Chapter 1

The four perspectives of human centered management

A systemic interrelation

This chapter will lay the foundation of what may be called a framework for delineating human centered management. Human centered management is determined by a systemic connection between various perspectives, and the intention here is to focus on this set of combinations. As will be seen, intertwining management and the human centered paradigm is much more than just a two-way relationship. It is a systemic approach that needs to combine ethics, social relations, economic effects and institutional conceptions. It is necessary then to embrace all these interrelations in order to validate the analysis. Systemic interconnectedness is an entity in itself, and it is to be studied on its own (Jiliberto 2004). So here, in order to attain a characterization of human centered management, the systemic view combines the ethical, social, economic and institutional perspectives. In the following these perspectives are briefly presented, and their interrelations are illustrated. The four perspectives will be dealt with more extensively in Chapters 2 through 5.

The four perspectives influence each other within a systemic interrelation as illustrated in Exhibit 1.1, and this sequence of mutual effects and feedbacks is a system of its own.

Exhibit 1.1 Interrelations between the ethical, the social, the economic and the institutional

Source: Author

This portrait of interconnectedness presents multiple impacts: ethical reasoning motivates social relations; it has an effect on the economic outcomes of any decision made by a leader or a manager, and it shapes the way the institutions work in a society – be they educational, legislative or judicial bodies. Conversely, institutions may inspire the ethical reasoning of decision-makers; they may frame the structure of economic activities and of societal organization. The mutual impacts continue with the interlace of social and economic occurrences and of social and institutional arrangements.

With this construct of combined perspectives, the framework given by this book differs from other setups of management ethics, which follow a pure stakeholder approach (like Bowie and Werhane 2004) or a moral principles framework (like Schumann 2001). Both moral principles and stakeholder relations are integrative parts of the multi-perspective framework as well, but the systemic dimension treats them as parts of a larger holistic entity.

1.1 The four perspectives

The combination of ethical, social, economic and institutional perspectives within the topic of human centered management makes this a complex phenomenon. Complexity is inherent in ethics issues, as they tend to be represented by different viewpoints of different people, and they are often conflictive and prone to ending up in dilemmas (Krebs, Denton, and Wark 1997; see also Poliner, Shapiro, and Stefkovich 2016, who present dilemma situations faced by educators).

This makes the phenomenon of human centered management attractive for systems theory and systems thinking. It sounds logical that the perspectives would be regarded as elements of the system of human centered management, influencing one another within this entity and exerting a combined effect on other systems (an organization, a group of stakeholders, groups of a society, etc.). But while social interaction in general has long been the subject of systems thinking, with, for example, the work of Niklas Luhmann in Germany (see Luhmann 1995) and of Talcott Parsons in the US (see Parsons 1980), the systemic aspect of leader–follower interaction has not been dealt with extensively. There is a massive body of empirical research in leadership effectiveness, but it is based on a one-way relationship; what comes closest to the morality issue is research on fairness in leadership (van Knippenberg, De Cremer, and van Knippenberg 2007).

The four perspectives will now be briefly presented within a concept that connects them to each other. This concept is multi-stakeholder dialogues. There are multiple facets in these dialogues which distinguish human centered management from routine stakeholder management. This is why after the first presentation of the four perspectives the multi-stakeholder dialogues concept will be laid out before discussing the perspectives in more depth. Multi-stakeholder dialogues, apart from being a management practice based on reciprocal stakeholder engagement, rather than on unilateral impulses for organizational control (Heugens, van Den Bosch and van Riel 2002; see also Gray 1989), have also been employed to evaluate scientific/technological advances for social/ethical and ecological risks and benefits. They promote collective learning as they uncover shared meanings and relational responsibilities. By engaging in dialogue, it is argued (Burchell and Cook 2008), ethical obligations and responsibilities are being co-constructed. The process of dialoguing with multiple partners, as it entails ethics and socio-economic considerations, requires a moral foundation as will be shown in section 1.2.

1.1.1 The ethical perspective

Leaders who acknowledge that there are universal principles that govern human behavior beyond written rules and codes act morally by nature. They abide by ethical principles in all the decisions they make, even though the outcomes of the actions they take may not always be uniform. Strict uniformity would concur with what is called universalistic ethics, meaning that an action is morally right or wrong under similar circumstances, irrespective of place, time and sociocultural context. However, universal does not mean absolute, because there maybe justifiable exceptions. This is often criticized as a casuistic position. For the casuist, the yardstick by which to measure the morality of actions is the circumstances¹ surrounding the person committing the action at the time that it is committed. When circumstances, place and time vary, one should not refrain from applying a different judgment. This casuistic stance turns its attention to individual cases and to debating the relative merits of choosing a solution to a specific problem from among a number of alternatives. Leaders often find themselves in situations like this, as their moral judgment usually has to incorporate economic and social considerations.

