Stakeholders Theory Stakeholder theory is an idea about how business really works.

It says that for any business to be successful it has to create value for customers, suppliers, employees, communities and financiers (shareholders, banks and others, people with the money). It says that you cant look at any one of those stakes, or stakeholders if you like, in isolation. Their interest has to go together. And the job of a manager or an entrepreneur is to figure out how the interest of customers, suppliers, communities, employees, and financiers go in the same direction. Stakeholder theory is the idea that each one of these groups is important to the success of a business. And figuring out where their interests go in the same direction is what the managerial task and the entrepreneurial task is all about. Stakeholder theory says if you just focus on financiers, you miss what makes capitalism tick. What makes capitalism tick is that shareholders and financiers, customers, supplies, employees, communities, can together create something that no one of them can create alone. Stakeholders are those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends. In the other words, any constituency in the environment that is affected by an organizations decisions and policies and that can influence the organization. Influence is likely to occur only because individuals share expectations with others by being a part of a stakeholder group. Individuals tend to identify themselves with the aims and ideals of stakeholder groups, which may occur within departments, geographical locations, different levels in the hierarchy, etc. Also important are external stakeholders of the organization, typically financial institutions, customers, suppliers, shareholders and unions. They may seek to influence company strategy through their links with internal stakeholders. For example, customers may pressurize sales managers to represent their interests within the company. Even if external stakeholders are passive, they may represent real constraints on the development of new strategies.

Individuals may belong to more than one stakeholder group and stakeholder groups will line up differently depending on the issue or strategy in hand. For example, marketing and production departments might be united in the face of proposals to drop certain product lines, whilst being in fierce opposition regarding plans to buy in new items to the product range. Often it is specific strategies that trigger off the formation of stakeholder groups. For these reasons, the stakeholder concept is valuable when trying to understand the political

context within which specific strategic developments would take place.

Identifying the stakeholders An organizations mission and objectives need to be developed bearing in mind two sets of interests: 1. the interests of those who have to carry them out e.g. the managers and employers Internal stakeholders; 2. the interests of those who have a stake in the outcome e.g. the shareholders, government, customers, suppliers and other interested parties - External stakeholders

Types of Stakeholders 1. 2. 3. Primary stakeholders are the intended beneficiaries of the project. Secondary stakeholders are those who perform as intermediaries within a project. Active stakeholders are those who affect or determine a decision or action in the system or project. 4. Passive stakeholders are those who are affected by decisions or actions of others.

Together these groups form the stakeholders the individuals and groups who have an interest in the organization and may therefore wish to influence its purpose, mission and objectives.

External Stakeholders Internal Stakeholders Executive officers Board of directors Stockholders Employees Customers Suppliers Creditors Governments Unions Competitors General public

Stakeholder analysis Stakeholder analysis provides a link between internal analysis and external analysis. Internal stakeholders are the management, the different departments within the organization and its employees. The needs, wants and motivating factors for each of these groups are different. What may please management could cause unease among the workforce. On their own, no one group is able to completely influence the direction and activities of the organization. There are groups, however, who possess greater power than others.

Stakeholder analysis seeks to identify these.

External stakeholders cannot simply be identified or listed; they differ between organizations and industries. However, external stakeholders may be grouped into segments which are frequently involved in the organizations activities: owners (shareholders), suppliers, customers and financiers. Other groups which could also have stakeholder status for an organization are the government (central and local), guilds and associations, and pressure groups who may or may not have an interest in the success of an organization with its present or future activities.

Stakeholder groups vary both in terms of their interest in the business activities and also their power to influence business decisions. Here is a useful summary:

Stakeholder Shareholders

Main Interests Profit growth, Share price growth, dividends

Power and influence Election of directors

Banks Lenders

&

other Interest and principal to be repaid, maintain credit rating and Salary ,share options, job satisfaction, status Salaries & wages, job security, job satisfaction & motivation

Can

enforce

loan

covenants

Can withdraw banking facilities Make decisions, have detailed

Directors managers Employees

information Staff turnover, industrial action, service quality Pricing, quality, product availability

Suppliers

Long term contracts, prompt payment, growth of purchasing

Customers

Reliable quality, value for money, product availability, customer service

Revenue

repeat

business

Word of mouth recommendation Indirect via local planning and opinion

Community

Environment, local jobs, local impact

leaders Government Operate legally, tax receipts, jobs Regulation, subsidies, taxation, planning

Stakeholder mapping might help in understanding better some of the following issues: 1. Whether the levels of interest and power of stakeholders properly reflect the corporate governance framework within which the organization is operating, as in the examples above (non-executive directors, community groups). 2. 3. Who are likely to be the key blockers and facilitators of a strategy and how this could be responded to for example, in terms of education or persuasion? Whether organizations should seek to reposition certain stakeholders. This could be to lessen the influence of a key player or, in certain instances, to ensure that there are more key players who will champion the strategy (this is often critical in the public sector context). 4. The extent to which stakeholders may need to be assisted or encouraged to maintain their level of interest or power. For example, public endorsement by powerful

suppliers or customers may be critical to the success of a strategy. Equally, it may necessary to discourage some stakeholders from repositioning themselves.

