Stakeholder theory as a way of viewing social media policies and risk


My Skype guest of the week for our Social Media Law and Risk Management course this week is Professor Andrew Crane from York University in Toronto, Canada, the author of one of our key readings for the week on stakeholder theory.

The article is co-authored with Trish Ruebottom and is titled ‘Stakeholder Theory and Social Identity: Rethinking Stakeholder Identification’, Journal of Business Ethics, Vol. 102, Supplement 1: Ethics, Corporations, and Governance (2011), pp. 77-87

We discussed the application of stakeholder theory to social media risk management and policy development. Professor Crane starts by explaining the basics of stakeholder theory (video and transcript below). Enjoy!


Mark Pearson (@Journlaw): I am delighted to be joined here today by Professor Andrew Crane who is the George R Gardiner Professor of Business Ethics and Director of the Centre of Excellence in Responsible Business at the Schulich School of Business in the York University in Toronto, Canada. Welcome Andy.

Professor Andrew Crane: Thank you Mark, it’s a pleasure to meet you.

MP: Well you’ve done a lot of research and writing in Stakeholder Theory, and my students have actually been reading one of your co-authored articles on the topic. And for postgrad students who are relatively new to this theory, would you mind just giving a nutshell summary for them?

AC: Sure. Stakeholder Theory is a pretty simple idea in many respects, you know. It’s really about the idea that corporations in particular are not just there to serve the interests of shareholders. So Stakeholder Theory was designed to give us a way of thinking about other ways of understanding both the ownership of corporations, but in particular how decisions should be made. So, who should be involved in decision making, and how should the benefits that are, driven by corporations, the value that is created by them; who should it go to? So Stakeholder Theory is really about those sorts of questions, so who can affect organisations, but also who is affected by them, and what sort of rights do they have in respect to that stake they have, how should they be consulted, how should they be involved in the decision making, and those sorts of things. So it’s a very broad theory, and I saw that in one of your other readings you had the paper What Stakeholder Theory is Not, because there is a whole sort of set of different ways of understanding what it is – you know, it’s a very simple idea: there are multiple constituencies in any organisation, but then when it comes to [the question] of well, who is actually included and what are the implications of that, then it becomes a much broader discussion of the purpose of corporations.

MP: Yes, and we see that at its simplest level, I guess it’s just simply a matter of stakeholders being there to serve the interests of a company, and the main stakeholders being the shareholders and the customers and the corporate directors. But really your article and the other one you mentioned certainly extends that a lot further and it enters that corporate ethics field, where a company and its decisions have so many more stakeholders interests at play.

AC: Exactly

MP: So, coming to your article which starts to talk about social identity and basically presenting a grid which shows some intersection of what might be seen as a traditional role in relation to a corporation, and other social roles someone might play. Would you mind just talking us through the basic principles there and your spin on that?

AC: The basic way we understand stakeholders is the kinds of interactions that they have with the firm; so we think about them as either customers or employees and suppliers, regulators or NGOs or whatever else they might be. That’s typical kind of transactional view of who those different constituencies are. But the reason why different groups may actually mobilise or try and gain legitimacy in relation to firm, how they might press their claims, the kind of stake that they think they have, is not always about those simple transactions that they are engaged with. The reasons that people do things, the reasons people collect together to collaborate and press their claims upon firms are also about who people believe they are, about their social identity. So what are the bonds that connect me to other people that means these are the things that bring people together and make them mobilise in a social movement or some sort of pressure towards companies. So it may well be that I’m a customer of a firm, but I’m might simultaneously also be an employee, I might also hold shares in that firm; and I’ve got all kinds of different relationships with that firm at any one time. What we are trying to do with (Stakeholder) Theory with our paper is to say well, when people actually do try and press their claims, it is often about who we feel connected to that’s important. So the fact that I’m a white, British male for example who lives in Canada, that is very important for why I may be involved, why I might connect with certain firms. For example, it might be very different if I was a woman or a person of colour, or any other kind of quality which might impact on how I connect with companies.

MP: Well it seems, because of that very reason, to lend itself to an examination of social media in relation to a corporation; and particularly in the case of an emerging crisis because people with different social identities might fluctuate more towards social media for different reasons and in different places. Have you thought yourself about the interaction of Stakeholder Theory and social media in the corporation?