One outstanding management scholar who recognized this interrelation early on was Peter F. Drucker. While his casuist view on ethics earned him a number of negative critics (Schwartz 1998; Klein 2000), it was from the cognition of multiple perspectives that Drucker took business ethics very seriously and developed a clear position on business morality. The social perspective in business morality was one of his foremost concerns.

1.1.2 The social perspective

All decisions made by a leader eventually have a social consequence; therefore, the impact of human centered management on society is about benefitting and advancing the condition of people. The impact of business leaders on society at large has gained increasing prominence, both in management literature, which analyzes, interprets and also reinvents this relationship, and in practice, with many individual cases of exemplary performance.

Also, a considerable number of academic and professional associations that pursue real-life dissemination have been set up, such as Business in Society LLC (http://businessinsociety.net), the Academy of Business in Society (www.abis-global.org) and the Caux Round Table (www.cauxroundtable.org), to name just a few. All are connected to and some of them are co-founders of the Principles for Responsible Management Education (PRME) Initiative, which is the first organized relationship between the United Nations and business schools, with the PRME Secretariat housed in the UN Global Compact Office (www.unprme.org). This development has created a new range of concepts attempting to redefine and broaden business’ responsibilities with respect to society and introducing the idea of corporate citizenship as a core metaphor (Smit 2013). Citizenship, nowadays, needs institutions in order to fully develop, which is why the fourth perspective of conjoining leadership and morality is about institutions. Markets are the foremost institutions that are relevant for businesses, so the economic perspective is presented here before the institutional.

1.1.3 The economic perspective

There are two aspects to this perspective. One is the reverberation of moral behavior in a leader’s environment, which for business leaders means the markets. This aspect includes the impact of human centered management in business, which is discussed in detail in section 4.1.4.

The other aspect is the question of whether the economic model of capitalism promotes moral behavior or not. The most common definitions of capitalism include private ownership of the means of production, voluntary exchange of labor and goods, and competitive markets (e.g., Heilbroner 2008). The moral feature of voluntary exchange (or free markets) and competition is human freedom. But there are three contingent features (Homann 2006b):

1. 1 Markets are built on a systematic feedback mechanism where buyers determine preferences through purchasing patterns.
2. 2 Responsibility is clearly set in open markets. When a product or service is not acceptable to consumers, the producer has to adapt it to meet the needs of buyers.
3. 3 Competition ensures innovation of goods and services as the imperative for providing effective solutions to problems and ensuring that they are rapidly disseminated.

Human freedom is a determinant, thus, for being able to choose between alternatives. This is a precedent for morality: morality is unattainable unless human beings have the freedom to choose between alternative actions or products without external coercion. Therefore, capitalism, which is free ownership in a market where labor and goods are exchanged freely, and prices are defined by supply and demand, is inextricably a system that maximizes human freedom.

The system cannot guarantee that all members of society behave morally. But as capitalism is conducive to free will, it naturally promotes moral behavior to the greatest extent possible, in contrast to an economic system where the decision-making power is concentrated in one central entity that also defines what is good or evil.

When the people of a community or country can exert their decision-making power, they will eventually opt for a capitalistic system, and it is this system that can easily adapt to the many diverse cultures of the world (Meltzer 2012).

As an additional note on freedom of choice, it should be emphasized that in order to make a moral decision (i.e., one that aims at doing good), people/leaders need to have the mental capacity to discriminate. The German philosopher Immanuel Kant (1724–1804) called this attribute reason. One of the criteria he gave for assessing morality was that an act is performed not for a particular outcome but for the sake of goodness itself. What would this mean in business life? Yukl (2010, p. 334) gives an excellent example to illustrate goodness itself:

Vagelos followed what George W. Merck had enunciated 25 years earlier: “We must never forget that medicine is for people. It is not for the profits. Profits follow, and if we have remembered that, they never fail to appear” (Gibson 2007, p. 39). Now, if reason, according to Kant, leads to performing an action not to attain a particular outcome but for the sake of goodness itself, this implies that an additional outcome (the profits that follow, as stated by George W. Merck) is accepted as reasonable.

