Stakeholder Salience

Stakeholder Salience:
  1. The Stakeholders' Power to influence the firm
  2. Legitimacy of the stakeholders' relationships with the firm
  3. The urgency of the stakeholders claim on the firm.
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The concept of Stakeholder Salience was proposed by Ronald K. Mitchell, Bradley R. Agle and Donna J. Wood in an article for The Academy of Management Review in 1997. The authors proposed a Theory of Stakeholder Identification and Salience in response to the many competing definitions of ‘stakeholder’ and the lack of agreement 'Who and What Really Counts' in stakeholder management (Mitchell et al. 1997, p.853-854).

a Stakeholder Salience template is available with the ebook.
Considering the principle, proposed by Freeman (1994), of 'Who and What Really Counts' Mitchell et al. argue that the first question calls for a normative theory which logically defines who should be considered as stakeholders. While the second requires a 'descriptive theory of stakeholder salience [emphasis in the original]' which explains what conditions are in place when managers do consider certain people or entities as stakeholders (ibid. p.853).

Although there are many different definitions used for identifying stakeholders they tend to be either broad and inclusive or narrow and pragmatic. For example, Freeman’s broad definition allows practically anyone to be classified as a stakeholder as virtually anyone can affect or be affected by an organisation.

'A stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization's objectives' (Freeman, 1984, p.46).

In comparison other definitions take an arguably more pragmatic approach by emphasising legitimacy.

'persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity' (Donaldson and Preston, 1995, p.85).
In other words, an entity must have a legitimate claim or stake in the organisation to be considered a Stakeholder. These narrow definitions accept the reality that managers can’t and don’t consider all possible stakeholders.

Both definition types tend to focus either on power or legitimacy. The power of a firm over a stakeholder and vice versa or the legitimacy of a stakeholder’s claim on an organisation this could be that they have something at risk or they have a legal, contractual, moral or financial claim.

Following a detailed literature review Mitchell et al. (1997, p.864) noted that all definitions ignore 'urgency, the degree to which stakeholder claims call for immediate attention [emphasis in the original]'. They proposed a new normative theory of stakeholder identification based on three variables:
  1. Power to influence the firm
  2. Legitimacy of the stakeholders’ relationships with the firm
  3. The urgency of the stakeholders claim on the firm.
Mitchell et al. Draw on Etzioni (1964, p.59) to define power as the extent to which a party has or can gain access to coercive (physical means), utilitarian (material means) or normative (prestige, esteem and social) means to impose their will.

The definition of legitimacy is taken from Suchman (1995, p.574) who defines legitimacy as 'a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions'.

Urgency is defined as 'the degree to which stakeholder claims call for immediate attention'. The ‘degree’ depends not just on time- sensitivity, but also on how ‘critical’ the relationship is with stakeholder or the importance of their claim (Mitchell et. al, 1997, p.867).

From this stakeholder typology the authors introduce managers’ perceptions to develop a theory of stakeholder salience. They define 'salience' as 'the degree to which managers give priority to competing stakeholder claims' (ibid. p.854).

The more attributes – power, legitimacy, and urgency – stakeholder is perceived to have the higher their salience. In other words the greatest priority will be given to stakeholders who have power, legitimacy and urgency.

Power and legitimacy are interrelated and the three variables can overlap. The combinations given seven different classes of stakeholders, which the authors illustrate using a venn diagram.
Stakeholder Salience model
Adapted from Mitchell et al. 1997, p.873. Colour not in the original.
A Stakeholder Salience Template in Word & Excel is available with the eBook

The seven stakeholder classes can be separated into three groups: Latent, Expectant and High Salience. I have adapted the Salience diagram, to highlight the three groupings.

Green Latent stakeholders: one attribute, low salience. Managers may do nothing about these stakeholders and may not even recognise them as stakeholders.
Amber Expectant stakeholders: two attributes, moderate salience. Active rather passive. Seen by managers as 'expecting something'. Likely higher level engagement with these stakeholders.
Red Definitive stakeholders: all three attributes, high salience. Managers give immediate priority to these stakeholders.

The key to understanding Stakeholder Salience is to grasp that the number and mix of attributes defines the Stakeholders Salience (the priority which managers will give that group or individual). The diagram below illustrates this – stakeholders with one attribute lack the two other attributes that would lend them enough rights, authority, voice or exercise to be highly salient and so on.

Stakeholder Salience - how different attributes impact stakeholder salience

Red boxes indicate the attribute the stakeholder type has. Grey boxes indicate an attribute the stakeholder lacks. The text in the grey boxes describes what the stakeholder would need to gain to be considered a Definitive Stakeholder.

