Social Responsibility: The Stakeholder Theory And Approach

INTRODUCTION

According to the stakeholder theory, stakeholders could refer to individuals or groups who are affected by, or can affect, an organisation’s decisions, policies and practices (Donaldson & Preston, 1995). Some prominent stakeholders include stockholders, managers, employees, media and non-governmental organisations. However, we often tend to neglect and forget about one important stakeholder – communities.

Individuals in society often do not have much say but however, when they come together and form stakeholder coalitions, their stakeholder salience increases and as a community, they have greater bargaining power to fight for their rights (Lawerence & Webner, 2013). There have been many cases from Ecuador, Ghana, Indonesia, Nigeria,

For businesses that are looking to enter and set up operations in a new area, the SLO would signal the need to first overcome the legitimacy barrier by facilitating discussions with the local governments and the local community. They would need to address their concerns and implement policies that would benefit them. Companies might incur higher costs for projects if there is no SLO obtained and it would diminish shareholders’ profits (Nelsen, 2006). Such costs could include longer time needed to start on projects and vandalism of machinery. With an SLO, companies would be able to hire more easily and protect against delays arising from strikes or societal protests. The importance of gaining and maintaining the SLO is now seen as a crucial part of a company’s

It has extended to many other industries, most notably in the usage of natural resources (Syn, 2014). Fishing, lumbering and extraction of geothermal and nuclear energy are just some examples. I believe that the concept of the SLO is very relevant and applicable to all companies, especially for those seeking to enter into a particular local community.

One should note that the SLO is site specific in nature. What works in one country might not work in another country. As such, there is no guaranteed method for success. This reflects the dynamic and diverse nature of each culture. Even within a particular culture, there could be groups with very different expectations and demands. Even though the methods might be different, the process of obtaining and maintaining the SLO is similar. Hence it provides good guidelines on how a company can establish and maintain good relationships with the local