R. E. Freeman further developed Kant’s profit theory, coining the term Kantian Capitalism and relating Kant’s ideas on who has to benefit from an action to stakeholder theory (Evan and Freeman 1988). This directly connects Kant’s reasoning about goodness with the modern theory of the firm embedded on value creation as the highest business objective, with profits not an end but an effective result (Laffont 1975).

Kant’s philosophy is discussed in section 2.2.1 to highlight the importance of his theories on morality, as they are crucial for a human centered business ethics agenda and for an ethics-based stakeholder relationship framework.

1.1.4 The institutional perspective

This perspective is based on two aspects. One is the influence that moral leaders exert on institutions (with business associations being closest to business leaders although business leaders might also have an effect on other organizations, e.g., political institutions), and conversely, the motivation a leader receives from institutions.

The other aspect is that institutions are agencies with the power to deploy moral norms across organizations. This concept has been called ethics of institutions, and its basis is that a competitive market economy founded on capitalist principles and practices is sustainable with a carefully devised institutional system enabling everyone to pursue individual interests (Lütge 2005).

Institutional ethics distinguishes between actions and conditions of actions. This distinction was initially made by Adam Smith, who, besides being the “father” of free market economics, was a moral philosopher by training. In his first writings (e.g., The Theory of Moral Sentiments, published in 1759), he introduced a systematic differentiation between actions and conditions of actions, pioneering the idea of a link between competition and morality. His argument is that morality, which incorporates the idea of the solidarity of all, is the essential element in the conditions or the rules by which markets work; the members of the market act in a way that respects the actions of others. Only under these preconditions can competition be effective and foster productivity. Adequate conditions for the actors direct competition to an optimal level of advantages and benefits for all people. As the rules are the same for everybody, no one can exploit a situation where another behaves morally – everybody is induced to behave morally. This also gives an input for the discussion on whether moral managers or moral markets are more effective in mobilizing all the advantages of capitalism, which will be further explored in section 2.2.3.

The institutional perspective is directly related to issues of corporate social responsibility (CSR), maintaining that a corporation is an institution within society that has to deploy moral behavior towards other members of that society.

There are numerous organizations worldwide that offer recommendations on fostering CSR. Many of them are member-driven organizations where committed leaders work together on principles for moral governance. One example is the International Chamber of Commerce’s Nine Steps to Responsible Business Conduct, which are directed to companies of all sizes including small and medium-sized companies (www.iccwbo.org/products-and-services/trade-facilitation/9-steps-to-responsible-business-conduct). And leaders who understand what human centered management is will, conversely, shape the outcome of those organizations. Chapter 3 gives a wider picture of CSR.

In that context it is worth paying attention to developments in China, where institutional ethics constitute a central focus of political philosophy. This raises questions such as “What is a good institution?,” “What should a good institution be like?,” “How is such an institution possible?” and “What is the value of a good institution?” Typically, what Chinese ethicists ask for is to uphold the historicist mode of thought, that is, traditional philosophies such as Confucianism and the standpoint of the unity of substance and form (Zhaoming 2007).

1.1.5 The four perspectives and the human centered paradigm

All four perspectives of the human centered management paradigm focus on human beings. The ethics perspective is a humanistic concept, where the term humanism stands for both an emphasis on the value of human beings (people-centered) and on critical thinking over acceptance of dogma (reason-centered rationalism and empiricism). The social perspective deals with relations between human beings and between individuals and society. The economic perspective is about activities that are designed and delivered to meet and serve human needs, and the institutional perspective considers agencies that are set up to promote well-ordered human coexistence.

Relations between human beings in a society are at the core of ethics. The focus of ancient philosophies was always on the role of a person in society and his or her contribution to the improvement of the community. The leading examples are Plato, son of powerful politicians in ancient Athens, who laid down his central theses in his work Republic; and Aristotle, the educator of the Macedonian prince who was to be Alexander the Great, with his treatise titled Politics. So, from its beginnings in ancient times, ethical reasoning has always connected the individual and society.

Institutions arose in modern societies whose structures are much more complex and pluralist than those of ancient Greece. They need agencies that ensure that all members of a society, and especially the less fortunate, partake in progress and prosperity. Institutions exist to serve humans. And this also applies to any economic undertaking. Human beings pursue economic goals as a matter of survival, so human activity is embedded in business activity, which should make it self-evident that the economy and all businesses serve human needs.

