual Mutual By the rm Natural Of the rm Natural Implicit Derivative Firm dependence On the rm/indirect On the rm Limited None Expected Expected neutral Mixed Independent On the rm/indirect On the rm Neutral Externally imposed Expected Neutral Stakeowner Stakeholder Stakewatcher Pressure group Stakekeeper Regulator

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Stakeseeker Activist

Self-proclaimed Independent Indirect On the rm Opportunistic None Non-existent Arbitrary

them. The rm has no responsibility for stakekeepers. These are totally independent of the rm although, indirectly, regulators can externally impose responsibilities. The independent stakeseekers, with their self-proclaimed legitimacy, have an indirect inuence and can potentially wield considerable power over the rm without taking any responsibility. Stakeowners have a natural loyalty to the corporation; stakekeepers are expected to be neutral; the loyalty of stakewatchers to the corporation is generally limited to the stakeholders they represent, while opportunistic stakeseekers display no loyalty at all towards the corporation. Fairness is natural for stakeowners, expected from stakekeepers and for most stakewatchers, but non-existent stakeseekers. Reciprocity of loyalty, responsibility and fairness is implicit or expected of stakeowners and arbitrary for stakeseekers. Reciprocity of fairness and stakeholder responsibility cannot be imposed nor forced on most stakekeepers and stakewatchers, it can only be expected; if the corporation treats them in a fair and responsible way, at least, a neutral attitude may reasonably be assumed. Referring back to the analysis of the numerous denitions of stakeholder in Table 1, the rst four groupings, of stakeholder claim, company dependence, reciprocal dependence, legitimacy and stakeholder interest, can all to a certain extent be applied to all four categories of stakeholders. Only the last group of denitions, involving corporate responsibility, seems to be restricted to the category of stakeowners.

The Need for Consistency and Stakeholder Reciprocity Stakeholder theory does not claim to be a comprehensive moral theory (Phillips 2003b, p. 144). The principle of fairness provides a normative justication framework for stakeholder theory rather than notions of responsibility that focus on externally imposed obligations (Phillips 2003b, p. 96). The more a stakeholder contributes to an

organisation, the greater their voice and their share of any value created should be (Phillips 2003b, p. 160). According to some authors, stakeholder theory is rather ve and leads to unrealistic hopes and expectations na (Carson 2003). In reality, stakeholders usually defend their own particular interests, whereas the general public has a quite different intention (Ulrich 1995). Opportunistic and irresponsible behaviour by stakeholders also undermines ethical business practice (Goodstein and Wicks 2007, p. 389). In understanding the reciprocal rights and duties of real stakeholders, one should include those stakeholders who express loyalty as well as voice. Power indeed implies responsibility (Frederick 1994). However, just like other stakeholders, stakewatchers should also take into account the rights of other stakeholders. Unions and NGOs have to realise that the triple P approach includes, besides People and Planet, also Prot. Pressure groups as stakewatchers should maintain realistic expectations. They cannot expect business to solve all the problems of society. Just as corporations have duties to their stakeholders, stakeholders should acknowledge that besides their rights and justied claims, they also have at least basic obligations to the corporation. The recognition of reciprocity would facilitate a semantic debate on who is a stakeholder and who is not. To deserve the status of a real, genuine and fair stakeholder or stakeowner, stakeholders should also recognise the rights of other stakeholders while remaining loyal to the corporation. This does not mean that one cannot disagree or act, but that one has to search for constructive dialogue and avoid unfair actions that could unnecessarily harm the corporation and other stakeholders. On the basis of principles of fairness and of avoiding harm to others, hidden agendas, conicts of interest and abuses of power should be avoided. Stakeholders who do not contribute, but on the contrary only affect the company by harming it or its stakeholders, even if they have to be considered from strategic point of view, do not merit the term stakeholder. As the secondary stakeholder appellation still contains the word

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stakeholder, the more recent terminology of stakewatcher (Fassin 2009b) or stakeseeker (Holzer 2008) may be more appropriate for clearly highlighting this distinction. When stakeseekers such as confrontational activist groups and terrorists pursue a hidden agenda, and wilfully harm the rm through unjustied and unfair actions or by spreading false information, the term of stake impostor (Fassin 2009b) may be more appropriate.

