Stakeholder Treatment:
The relationship between
provided and received
attention
BOAVENTURA, J.M.G. ACADEMY OF MANAGEMENT, 2016
Introduction and Hypothesis
 One of the most controversial debate on Stakeholder Theory is related to the question if a
company should treat all Stakeholder equally. This debate is one of the criticisms over
Stakeholder Theory: while the mainstream theory of the firm pointed a clear public to be
satisfied, Stakeholder Theory does not provide a clear guide to practitioners (which can
facilitate opportunistic behavior).
 In order to overcome this possible flaw, Phillips (1997) presented the concept of fairness.
Based on this principle, this paper tests the following hypothesis:
Attention devoted
Firm
Fairness
H1: A firm´s level of attention to stakeholders is
different across Stakeholder groups
Stakeholders
Contribution to Performance
H2: A firm´s level of attention to stakeholders is
proportional to the stakeholder´s contribution to
firm performance
Abstract of Theoretical Discussion –
Fairness
 As we discussed last week, the Stakeholder Theory can de approached based on three different
perspectives: Normative, Descriptive and Instrumental.
 Normatively, which stakeholder emphasize? Allocate more resources?
 It is possible to consider that stakeholders are (i) groups with legitimate interests intrinsically or
(ii) extrinsically. Phillips (1997), however, defends the criteria of fairness. Based on this concept
firms should treat Stakeholders according to the perception of fairness:
 “whenever persons or groups of persons voluntarily accept the benefits of a mutually beneficial scheme
of co-operation requiring sacrifice or contribution on the parts of the participants and there exists the
possibility of free-riding”
Abstract of Theoretical Discussion – sources of
utility of Stakeholders Interests
Abstract of Theoretical Discussion –
Stakeholder Contribution to CP
 Corporate performance is the total value created by the company (Harrison & Wicks, 2013).
This total is the sum of the utilities created for each of the legitimate stakeholders of the
company.
Methods
 Population: 528 publicly traded companies of BM&Bovespa
 Sample: 137 companies (reduction by availability of information)
 Data:
 Financial statements of companies from Economatica, “Maiores e Melhores” and “Valor: Grandes
Grupos”
 Non-financial data from ISE
Measurement
Vazquez-Brust, Liston-Heyes, Plaza- Úbeda, &
Burgos-Jiménez (2010) looked to the corporate
importance given in firms’ decision-making
processes to stakeholder prioritization.
Their study, of 505 Argentinean firms, ranked the
stakeholders we measured in the following order:
customers, employees, shareholders, environment
and suppliers. Despite all the differences between
the studies (e.g., company sample, country and
methods) it is interesting to note that only
customers are in a slightly different rank position,
second instead of first, across both studies.
Results- Equal Treatment – H1
Bussy and Suprawan (2012) measured the
influence of the stakeholders on firm’s financial
performance in 209 Australian firms. They found
the following order of stakeholder contribution to
firm performance: employees, community,
supplier, customer and shareholder. Comparing
both studies, despite all differences between
them (company sample, country and methods) it
is interesting to note the ranks have some
similarity. More precisely, in both cases,
employees, community and suppliers are
contributing more than customers and
shareholders.
Results – Testing Fair Treatment – H2
Conclusions
 “Our results are consistent with others’ anecdotal refutations: all stakeholders are not treated
equally (Freeman et al., 2010). Further, we also found stakeholders are not treated
proportional to their contribution to firm performance, according to the principle of fairness
(Phillips, 2003). Interestingly, shareholders and suppliers have the greatest mismatch in
attention levels and contribution to performance. Shareholders garner a lot of attention yet
contribute minimally to firm performance while suppliers are given minimal attention yet
contribute quite a bit to firm performance”.