Stakeholders in Nestle Breast Milk Crisis: 1) The New Internationalist 2) British organisation War on Want 3) Arbeitsgruppe Dritte Welt (Third World Working Group) 4) International Council of Infant Food Industries (ICIFI) 5) Dana Raphael 6) Infant Formula Action Coalition (INFACT)/ Action for Corporate Accountability (ACA) 7) U.S. Senator Edward Kennedy 8) WHO and UNICEF 9) World Health Assembly (WHA) 10) Nestl Infant Formula Audit Commission or Muskie Commission 11) Methodist Church 12) The Washington Post 13) American Federation of Teachers 14) Baby Milk Action (BMA) 15) Church of England 16) Advertising standards authority (ASA)

1) The New Internationalist

In August 1973, New Internationalist published an interview with leading child nutrition experts Dr. R. G. Hendrickse and Dr. David Morley who talked of a worrying swing away from breastfeeding in favour of commercial breast-milk substitutes. The Baby Food Tragedy article, along with a 1974 War on Want report called The Baby Killer and the 1975 documentary film Bottle Babies, drew widespread attention to the issue and led to an international campaign that continues today.

2) British organisation War on Want

Nestl's perceived marketing strategy was first written about in New Internationalist magazine in 1973 and in a booklet called The Baby Killer, published by the British NGO War On Want in 1974. Nestl attempted to sue the publisher of a Germanlanguage translation (Third World Action Group) for libel. After a two-year trial, the court found in favour of Nestl because they could not be held responsible for the infant deaths 'in terms of criminal law'. Because the defendants were only fined 300 Swiss Francs (just over US$400, adjusted for inflation), and Judge Jrg Sollberger commented that Nestl "must modify its publicity methods fundamentally", TIME magazine declared this a "moral victory" for the defendants.

3) Arbeitsgruppe Dritte Welt (Third World Working Group)

In response to a pamphlet entitled "Nestl Kills Babies," published in 1974 by the Swiss consumer/activist group, Arbeitsgruppe Dritte Welt, Nestl Alimentana filed a four-count libel suit against members of the organization. The pamphlet was a reprint of an earlier one entitled "Bottled Babies," published by a similar British group. Both alleged that false advertising had prompted mothers in LDCs to use infant formula instead of breast feeding, and consequently caused the deaths of thousands of children. However, the original pamphlet had not mentioned Nestl or any of the other companies by name, and thus did not raise the issue of libel. In his decision, the judge stated that the cause behind the injuries and deaths was not Nestl's products; rather, it was the unhygienic way they were prepared by end-users. Although Nestl won its case, the firm's victory was diluted by: (1) having to pay one third of the court costs and (2) being told by the judge to change its marketing methods to prevent further misuse of its products. The defendants were ordered to pay $120 each in damages to Nestl and two thirds of court costs.

4) International Council of Infant Food Industries (ICIFI)

A few days before Nestle went to trial, International Council of Infant Food Industries (ICIFI) was formed by the coalition of Cow & Gate, Dumex, Meiji, Morinaga, Nestl, Snow Brand, Wakado and Wyeth. A code of ethics was adopted to guide companies marketing and advertising practices. The aim as stated was to cooperate and respond to critics and to

develop self-regulation instruments, and a code of ethics was also issued. Nestle wanted through this initiative to create a united front against its critics and make critics perceive the issue as an industry wide problem rather than one linked to nestle alone. However internal disagreements and external distrust made the activities of ICIFI difficult and it was eventually disbanded in 1983. Another organisation by the name International Association of Infant Food Manufacturers replaced it in the following year.

5) Dana Raphael
Dana Raphael was one of the first scientists to hold the formula companies responsible for high infant mortality, but then she decided it wasn't quite that simple. An anthropologist who heads the Human Lactation Center Ltd., in Westport, Conn., Mrs. Raphael changed her mind after a study team she led spent two years observing how women in 11 different cultures around the world feed their babies. What the team found was that many poor and undernourished third world women are physically unable to breast-feed and that others are too preoccupied with the basics of survival to find the time to do so. Though she still strongly favors breast-feeding when possible, Mrs. Raphael now believes that the general unavailability of food is responsible for high infant mortality. ''Formula is gold for the mothers who can afford it,'' she says. ''If every 3-month-old baby could have a sufficient amount of formula, they'd all live. But the price is prohibitive. They're lucky if they can afford a cup of buffalo milk every day.''

6) Infant Formula Action Coalition (INFACT)/Action for Corporate Accountability (ACA)

The Nestl boycott was launched in the US by INFACT (Infant Formula Action Coalition) to protest against Nestl's unethical marketing. Action for Corporate Accountability set in the U.S accused Nestle, which it called the largest manufacturers of infant formula in the world, of distributing free formula through maternity wards as a promotional tactic that undermines the practice of breast-feeding.Representatives of Nestle rejected the accusations and said they were complying with World Health Organization and individual national codes on the subject. In an article printed in the LA Times on October 4, 1988 ACA claimed that the Nestle boycott will focus on Taster's Choice Instant Coffee, and Coffeemate Non-dairy Coffee Creamer. Coffeemate is a product of Carnation, which is a wholly owned Nestle subsidiary. This boycott lost its foothold in the early 1990s.