Stakeholder Responsibility Towards Other Stakeholders of the Firm Besides the question as to whether stakeholders should treat the corporation in a fair and responsible way, a question can be raised over whether stakeholders should also consider the impact of their actions on other stakeholders of a corporation. Having their own single focus, stakewatchers and pressure groups sometimes do not realise that they might not respect the rights of other stakeholders of the rm (Baker 1996; Adair 1999). The unions that decide to call a strike have little consideration for the legitimate rights of customers, shareholders and the local community disturbed by demonstrations, pickets and blockades. Surveys on product quality or the ratings on services published by consumer organisations can have huge consequences for companies, and consequently on their stakeholders. Some peace or environmental activists display little respect for the employees and customers of the companies they attack (Bowie and Werhane 2005; Fassin 2009a). NGO advocacy activities can have unintended impacts and unforeseen consequences on a wide range of stakeholder groups (Unerman and ODwyer 2006). Ideological or dogmatic attitudes tend to obfuscate the negative consequences of courageous actions for a good cause. The media, always eager for sensation, do not always bring sufcient nuances or present the viewpoints of other stakeholders. On the regulatory level, well-intended proposals for increased regulation sometimes have unintended consequences: additional control costs and an administrative burden. Sometimes, paradoxically, good intentions and well-intended actions cause harm to the group they were intended to protect (Fassin 2009a). Civil rights organisations launching boycotts against dictatorial regimes do not always consider the negative consequences for the local population (Henderson 2001; Jamison and Murdoch 2005). The appeals for the abolition of child labour in developing countries do not always take account of the needs of the families of the children (Kapstein 2001). Members of activist groups, with genuine idealistic motivations, do not always realise the perverse results of some of the actions of their organisation (Fassin 2009a). These actions can

involuntarily and unconsciously hit unforeseen victims such as individuals in small businesses, local suppliers and the workers of subcontractors in developing countries. Globalisation has increased the distances between successive levels in the production and investment chain. Despite the value responsibility chain engaging the rm in wider responsibilities (Freeman et al. 2007), this globalisation has also contributed to anonymity in a depersonalised system (Fassin 2009a, 2010). Shareholders, traditionally seen as the most important stakeholder group worthy of the highest loyalty, can also have their interests defended by a specic category of stakewatcher: an activist group representing minority shareholders (Gillan and Starks 2000). Shareholder activism has often been portrayed as a positive evolution in corporate governance. It seeks equal treatment for all shareholders, and respect for the rights of minority shareholders. Some ethical investment funds screen rms on responsibility and ethical criteria (Hutton et al. 2001; Hellsten and Mallin 2006). Shareholder activism, through specialised pension funds, has been advocating increased stro m 2008; Southwood 2003). HowCSR practices (Sjo ever, when specialised hedge funds use shareholder activism practices to attack under-performing corporations to force an alternative strategy of divestment or asset-stripping, and then negotiate the sale of their shares, at huge prots, to stop these attacks, they appeal purely to selfinterest without any consideration of other stakeholders. This variety within shareholders again highlights the fact that this stakeholder group can be anything but heterogeneous and that not all shareholders are stakeowners, that some are rather opportunistic stake impostors, as can be found in all the stakeholder categories. Stake impostors have a stake, but only an egotistical or opportunistic one in the company, and are probably very far from sharing the legitimate company objectives.* As an aside, this discussion also presents a case for an improved corporate governance system. While activists have pushed to extend voting rights in corporate assemblies to additional stakeholders groups such as personnel and communities, a measure supported by some stakeholder scholars (Freeman and Evan 1990; Donaldson and Preston 1995; Luoma and Goodstein 1999; Galai and Wiener 2008), one could also envisage restricting voting rights to genuine shareholders with a long-term commitment. Corporate governance commissions should consider developing mechanisms better able to ensure the participation and representation of minority shareholders and other committed stakeholders in publically quoted companies. Key actors in corporate governance are the board of directors and management who occupy a special place in the corporation with a strong commitment to increase shareholder value. Management and CEO have a unique

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position as stakeholder: They belong to the category of employees, at the top of the hierarchy; but, at the nexus of contracts, they interact with all the stakeholders of the rm and are therefore positioned in the center in Fassins rened stake model (Fassin 2009b). But often, CEOs and management also are shareholders themselves, through their stock options packages and bonus reward systems. Directors and especially independent board members have even a more special place: They are not employees, in most cases they are not shareholders but representatives of the majority shareholders. Through inuence of stakeholder management, the objective of increasing shareholder value has evolved towards shareholder value on the long term, which implies a process of value creation for all stakeholders (Freeman et al. 2010). Stakeholder management urges the rm to take into account the needs and expectations of all stakeholders; implementing this task belongs to the priority assignment of management and CEO. The board of directors has a special mission of strategic advice and control: The board members have a duciary duty against the shareholders, but also have the duty to preserve the interests of the corporation, which implicitly includes the interests of its various stakeholders. Through their privileged position of major stakeholder, management and directors thus have or should have implicitly a reciprocity approach regarding loyalty, responsibility and fairness; in this sense, they belong to the category of stakeowners. Furthermore, with their specic role of balancing the interests of the various shareholders, they have a role of example to increase stakeholder reciprocity with all the stakeholders.

