Public and voluntary sector organisations do not have the same shareholder obligations as those in the private sector. However, as the distinction between public and private sector organisations becomes blurred, there are concerns that the ethical role of public service organisations – defined as acting in the public interest through a public service ethos – is being undermined. As public service and non-profit organisations are increasingly expected to achieve targets and become more ‘businesslike’, there are worries that short cuts are being taken and dubious practices are emerging, particularly at the boundary between the public and private sectors.

An ethical approach would normally incorporate a range of stakeholders. Accounts of which groups and individuals may be considered to be stakeholders vary, but most would agree with Wood's categorisation of core stakeholders as:

• (a) constituents on whose behalf the organization exists and operates, e.g., business owners or voluntary association members;

• (b) employees who conduct the organization's affairs;

• (c) customers who receive the goods or services the organization produces;

• (d) suppliers who provide the input materials for the organization's activities; and

• (e) Government that guarantees an organization's rights and privileges, enforces its responsibilities, and regulates its behaviours through political processes.

In addition, some scholars are now adding the natural environment as a core organizational stakeholder.

‘Organizations have many other stakeholders, including local communities, competitors, media, financial analysts and markets, financial institutions, voluntary organizations, environmental and consumer protection groups, religious organizations, military groups, political parties or factions, etc.’

(Wood, 1995: 529)

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Stakeholders

Ed Freeman, professor of business administration at the Darden School of the University of Virginia conceived of organisational stakeholders in his book Strategic Management: A Stakeholder Approach (1984).

In the traditional view of the firm, the shareholder MH (Majority Holder) view (the only one recognized in business law in most countries), 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. In older input-output models of the corporation, the firm converts the inputs of investors, employees, and suppliers into usable (sale-able) outputs which customers buy, thereby returning some capital benefit to the firm. By this model, firms only address the needs and wishes of those four parties: investors, employees, suppliers, and customers. However, stakeholder theory argues that there are other parties involved, including governmental bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, and the public at large. Sometimes even competitors are counted as stakeholders.

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Activity 2.3 – Stakeholders Go to http://www.youtube.com/watch?v=Ih5IBe1cnQw and watch Ed Freeman talk about stakeholder theory. You need only to watch the first 15 minutes of the video. Now make an entry in your learning diary entitled Stakeholders of the University of Nottingham. Spend 15 minutes listing all of the stakeholders of the University. Once complete, try to categorise them into primary and secondary stakeholders. Primary (usually internal) stakeholders are defined as are those that engage in economic transactions with the business (for example, stockholders, customers, suppliers, creditors, and employees). Non-Market (or Secondary) stakeholders are usually external and 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). Imagine now that the University decides to build a campus in Spain to take advantage of the large numbers of unemployed youth considering tertiary education. How will this affect the University’s list of stakeholders? Spend 15 minutes listing any new stakeholders. Content in this section is sourced from Wikipedia on 25/07/2012 under a Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Licence. http://en.wikipedia.org/wiki/Stakeholder_theory.

Content in this section is sourced from The Open University on 25/07/2012 under a Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Licence. http://openlearn.open.ac.uk/mod/oucontent/view.php?id=397369&printable=1