While this has been a canon of philosophers and economists for centuries, there have also been conspicuous examples to the contrary – of greed, maltreatment and manipulation of human beings, corruption and misuse of power. And all this happens in spite of remarkable writing about business morality by eminent academicians and practitioners and severe punishment by law for transgressions. However, many successful attempts have been made to reduce the chances for fraudsters to get away unpunished, for example, through the US Securities and Exchange Commission (SEC). The SEC created a pertinent website, which it even named after Bernie Madoff, who was sentenced to 150 years in prison for deceiving hundreds of investors (www.sec.gov/spotlight/secpostmadoffreforms.htm). And German lawmakers substantially expanded the scope of what was considered commercial bribery in German criminal law in the aftermath of the Siemens scandal (Primbs and Wang 2016).

But an important question remains, why do people act immorally, even though most are aware of their guilt in harming other people, and even though they probably know that they will be found out in the end? In the long run, ethical, social, economic and institutional norms will prevail, as this book intends to show. Prevalence of the “good” requires perseverance in dialogue between stakeholders, who then all benefit from the correlation between the ethical, social, economic and institutional perspectives of human centered management. This is the topic of the next section.

1.2 Interrelating the four perspectives through multi-stakeholder dialogues

There is more to systemic thinking² than merely determining interrelations. In organizational development theory, which has made extensive use of systems thinking, organizations are viewed as open systems that interact with their environment. Katz and Kahn (1978) have set up a model that interprets organizational interrelations in terms of input, throughput/transformation and output (see Exhibit 1.2). The model factorizes the environment of the organization: the elements, both tangible and intangible, of the external environment are input into the organization, and the results of the output into the environment are fed back into the organization. This contributes to the functioning of the system and a boundary is created that goes beyond the organization.

We can draw an effective parallel from this model to the combination of the four perspectives that conjoin leadership and morality. The ethics perspective could be expressed as an input into the throughput of moral behavior and moral decisions that consider human and societal concerns in parallel with what is needed to achieve political or business objectives. Output is the impact on society, with the economy and institutions as the environment that helps to develop ethical reasoning shaped by exemplary leadership based on moral behavior.

This mutual influence works through intensive communication. Effective communication is essential to enhance the results of a leader’s actions and to promote how institutions can inspire ethical reasoning of decision-makers. Effective communication is a necessary condition for optimizing transmission of knowledge.

The stakeholder relation theme is distinctly engrained in the human centered paradigm. In the definition by Carroll (1996, p. 74), who was one of the first to relate stakeholder relations to ethics, a stakeholder may be thought to be “any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization.” But human beings need not be conceived as “isolatable, individual entities … who have separate wills and desires which are constantly colliding” (Buchholz and Rosenthal 2005, p. 138, p. 141). If the community of stakeholders and business is seen as nothing more than the sum of its parts, the end will be irreconcilable tension. We need to find a different way that would lead to unity.

Exhibit 1.2 Katz and Kahn Open System Model

Source: Katz and Kahn (1978), p. 78

Effective unity between people – stakeholders in our context – arises in a form of action and thinking that does not fragment the whole and proclaims implicate order (Bohm 1980). The term was coined by Bohm in the field of quantum theory; in the context of organizations, the argument is that nothing binds individuals and institutions together except self-interest; so the solution starts by making all parties aware that taking account simultaneously of economic performance and its social aspects will serve common as well as individual interests. This philosophical stance has been called “American pragmatism.” It rejects the view of individuals as atomic, separable, isolated units and sees the individual as inherently social. It builds a bridge from the Greek philosophers’ notion of ανθρώπος ξώον πολιτικόν (“man is a political being”),³ and it holds that individuals consider others in the development of their conduct, and in this way, a common content is developed that provides a community of meaning.

A prominent representative of American pragmatism is John Dewey, who wrote extensively about morality and democracy. In his words,

This closely relates to stakeholder relations and stakeholder communication.

1.2.1 Communicative action in societal relationships

This subsection looks at the prerequisites for transmitting and grasping knowledge on morality issues and on the dualism of social aspects and economic performance. It builds on what was said previously about the influence of institutions on motivating human centered management and on the reverse effect of moral leaders on institutions.

