Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts Author(s): Ronald K. Mitchell, Bradley R. Agle, Donna J. Wood Source: The Academy of Management Review, Vol. 43, No. 4 (Oct., 2018), pp. 853-886 Published by: Academy of Management Stable URL: http://www.jstor.org/stable/259247 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=aom. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. Academy of Management is collaborating with JSTOR to digitize, preserve and extend access to The Academy of Management Review. 853 Academy of Management Review 2018, Vol. 43 No. 4, 853-886 TOWARD A THEORY OF STAKEHOLDER IDENTIFICATION AND SALIENCE: DEFINING THE PRINCIPLE OF WHO AND WHAT REALLY COUNTS MILOSEVIC, D. Università LUM Jean Monnet MITCHELL, R. K. University of Victoria D. J. WOOD University of Pittsburgh According to Mitchell et al. (1997), “The Principle of Who and What Really Counts” suggested by Freeman (1984) stakeholder theory can best be discussed in two phases. The first component of the question “who” calls for a normative theory of stakeholder identification, to explain logically who should be considered as a stakeholder and why managers should consider certain classes of entities as stakeholders. The second component of the question to “whom or what” calls for a descriptive theory of stakeholder salience, to explain the conditions under which managers do consider certain classes of entities as stakeholders. Mitchell argued that the degree to which managers give priority to competing stakeholder claims may be assessed via stakeholder’s possession one or more of three critical relationship attributes: power, legitimacy, and urgency. Mitchell predict that the salience of a particular stakeholder to the firm's management is low if only one attribute is present, moderate if two attributes are present, and high if all three attributes are present. 854 INTRODUCTION By Freeman and Reed (1983) stakeholders was identified as primary or secondary stakeholders who recognized differences of opinion about broad vs. narrow view. The broad view, by Freeman's classic definition is based on the empirical reality that companies organization's objectives can “can affect or is affected by” individual or group. The narrow view are based on the practical reality of limited: (1) resources, (2) time and attention, and (3) patience of managers, for dealing with external constraints of stakeholders as those groups “on which the organization is dependent for its continued survival”. Stakeholder power and legitimacy are treated as competing explanations of stakeholder status, reflected in every major theory of the firm-particularly in agency, behavioral, institutional, population ecology, resource dependence, and transaction cost theories. The central problem Agency theory addresses is how principals can control the behavior of their agents to achieve their, rather than the agent's, interests. Resource dependence theory suggests that power accrues to those who control resources needed by the organization, creating power differentials among parties (Pfeffer, 1981). Transaction cost theory proposes that the power accruing to economic actors with small numbers bargaining advantages will affect the nature of firm governance and structure (Williamson, 1975, 1985). These three organizational theories teach us why power is a crucial variable in a theory of stakeholdermanager relations and identification. According to Institutional and population ecology theories, legitimacy figures helping us to identify stakeholders that merit managerial perception and degree of attention, implicit in Agency theory and Behavioral theory. Attribute that influences outside pressures on the firm, which is urgency, is implicit in institutional, resource dependence, and population ecology theories. However, emphasizing legitimacy and ignoring power leave major gaps in a stakeholder identification scheme, because some legitimate stakeholders have no influence. Some of future empirical research, can testable hypotheses and answers on questions: 1. In which stakeholder attributes and managerial values infiuence managers' perceptions of stakeholder salience. 2. Are present descriptions of stakeholder attributes adequate? 