Stakeholder Management, Reciprocity and Stakeholder Responsibility Earlier in this article, various stakeholder denitions and interpretations of views of stakeholders were discussed: the claimant versus the inuencer denition, and the broad versus the narrow view on stakeholding, the strategic managerial perspective or the theoretical philosophical perspective. Several stakeholder categorisations have been proposed in the literature: primary versus secondary stakeholders, normative versus legitimate stakeholders; real stakeholders or stakeowners, stakewatchers, stakekeepers and stakeseekers. The broad denition of a stakeholder as one who has the capacity to affect or to be affected includes a form of reciprocity between the corporation and the stakeholder in the sense of mutual dependence, but not of mutual responsibility. This ts with a strategic approach to the stakeholder notion. The narrow denition of stakeholder to take into account and, by

extension, to have responsibility for does not automatically include reciprocity in responsibility. From a descriptive stakeholder theory viewpoint, many stakeholders will display some degree of reciprocal behaviour, although others will not. From a normative standpoint, there is no obligation for reciprocity from any of the various stakeholders: The philosophy is to practice this as part of good management, from conviction. The instrumental point of view expects that a rms good treatment of stakeholders will lead to some form of reciprocity by these stakeholders. The literature in various domains, such as human resources (Bohlander and Snell 2009), marketing (Kotler and Armstrong 2010) and reputation management (Fombrun 1996), has implicitly built, on this basis, a business case for stakeholder management. Numerous empirical studies by behavioural scientists have demonstrated that perceptions of just treatment by employees result in positive changes in individual attitudes, group behaviour and productive outputs of the employees within the organisation (Hosmer and Kiewitz 2005, p. 86). Marketing studies have supported the arguments for their being positive effects of respectful treatment in the form of customer loyalty (Rauyruen and Miller 2007). Studies on the impacts of CSR and socially responsible activities have demonstrated their positive effects on reputation (Fombrun 1996). Furthermore, positive actions towards one stakeholder group also reect towards others stakeholders (Reichheld 1993). Even the narrow denition of stakeholder does not incorporate reciprocity in stakeholder responsibilities. Although only stakeowners can display stakeholder responsibility towards the rm, the question remains as to who can be considered as stakeowners? Heterogeneity among the stakeholders, and also intra-heterogeneity (Fassin 2008), are important and will have consequences. Different stakeholders will behave differently, even within one group of stakeholders. While many groups of stakeholders display loyalty and fairness, as a result of being treated with respect, and responsibility as stakeholders, some individual stakeholders in any group are likely not to reciprocate the loyalty, but to strive only for their cause or their own particular interests. Such stakeholders belong to the categories of stakewatchers or stakeseekers that strive to have a voice, but without accepting responsibility. This analysis accepts that the attribute of stakeholder reciprocity is probably limited to stakeowners or genuine stakeholders: The loyal partners who strive for mutual benets (Phillips 1997, p. 64). Stakeowners are likely closest to the normative stakeholders in Phillipss terminology. Referring to the discussion on stakeholder denitions, the stakeowners in our terminology are close to the narrow denition used with the stakeholder concept (Kaler 2002; Fassin 2009b); they include a selected number of legitimate stakeholders mostly linked through contractual

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relationships. The traditional stakeholder categorisation does not help in dividing stakeowners from the rest. Discrimination in our categorisation is not based on a classical stakeholder label such as NGO, union, press, but on the individual basis: every specic NGO, union, newspaper with its concrete actions and purposes. As we have demonstrated, stakeowners can be found within each traditional category just as all categories can contain opportunistic stakeseekers and stake impostors. Governmental environmental authorities and NGOs that honestly try to improve working conditions in developing countries in dialogue with corporations can behave as stakeowners, while opportunistic grassroots activist groups or NGOs that arbitrary attack a rm for their own publicity sake act as stakeseekers (Winston 2002). However, without primary stakeholdersemployees, customers and shareholdersa company cannot pursue its objectives or survive, without stakewatchers and stakeseekers it can.* Most stakeowners are primary stakeholders; their position ts nearer to the claimant denition. Stakeowners who display responsibility and long-term commitment to a company have a legitimate stake in the company. The corporation has the ethical duty to treat stakeowners with respect, fairness and loyalty. Genuine responsible stakeowners contribute to the value creation of a rm and its stakeholders (Freeman et al. 2010). Although all these categorisations overlap, they do not fully coincide. Stakewatchers, as secondary or derivative stakeholders, can also treat the corporation in a fair way; and in most circumstances, most of them generally do. Even if there is no obligation to demonstrate mutual responsibility, stakeholders should consider the impact of their actions on the corporation and on other stakeholders of the corporation. Given the prominent role that NGOs with an ethical purpose have achieved as stakewatchers in the interaction between business and government (Fassin 2009a), and their impact on regulation and legislation (Doh and Teegen 2002), this should certainly be the case. In some situations, this might be difcult, but just as the rm has to manage disparate and contradictory demands and to balance stakeholder interests, stakewatchers should proceed in a similar ethical way. The fair and responsible treatment by a rm of its stakeholders helps to build trust in the organisation. However, whereas stakeholder reciprocity towards the rm from most stakewatchers and stakeseekers cannot realistically be assumed in all circumstances; one might expect to see this reciprocity in stakeholder responsibilities towards other stakeholders of the rm. Corporate responsibility requires stakeholder responsibility.