Description of each Stakeholder type or class

Dormant Stakeholders

- Possess power to impose their will through coercive, utilitarian or symbolic means, but have little or no interaction /involvement as they lack legitimacy or urgency.

Discretionary Stakeholders

- Likely to recipients of corporate philanthropy. No pressure on managers to engage with this group, but they may choose to do so. Examples are beneficiaries of charity.

Demanding Stakeholders

- Those with urgent claims, but no legitimacy or power. Irritants for management, but not worth considering. Examples are people with unjustified grudges, serial complainers or low return customers.

Dominant Stakeholders

- The group that many theories position as the only stakeholders of an organisation or project. Likely to have a formal mechanism in place acknowledging the relationship with the organisation or project e.g. Boards of directors, HR department, public relations.

Dangerous Stakeholders

– Those with powerful and urgent claims will be coercive and possibly violent. For example employee sabotage or coercive/unlawful tactics used by activists. Note that Mitchell et al. identify these stakeholders, but don't require them to be acknowledged & thus awarded legitimacy (ibid, p.878).

Dependent Stakeholders

– Stakeholders who are dependent on others to carry out their will, because they lack the power to enforce their stake. For example local residents & animals impacted by the BP oil spill. Advocacy of their interests by dominant stakeholders can make them definitive stakeholders.

Definitive Stakeholders

- An expectant stakeholder who gains the relevant missing attribute. Often dominant stakeholders with an urgent issue, or dependent groups with powerful legal support. Finally those classed as dangerous could gain legitimacy e.g. democratic legitimacy achieved by a nationalist party.

A key tenet of the Stakeholder Salience model is that it is dynamic. Mitchell et al. point out that the three variables can and will change (ibid, p.879). Dependent Stakeholders can become Definitive if their cause is picked up by a Dominant Stakeholder. Dominant Stakeholders can become Definitive if their legitimate stake becomes urgent, for example a representative of a regulator may become a Definitive Stakeholder in the event of a complaint or inspection.

Why the Salience model is dynamic
The Salience model becomes dynamic because it accepts that:
  1. Each of the three attributes or variables: power, legitimacy and urgency can change.
  2. The attributes are not objective they are based on human perception.
  3. The stakeholder may or may not be aware that they possess a particular attribute or may not be willing or wish to act on that attribute.

Use of the Stakeholder Salience model

Stakeholder Salience is a very useful addition to Stakeholder Theory. In addition to providing a model to help identify ‘who and what counts’ it can explain some stakeholder behaviour. For example people who have an issue that is urgent to them, but don’t have any power or legitimacy are demanding.  Those with power and legitimacy are dominant the team will report to them and defer to their direction.

The original 1997 article is not based on any empirical research, which is acknowledged on page 881. Instead the authors' proposal relies on a literature review to draw out the three variables for determining Stakeholder Salience. In 1999 Agle, Mitchell and Sonnenfield reported the results of a study conducted to empirically test the Salience Model's application to decisions made by CEOs. Their study reported in The Academy of Management Journal, 1999, Vol. 42, No. 5, 507 -525 supports the Stakeholder Salience attributes. See also Magness, V. Who are the Stakeholders Now? An Empirical Examination of the Mitchell, Agle, and Wood Theory of Stakeholder Salience.

Stakeholder Salience Resources

Stakeholder Salience reference and bibliography

Donaldson. T.. & Preston, L. E. 1995. The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20: 65-91.

Etzioni. A. 1988. The Moral Dimension: Towards a New Economics New York: Basic Books.

Freeman, R. E. 1984. Strategic management: A stakeholder approach. Boston: Pitman. Latest edition Strategic Management: A Stakeholder Approach

Freeman, R. E. 1994. The politics of stakeholder theory: Some future directions. Business Ethics Quarterly 4: 409-421.

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 December 2008, Volume 83, Issue 2, pp 177-192 First online: 13 November 2007. Available at: http://link.springer.com/article/10.1007%2Fs10551-007-9610-2 [Accessed: 23 February 2016].

Mitchell, R., Agle, B. and Sonnenfeld, J. 1999. Who Matters to CEOs? An Investigation of Stakeholder Attributes and Salience, Corporate Performance, and CEO Values. The Academy of Management Review, 22 (5), pp. 507-525. Available at: http://www.jstor.org/stable/256973 [Accessed: 22 June 2013].

Mitchell, R., Agle, B. and Wood, D. 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), pp. 853-886. Available at: http://links.jstor.org/sici?sici=0363-7425%28199710%2922%3A4%3C853%3ATATOSI%3E2.0.CO%3B2-0 [Accessed: 15 June 2013].

Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20: 571-610.

 
 
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