7) U.S. Senator Edward Kennedy

U.S. Senator Edward Kennedy was chair of the Subcommittee on Health and Scientific Research of the Committee of Human Resources. A senate hearing held by Senator Kennedy in 1978 led to a marketing code being adopted by the World Health Assembly three years later, a vital tool for holding corporations to account. Today over 70 countries have introduced the International Code of Marketing of Breastmilk Substitutes and subsequent, relevant Resolutions into national measures and where these are enforced, breastfeeding rates are recovering.The Senate Hearings held by Senator Kennedy culminated in a call for there to be a marketing code for Breastmilk substitutes, a call that was heeded by the World Health Organisation (WHO) and UNICEF, which began the drafting process the following year.Six civil society organisations involved in the first 1979 drafting meeting formed the International Baby Food Action Network (IBFAN) to coordinate their activities. Today IBFAN consists of more than 200 groups in over 100 countries and trains policy makers on the International Code and Resolutions and monitors baby food companies against them.

8) WHO and UNICEF

In 1979, WHO and UNICEF hosted an international meeting that called for the development of an international code of marketing, as well as action on other fronts to improve infant and early child feeding practices. The International Baby Food Action Network (IBFAN) was formed by six of the campaigning groups at this meeting.

9) World Health Assembly (WHA)

In 1981, the 34th World Health Assembly (WHA) adopted Resolution WHA34.22 which includes the International Code of Marketing of Breast-milk Substitutes. The Code covers infant formula and other milk products, foods and beverages, when marketed or otherwise represented to be suitable as a partial or total replacement of breast milk. It bans the promotion of breast milk substitutes and gives health workers the responsibility for advising parents. It limits manufacturing companies to the provision of scientific and factual information to health workers and sets forth labeling requirements.Yet the World Health Assembly reiterated in May 2010 that improved breastfeeding practices could save 1.5 million babies every year.

10) Nestl Infant Formula Audit Commission (NIFAC) or Muskie Commission

On May 3, 1982, Nestle announced the establishment of the Nestle Infant Formula Audit Commission (NIFAC). The new organization was to be chaired by former Senator and Vice Presidential candidate, Mr. Edmund Muskie. Commenting on the rationale for establishing the Commission, Dr. Carl Angst,Nestls executive vice-president, stated: the Muskie Commission plays a vital role in evaluating our policies and in ensuring that our infant formula marketing practices are in conformity with the WHO Code. The Commission also provides a channel of communication with all concerned people through which legitimate questions about our policies can be raised and which guarantees serious consideration of all reasonable criticism.

11) Methodist Church

The Church actively supported the boycott. But following the set-up of the Muskie Commission, it withdrew its support in 1982.

12) The Washington Post

The Washington Post supported the boycott with its anti- Nestle editorial features and provided major publication support. But it too withdrew its support following the formation of Nestls internal regulatory board in 1982.

13) American Federation of Teachers

Like many others in 1983, the American Federation of Teachers too gave up their stand against the marketing of Nestls breast milk substitutes following the set-up of the Muskie commission.

14) Baby Milk Action (BMA) in the U.K

Baby Milk Action is a non-profit organisation which aims to save lives and to end the avoidable suffering caused by inappropriate infant feeding. Baby Milk Action works within a global network to strengthen independent, transparent and effective controls on the marketing of the baby feeding industry. It is a member of IBFAN.Through the years BMA has resorted to aggressive boycotts and has possibly been Nestls biggest opposer. Baby Milk Action is

currently asking the public to email Nestl over its latest global marketing strategy: the company has added logos to its packaging claiming its formula protects babies and is promoting it to health workers.

15) Church of England

The Church of England which had backed Baby Milk Action (BMA) in their boycott against Nestls Breastmilk substitutes decided to withdraw its support in 1994 following Nestls adherence to the WHO rules and guidelines of breast milk substitutes marketing.

16) Advertising standards authority(ASA)

In May 1999 a ruling against Nestl was issued by the UK Advertising Standards Authority (ASA). Nestl claimed in an anti-boycott advertisement that it markets infant formula ethically and responsibly. The ASA found that Nestl could not support this nor other claims in the face of evidence provided by the campaigning group Baby Milk Action.

STAKEHOLDERS TABLE
Primary Active Secondary Active Primary Passive Secondary Passive

Arbeitsgruppe Dritte ICIFI INFACT/ACA MUSKIE COMMISSION BMA

DANA RAPHAEL SENATOR KENNEDY

WHO AND UNICEF

The New Internationalist War on want WHA METHODIST CHURCH WASHINGTON POST AMERICAN FEDERATION OF TEACHERS CHURCH OF ENGLAND ASA