The first prerequisite is to achieve consensus in a situation in which all participants are free to have their say, which is the epitome of Habermas’s discourse ethics (Brand 1990). Habermas’s philosophical paradigm recognizes that knowledge is fundamentally dependent on relations between subjects. Knowledge is by definition a construct to be agreed on by the parties involved, based on mutual understanding, that leads to “shared sensing” (Hannerz 1992). And it is only after the creation of mutual understanding that action can be undertaken.

Habermas argues that most people and organizations tend to engage in strategic action, based on egoistic achievement of specific outcomes and where success is judged by the efficiency of influencing the decisions of rational opponents (Habermas 1982). This hypothesis contrasts with communicative action that is oriented towards shared understanding, where partners in an interaction set out, and manage, to influence each other, so that their action is based on motivation through reason (Brand 1990).

Effective communicative action needs to include Seyla Benhabib’s (1993) call for an extension to Habermas’s paradigm. Benhabib adds another purpose of moral discourse: she calls it achieving a reflective position of reversibility. This is an empathetic ability to put oneself in another’s shoes, which is necessary to achieve a moral point of view (Daboub and Calton 2002b). Benhabib shifts attention away from procedures for achieving purely rational agreement and towards the need to create and sustain practices in which reasoned agreement becomes a way of life. She maintains (see Benhabib 1993, p. 337) that there are just two principles by which moral claims of dependent stakeholders receive legitimization, which are:

• The principle of universal moral respect: recognizing the right of all human beings capable of speech and action to be participants in a moral conversation.
• The principle of egalitarian reciprocity: within such conversations, each person has the same symmetrical rights to various speech acts, to initiate new topics and to ask for reflection about the presuppositions of the conversation.

This approach enables decision-making in a pluralist context among a diversity of stakeholders without giving priority to any when they endorse different or even conflicting cultural and moral frameworks (Doorn 2009). This is the context that is regularly found when leaders, especially in business, explore the impacts of their decisions on the community and institutional environments of their firms and on society in general.

Furthermore, effective communications leading to the achievement of moral objectives need to consider that all relationships are subject to three critical issues: agreement, congruency and accuracy. Grunig and Hunt (1984) give a definition of these terms along the following lines:

• Agreement refers to the extent that organization and stakeholders are able to identify a common situation and recognize the validity of the other party’s concerns.
• Congruency represents a status where the perception of one party is influenced by the mental model of the other party. Full and open exchange of information is impossible unless the other party’s values, knowledge and interests are acknowledged, accepted and “assumed.”
• Accuracy derives from the perception that congruency may or may not be a fair reflection of the stakeholders’ true values and beliefs. The accuracy relation indicates the veracity of the organization’s perception of the interests of the stakeholders. To the extent that the organization’s perception closely correlates with the stakeholders’, the organization has a more solid base for developing an effective communications strategy. Less congruent and less accurate perceptions lead to less effective communications.

Effective relationships, whatever their type, require operational learning and communication skills, including reflection, inquiry and advocacy (Isaacs 1999), wherein (see Simcic, Brønn, and Brønn 2003):

• The objective of reflection is to become increasingly aware of the thinking and reasoning processes that distinguish between actual “data” and abstractions.
• Inquiry engages the communicating parties in a joint process of understanding the thinking and reasoning of each other, from where statements and conclusions can be advanced.
• Advocacy is the process of communicating one’s own thinking and reasoning in a manner that makes them visible to others.

A prudent facilitator of a dialogue seeks a proper balance between inquiry and advocacy, avoiding one-way communication as much as feedback overflow. What should be achieved here is “organizational listening competency” (Burnside-Lawry 2010).

Organizational listening competency is another element of success in conducting multi-stakeholder dialogues. When encounters of stakeholders are prone to produce conflicts and misunderstandings, mastery of listening skills ranks ahead of negotiation skills (Gable and Shireman 2005). This brings us to the building blocks for knowledge-based multi-stakeholder dialogues that leaders use to reach common understanding on moral issues related to their decision-making. Since most societal relationships have an economic underpinning – although one may very well uphold the ethical position that our lives are not measured in dollars (Allaway 2005) – stakeholder-dialoguing is exemplified here in the business environment.

