Italians Federico Tonelli and Andrea Lazzari founded iFish Farm just off the shore of Bugala Island in Lake Victoria, Uganda. This effort was in response to their desire to support and empower the people living in one of the poorest areas in Uganda. Their business idea was to offer high-quality fish, while empowering their employees through a co-ownership business model. The case invites students to put themselves in the shoes of the founders who have decided to enlarge this social business. Students are asked to evaluate the benefits and related risks of the innovative business model.
The concept of stakeholder salience and classification was proposed by Mitchell et al. (1997). Here, the word salience refers to the degree to which managers of a firm might give priority to competing stakeholder claims. The authors proposed a theory of stakeholder identification and salience to align various definitions and perceptions of who really counts for the business. Although there are many different definitions that aim at describing the concept of stakeholders, they tend to be either broad and inclusive or narrow and pragmatic. Principally, the concept can be summarized as an entity that has a legitimate claim or stake in the organization in order to be perceived as a stakeholder. Thus, managers cannot consider all possible stakeholders and, therefore, they need to get grouped. Following a detailed literature review, Mitchell and colleagues proposed a new normative theory of stakeholder identification based on three key variables.
- Power. This defines the extent to which a stakeholder can gain access to coercive (physical means), utilitarian (material means), or normative (prestige and esteem) means to impose their individual will.
- Legitimacy. This defines the generalized perception that the behavior of an entity is appropriate within a socially constructed system of norms, beliefs, and values.
- Urgency. This defines the degree to which the claim of the party calls for immediate attention.
Considering theses variables, Mitchell et al. (1997) proposed a stakeholder typology based on the idea of stakeholder salience, regarding salience as the degree to which managers of a firm might give priority to competing stakeholder claims. The more variables associated with a stakeholder the higher its perceived salience. Hence, the greatest priority would be given to stakeholders who have power, legitimacy, and urgency. The attributes power, legitimacy, and urgency are interrelated and the three variables can overlap; stakeholders can also readily move from one type to another.
The fields identified (adapted from Mitchell et al., 1997), are as follows:
- Dormant Stakeholders possess power to impose their will through coercive, utilitarian, or symbolic means, but have little or no interaction as they lack legitimacy or urgency.
- Discretionary Stakeholders are those likely to be recipients of corporate philanthropy. There is no pressure on managers to engage with this group, but some managers might be willing to do so.
- Demanding Stakeholders are those with urgent claims, but without legitimacy or power. Management can regard them as irritants but not worth considering.
- Dominant Stakeholders represent the group that many theories define as the only stakeholders of an organization. Usually they have a formal mechanism in place acknowledging the relations. For instance, board of directors or public relations.
- Dangerous Stakeholders are those stakeholders with powerful and urgent claims. For instance, employee that may undertake sabotage.
- Dependent Stakeholders are those dependent on others to carry out their will, due to their lack of power to enforce their will.
- Definitive Stakeholders are expectant stakeholders who gained the relevant missing attribute. In most cases they are dominant stakeholders with an urgent issue and they are normally identified as very important for the firm.
Stakeholder salience is a widely accepted and useful model to identify those groups that are important to consider as stakeholders for a specific firm. Based on this model, stakeholders can be classified into various categories that describe their possible relationship with the organization.