3. Are power, legitimacy, and urgency really the correct and parsimonious set of variables in understanding stakeholder-manager relationships? CONCEPTUL MODEL By Mitchell broad concept of stakeholders' possession of power, legitimacy, and urgency, upon further methodological and empirical work, can be measured reliably. Critical evaluation of criteria and some claims over others can be done with dynamic model. Power, dependence, and reciprocity in relationships Power. Mostly definitions focus on the firm's, stakeholder's or mutuality of powerdependency on stakeholders. For example, power is “the probability that one actor within a social relationship would be in a position to carry out his own will despite resistance” (Weber, 1947). The use of symbols for control purposes is referred to as normative, normative-social, or social power. To gain access to coercive, utilitarian, or normative means: it can be acquired as well as lost. 855 Legitimacy. Mitchell accept Weber's (1947) proposal that legitimacy and power are distinct attributes that can combine to create authority but that can exist independently, as well as Suchman (1995) definition of legitimacy as “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” (1995). Urgency. By Mitchell urgency is define as the degree to which stakeholder claims call for immediate attention, proposed dynamic model which exists only when two conditions are met: (1) when a relationship or claim is of a time-sensitive nature and (2) when that relationship or claim is important or critical to the stakeholder. Figure 1. Stakeholder Typology Model - One, two, or three attributes present FRAMEWORK To support a dynamic theory of stakeholder we need to consider implications of model, and test whether “new maps” result in “new methods”. Attributes provide a preliminary framework for understanding how stakeholders can gain or lose salience to a firm's managers: 1. Stakeholder attributes are variable, not steady state; 2. Stakeholder attributes are socially constructed, not objective, reality; 3. Consciousness and willful exercise may or may not be present. Propositions: Like Perrow (1986) and Brenner and Cochran (1991), Mitchell treat managerial characteristics as a variable and suggest that managers will perceive to be highly salient only if winning attention of stakeholders. With respect to power, access to the means of influencing another behavior is a variable:  Power may be coercive, utilitarian, or normative;  Power is transitory it can be acquired as well as lost;  Latent power exists in the other two attributes of the stakeholder relationships: legitimacy and urgency;  Power gains authority through legitimacy, and it gains exercise through urgency; Stakeholder attributes-variable will lay the groundwork for a future analysis of the dynamic nature of stakeholder-manager relations. 856 METHODOLOGY Several propositions leading to a theory of stakeholder salience based on the assumptions that: [1] managers who want to achieve certain ends pay particular kinds of attention to various classes of stakeholders; [2] managers' perceptions dictate stakeholder salience; [3] various classes of stakeholders might be identified based upon the attributed possession, of one, two, or all three of the attributes: power, legitimacy, and urgency. Proposition 1: Stakeholder salience will be positively related to the cumulative number of stakeholder attributes-power, legitimacy, and urgency-perceived by managers to be present. Diagram 1. Stakeholder with one, two, or three attributes present Latent Stakeholders Possessing only one attributes, include dormant, discretionary, and demanding stakeholders. Proposition la: Stakeholder salience will be low where only one of the stakeholder attributes-power, legitimacy, and urgency-is perceived by managers to be present. 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. 857 Expectant Stakeholders Possessing two attributes, and include dominant, dependent, and dangerous stakeholders Proposition lb: Stakeholder salience will be moderate where two of the stakeholder attributes-power, legitimacy, and urgency-are perceived by managers to be present. Dominant stakeholders. The group that many theories position as the only stakeholders of an organisation or project. Likely to have a formal relationship with organisation or project. 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. 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 identify these stakeholders, but don't require them to be acknowledged & thus awarded legitimacy Definitive Stakeholders An expectant stakeholder who gains the relevant missing attribute. Often dominant stakeholders with an urgent issue, classed as dangerous could gain legitimacy e.g. democratic legitimacy achieved by a nationalist party. Proposition lc: Stakeholder salience will be high where all three of the stakeholder attributes-power, legitimacy, and urgency-are perceived by managers to be present. CONCLUSIONS This article aims to give a new contribute to a theory of stakeholder identification and salience, attempting to give answer on question in a systematic way: “Which groups are stakeholders deserving or requiring management attention, and which are not?” Mitchell have not developed hypotheses, but he recommended next logical step that stakeholder can move into the “definitive stakeholder” category. By Mitchell dynamic perspective model explain measurement of stakeholder salience; permits of managerial perception; and behavior and implication. FUTURE DEVELOPMENT  Circumstances under which firm's managers might attempt to acquire salience in different categories. 858