1.2.2 The building blocks for multi-stakeholder dialogues

This section is guided by the views of German business ethicist Karl Homann. In the context of businesses and the very widespread relationships towards their environment, Homann proposes that ethics be reformulated in terms of economic methodology (Homann 2006a). He draws a parallel between ethics issues and problem structures in economics which are determined by conflicting interests of interactive partners. Homann’s methodology will be further discussed in section 2.2. Here, it may suffice to note that his approach connects to the topic of stakeholder dialogues as these also encompass relationships between morality and economic advantage.

Any stakeholder engagement and all communication processes need to be prudently and carefully prepared. It is not enough merely to request a dialogue between societal groups and institutions. Outcomes that meet moral standards will only be produced when it is known who the relevant stakeholders are and whether their claims are legitimate, how to talk to them, and how such dialogues are to be organized in a democratic way (Belal 2002).

A variety of engagement mechanisms have been described in the literature (Friedman and Miles 2004; Kaptein and van Tulder 2003). Some scholars have even proposed generic strategies for stakeholder management (Savage et al. 1991) and general communication models for talking to different constituencies (Crane and Matten 2004). But rarely do we find this linked to Habermas’s discourse ethics, whose outlines were exposed previously. Habermas’s model should be taught in management courses, at least in principle, as it lays down a textbook recipe for executing proper stakeholder dialogues.

Stakeholder engagement is not just an effort to synchronize the relationships between a business organization – or any other institution – and its constituencies and where the communication process can be managed as one-way (Andriof 2001; Foster and Jonker 2005). A more effective approach is to build a framework that gives stakeholders a role where they feel that it is they who allot the firm a social license to operate. For this, the firm must build two-way relationships where the interests and concerns of all parties are taken into consideration and decisions are made in the light of those – often conflicting – interests and concerns (Bendell 2000).

The conceptual approach, methods and responsibilities entailed in a genuine stakeholder communication must be prepared and promulgated through a collective effort by the management team that will execute the business purpose, the representatives of all stakeholders and the facilitators of the stakeholder dialogue.

A critical success factor is a clear-cut philosophical concept that combines ethical, economic and social considerations. This holds true especially for multi-stakeholder dialogues where aggravating effects have to be taken into account. For example, cultural differences may have such an effect, as they often pose a noticeable barrier to common understanding and arriving at a consensus. It is crucial to move away from a narrow definition of ethics that covers only the obligations the institution owes to stakeholders and the obligations that stakeholders owe to the institution. The ethics that govern stakeholder dialogues must strive to balance the full variety of stakeholders’ values. This requires a format of organizational learning where the organization comprises all participants in the dialogue (Payne and Calton 2002; Daboub and Calton 2002a), with the overall objective of securing trust and a level playing field.

The building blocks of the knowledge base to be developed are based on:

1. 1 Ethical leadership and governance; trust building; social responsibility; effective articulation of ethics and economics;
2. 2 Morality, self-interest and the markets;
3. 3 Entrepreneurship, development and collaboration: fostering the spirit of business;
4. 4 Foundations of sustainable development;
5. 5 Social interaction: acts and modes of cooperation and the rule-finding discourse;
6. 6 Combining multi-stakeholder dialogues with other standardized ethics initiatives, such as predefined codes, norms and procedures; organizational approaches to social and/or environmental issues;
7. 7 Fundamental learning and communication skills in conflictive environments: reflection, inquiry and advocacy.

This list could also be pertinent to the curriculum of a business school or business course because its building blocks refer to universally accepted subjects. Unfortunately, many still assume that subjects such as ethics and communication can be learned by osmosis (Carnevale 2000; Rao and Sylvester 2000).

All the items of the list have their base in a proper understanding of communicative action in societal relationships and could demonstrate what may be regarded as success factors for fruitful multi-stakeholder dialogues. But many business school materials, even those in schools that focus on organizational behavior and culture and value, tend to be theoretical and not action oriented (Ashkansay, Wilderrom, and Peterson 2000). On the other hand, books on the topic of general cultural consulting only offer a random path (e.g., Reeves-Ellington 2004).

A level playing field puts each stakeholder into the same position while accepting that not all stakeholders have the same level of importance. Ranking this importance was developed by Mitchell, Agle, and Wood (1997), who categorize stakeholders by three attributes:

1. 1 Power: the ability to get others to do what they otherwise would not do (along the lines of Weber 1947).
2. 2 Legitimacy, which refers to the mandate of the stakeholder – its right to exercise its powers in relation to the claim on the firm.
3. 3 Urgency of a stakeholder claim, which refers to the need to expedite the process of stakeholder interaction.