AC: I think one of the important ways of connecting up Stakeholder Theory and social media as well if a firm is trying to work out who it should be communicating with through social media; who the constituencies who are important; Stakeholder Theory provides a framework for that, because it gives us a way of thinking through who are the legitimate constituencies that we should be connecting with, how can we distinguish between legitimate and illegitimate, and also between who are the more powerful or less powerful that we should be connecting with. Stakeholder Theory is often seen in very instrumental terms in that sense; it is a strong instrumental approach there which says firms will care about stakeholders that matter – those that have power, those that have legitimacy, those whose stakes are very urgent. So social media is all about power in many respects; it’s about who you can influence, who you can connect to, how many people in your list of Twitter followers and what have you. So for firms it provides a framework for them to establish who matters in terms of their different constituencies. If we take it in an ethical dimension, take it in a more normative perspective, we say well ‘what rights do those people then have’? What sort of rights do you have as an employee, as a consumer, as a broader stakeholder of an organisation in relation to how it is going to communicate to you – in terms of protection of privacy, protection of various rights in terms of bullying and other things through social media?

MP: Yes – and also I think it can catch some corporations by surprise if they haven’t thought through particular social media stakeholders, or people who are using social media who may be stakeholders. And we see this with these grassroots campaigns against major corporations where they’ve underestimated the power of public momentum and social conscious using social media – which fits with your social identity perspective on that, doesn’t it?

AC: Absolutely. I think one of the interesting things here is that we tend to think of stakeholders in terms of a hub with spokes, right? Here’s the firm, here’s the decision making unit, and here’s the employees, here’s the consumers, here’s the suppliers, here’s the others; but social media is all about interconnections between different stakeholders and between different groups. You can’t think in those terms anymore if you’re trying to understand social media. Stakeholder Theory has limits in its traditional view and understanding it, unless you take it to a much more networked, much more nuanced kind of understanding of the types of environments that firms are interacting with.

MP: Well, while Stakeholder Theory might be very useful in research and the academic and looking at corporations and their interaction with various stakeholders, how useful is it as a practical tool in an organisation? So if you were a marketing manager or a public relations manager and you wished to avert some crisis in your company by trying to ascertain who the various stakeholders are and their respective interests.

AC: It can be very useful. It depends how you use it. It can be very effective at helping firms become prepared for identifying the various constituencies they need to be concerned about. If you take it seriously you need to be creative about trying to imagine who those constituencies are, because it is not just who is going to affect you now, when you think about a particular decision, who is going to be affected further down the line. So it can help you to identify these constituencies, but it can also help you to start thinking about, well, how can we predict what the type of response will be from those constituencies, depending upon how much power they have, how much influence, leverage, whether they are connected to other stakeholders in ways that mean they can leverage even greater influence and those sorts of things. So you can start to predict the kind of responses that may happen based on simple stakeholder framework that then gets into the idea of who has power, who can influence what is going to happen in the firm.

MP: And could you see it fitting in any way into the planning and drafting of a social media policy within an organisation?

AC: Certainly, yes. Both in terms of identifying who should be included in that policy, but perhaps more importantly, who should actually be involved in even devising the policy. Stakeholder Theory is all about who should be involved in decision making, so the question will be can we just set up a policy and then kind of send it out and everyone is going to abide by it. Well, realistically, that is not how social media works is it? It is a very unruly phenomenon. So it’s also thinking about who should be involved in the decision making. Who are the parties who are affected by this, and with our social identity card on it. So it’s not just ‘okay we need to involve our employees, or we need to involve our consumers’, but what particular subgroups of those employees or consumers might we need to be concerned with? So Facebook had its big issues with lesbian, gay, bisexual and trans community a couple of years ago by making sure that everyone had their real name as part of their Facebook profiles. This community was saying that they wanted also to express other identities as part of their names. So if you don’t have those groups involved when you’re setting up that policy in the first place, you’ve got all sorts of problems down the line when you realise you’ve upset core constituencies without thinking what it is that bind us all together in terms of our identity.

MP: Well that’s terrific, thanks Professor Crane. It’s great to have one of the authors of our readings talking to us about the subject matter at hand, and I would really thank you for your time today.

AC: It’s been a pleasure, thank you very much.

© Mark Pearson 2015

Disclaimer: While I write about media law and ethics, nothing here should be construed as legal advice. I am an academic, not a lawyer. My only advice is that you consult a lawyer before taking any legal risks.

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