Conclusions Stakeholder theory has its origins in the eld of strategy (Freeman 1984). The stakeholder theory is managerial

and recommends the attitudes, structures, and practices that, taken together, constitute a stakeholder management philosophy (Donaldson and Preston 1995, p. 87). It has gradually been adopted by scholars in the business and society elds. Stakeholder management has been utilised as the leading red line through several recent handbooks on business ethics (e.g., Crane and Matten 2004; Carroll and Buchholtz 2006). It has become the grille de lecture in the analysis of corporate responsibility (Attarc a and Jacquot 2005). The stakeholder approach has, therefore, come to be presented as a theory of ethics for the business world. A pragmatic conclusion that could be deduced from the present analysis of stakeholder reciprocity, seen as reciprocity in stakeholder responsibility, is that while the impact of stakewatchers on corporations has to be studied from a strategic point of view when using the stakeholder theory, pressure groups and stakewatchers formulate their strategy using a political resources perspective that ignores the ethical dimension of stakeholder theory. Various categories of stakeholders demonstrate different stakeholder attributes. If one considers the broader denition of stakeholders, including stakewatchers and other stakeholders that lack a need or obligation for reciprocal loyalty, then the stakeholder concept is applied from a strategic theory perspective that corresponds to the instrumental genre of stakeholder theory. In a more restricted interpretation of the stakeholder, limited to stakeowners or genuine stakeholders who reciprocate loyalty, responsibility and fairness, stakeholder theory could constitute an ethical framework. Corporate social responsibility then implies corporate stakeholder responsibility. For stakeowners, there is congruence between the companys legitimate objectives and the process of value creation for all stakeholders. Stakeowners own and deserve a stake in the rm. Our analysis of stakeholder reciprocity has practical implications for corporate governance. A stream of studies on stakeholder theory and corporate governance has investigated new ways to integrate more stakeholders into the governance of corporations through representation on the governing boards of directors. Stakeholder reciprocity could be an innovative criterion in this corporate governance debate. The analysis presented in this article argues for new criteria that will confer representation on loyal stakeholders who respect stakeholder reciprocity and who contribute to the process of value creation. Within existing corporate law and governance principles, it suggests, at the very least, restricting voting rights to loyal shareholders with a long-term commitment. Our approach is based on normative cores (Freeman 1994; Phillips et al. 2003) because reciprocity and stakeholder responsibility towards the rm and towards the other stakeholders falls within the ethical genre of stakeholder theory. It also meets the essence of stakeholder theory,

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which is creating value for stakeholders (Freeman et al. 2010). This additional dimension of reciprocity, if added to the stakeholder approach, would take the normative element beyond the essentially descriptive and instrumental applications of stakeholder theory (Andriof et al. 2002, pp. 3234; Gond and Mercier 2006). In this ethical perspective on stakeholder theory, reciprocity in loyalty, responsibility, fairness and ethical treatment needs to be demonstrated. If stakeholdership requires a long-term commitment and responsibility, it is probably restricted to a limited number of genuine, fair and loyal stakeholders with a legitimate stake, stakeowners. In this respect, the notion of stakeholder reciprocity could be the missing link in stakeholder theory.
Acknowledgments The author would like to thank the professors ` di Bergamo), Ed Freeman (Darden Silvana Signori (Universita Heene (Ghent University) and School, University of Virginia), Aime Marc Buelens (Vlerick Business School) for their valuable comments and suggestions that helped to improve this paper. I would also like to acknowledge the anonymous reviewers to whom I owe the formulation of the three observations marked with an asterisk* in the text.

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