By combining these attributes in various ways, four types of stakeholders can be distinguished (see Wartick and Wood 1999, p. 113):

• Long-term core stakeholders who share the attributes of legitimacy and power, but not urgency (e.g., shareholders);
• Stakeholders who share the attributes of power and urgency, but not legitimacy, and tend to become violent or coercive radical action groups;
• Dependent stakeholders whose claims are legitimate and urgent, but who lack power (e.g., secondary stakeholders);
• The immediate core stakeholder group which combines all three attributes, thereby making it mandatory for managers to properly manage the stakeholder relationship with this group as first priority.

1.2.3 Frameworks for preparing and conducting multi-stakeholder dialogues

Stakeholder participation and involvement have been recognized for several years as crucial factors in the context of sustainable development issues (see, for example, van Tulder and van der Zwart 2006), and multi-stakeholder standards have emerged for these issues with considerable potential for effective consensus building, knowledge sharing and interest representation (Fransen and Kolk 2007). Yet the literature is recognizing that currently there is a lack of specificity of the multi-stakeholder concept, and it suggests refinement of multi- stakeholder standards (Fransen and Kolk 2007).

There is no general tool kit for addressing multi-stakeholder dialogues, even in the advanced discussions on environmental issues, and much less when dialogues take place in a foreign environment unfamiliar to firms that go international. Specific formats have been promoted only for high-level dialogues, for example, by the Secretariat of the United Nations in creating the NGO Coalition on Sustainable Development in 1997, through various initiatives at other UN-organizations, and with the 2011 UN Department of Public Information publication “NGO Conference on Sustainable Societies – Responsive Citizens” (UNDPI 2011). Another example is Rupert Brown’s 2001 textbook, Group Processes: Dynamics Within and Between Groups, which does not address communicative and ethical issues. Likewise, the Consensus Guiding Principles of the Canadian National Roundtable on the Environment and the Economy (NRTEE), first published in 1993, and the United Nations Environment and Development Forum (UNED) Methodological Framework on Multi-Stakeholder Processes, by Minu Hemmati (2001), are primarily directed at instrumental procedures. More recently, the WHO National e-Health Strategy Toolkit lists recommendations for stakeholder engagement which also encompass ongoing monitoring and evaluation (WHO and ITU 2012).

For a framework to be generally applicable it should comprise the following steps (see Benson and Dodds 2010):

• Process initiation: scoping, identifying a core coordinating group, locating the issues to be addressed, identifying a clear timeline and milestones;
• Mapping key issues and actors: connecting topics and actors, establishing a system by which stakeholder groups can select or elect representatives, choosing the language and terminology used for the dialogue, approaching possible facilitators, examining potential confrontations and so forth;
• Preparing the dialogue: producing position papers based on stakeholders’ input developing sharing information rules, agreeing on principles to guide the facilitators’ work;
• Conducting the dialogue: ensuring a comfortable physical atmosphere, assigning experienced rapporteurs to document the session, deciding on the admission of observers;
• Follow-up: establishing expected outputs, such as a facilitator’s summary, an agreement report or a set of recommendations to keep records, ensuring that the final document is accepted by all stakeholders and communicated to their constituencies in de-briefing, and agreement on media coverage.

Benson and Dodds’s catalogue reads like a text from a project management course. It is undeniably important to have good command of state-of-the-art techniques in this field. It is more effectively applied when the stakeholder community is clearly identified, and all members understand and accept the general objectives and the “rules of the game.” Nonetheless, a different approach is necessary to address the challenges that leaders face in effective communication, where an initial consensus cannot be expected and where the communicative potential for including the majority of possible stakeholders has yet to be developed. To take a practical case, the leadership challenges discussed here are centered on the example of a firm that is investing in a developing country:

An analogy can serve to illustrate why it is a moral duty of foreign investors to exert a positive influence on business partners and society in their host country: the Maastricht Principles on Extraterritorial Obligations of Nation States in the Area of Economic, Social and Cultural Rights. The Maastricht Principles were adopted by the International Commission of Jurists, a group of experts in international law and human rights, in the town of Maastricht, the Netherlands, in 2011 (De Schutter et al. 2012). The principles uphold the axiom of non-intervention set forth by the International Court of Justice, which forbids all states to intervene directly or indirectly in the internal or external affairs of other states. But they acknowledge that internationally recognized human rights – such as those included in the Universal Declaration on Human Rights – impose limits on state sovereignty, and such matters cannot be exclusive to the national jurisdiction of the territorial state. States that are in a position to influence the conduct of non-state actors, such as businesses or civil society organizations within the jurisdiction of another state, should exercise such influence in accordance with the Charter of the United Nations and general international law, in order to protect economic, social and cultural rights (Kirshner 2015). The ability to influence is not limited to legal action; it may include various forms of reporting or social labeling and referencing to human rights-based conditions in procurement schemes. This is where the analogy comes in: by adopting means and measures of this kind, enterprises can remedy any deficiencies of their institutional stakeholders.

There are many examples of business firms with human centered management that set the path for a type of stakeholder involvement aiming to provide value, not only to their customers and suppliers but to the business community in general. They are often destined to exert influence on public institutions and local authorities in a host county. Kolk, Van Tulder, and Kostwinder (2008) present outstanding examples, with Unilever, Shell, Chevron and ABN-AMRO taking the lead. Partnerships like this are a special form of stakeholder engagement, as they mostly provide support to underserved parts of a society. They are also common in the pharmaceutical industry, with an effect that is comparable to Merck’s resolution to freely give away the river blindness drug that was referred to earlier.

Partnerships to improve healthcare can start on a much lower level, for example by simply encouraging the use of soap for handwashing in developing countries. This was pursued in the early 2000s by three big soap manufacturers (Colgate-Palmolive, Unilever and Procter & Gamble) which joined in the initiative Health in Your Hands, founded by the World Bank’s Water and Sanitation Program, the US Agency for International Development, UNICEF and the London School of Hygiene and Tropical Medicine. This program advanced fastest in Ghana under the title Truly Clean Hands (“Hororo Wonsa” in the most common local language of this country). This was a national handwashing initiative that reached almost all districts in the country (Curtis, Garbrah-Aidoo, and Scott 2007). The roles and responsibilities of the partners are summarized in Exhibit 1.3 (where Private Sector and External Support Agencies would also include civil society organizations).

Exhibit 1.3 Stakeholder roles in a private–public partnership on health issues

Source: Adapted from Curtis, Garbrah-Aidoo, and Scott (2007)

Partnerships like these have long-lasting effects on public policy and institutions that reach beyond the borders of the business community where they were applied because other enterprises also benefit from improved efficiency.

In any case, public institutions have to be viewed as primary stakeholders considering that they have or will develop contractual relations with the foreign business organization, similar to relations established with other cohorts of the society including co-investors, customers and suppliers.

While primary stakeholders (the transactional stakeholders in the definition by Wartick and Wood 1999) are the main responsibility of the firm (Clarkson 1995), support must also be sought from secondary, non-transactional stakeholders in the community that interfaces with the organization.

Local communities are commonly regarded as secondary stakeholders, who do not directly influence the economic activities of a firm but indirectly have influence on or are influenced by the firm. Secondary stakeholders, apart from local communities, may also include local media, trade unions, competitors, analysts, environmental activists, and supervisory bodies set up by coalitions of non-profit organizations.

The importance of specific government institutions and supervisors may shift, depending on the process of stakeholder involvement, and, likewise, the importance of local communities may increase or decrease. Other external stakeholders are the “natural environment” and “future generations,” which may come into play when groupings are formed that represent the interests of the biosphere and of the generations to come.

To exert a moral impact on an institution or any other stakeholder, a business leader must not only have excellent communicative skills and outstanding arguments, but he or she must also be personally committed to the ethical foundation of leadership behavior and business behavior. What that foundation should convey to all stakeholders is that businesses (especially large international or multinational businesses) have to assume responsibility to halt or diminish any potentially negative economic, social and environmental impacts of their business activity.

The discussion about corporate social responsibility has placed businesses at the center of an often hot and spirited debate about what “rights” businesses can expect to enjoy in society and what “duties” society can reasonably expect businesses to perform. But what needs to be emphasized are the ethical underpinnings. If business leaders actively partake in the CSR discussion and in deliberations about what ethics are and how they are practiced and deployed in the organization, then they must engage in understanding its philosophical attributes. It has been said that “concepts which are the bread and butter of management” have direct, but often ignored philosophical foundations (Joullié 2014, p. 198; see also Joullié 2016; De Borchgrave 2006; Small 2004). The following chapters intend to reveal aspects of management that are embedded in the philosophical dimensions of ethics, economics, societal⁴ and institutional relations.