The Primordial Stakeholder

The Primordial Stakeholder: Advancing the Conceptual Consideration of Stakeholder Status for the Natural Environment

ABSTRACT. This article furthers the argument for a stakeholder theory that integrates into managerial decision-making the relationship between business organizations and the natural environment. The authors review the literature on stakeholder theory and the debate over whom or what should count as a stakeholder. The authors also critique and expand the stakeholder identification and salience model developed by Mitchell and Wood (1997) by reconceptualizing the stakeholder attributes of power, legitimacy, and urgency, as well as by developing a fourth stakeholder attribute: proximity. In this way, the authors provide a stronger basis for arguing for the salience of the natural environment as the primary and primordial stakeholder of the firm.

Cathy Driscoll received her Ph.D. in organizational behaviour and marketing from Queen’s University in 1994. Currently, she is an associate professor of management in the Sobey School of Business at Saint Mary’s University in Halifax, Nova Scotia. Her research interests include stakeholder management, business ethics, corporate social responsibility, spirituality and business, multi-stakeholder collaboration, and management education. Mark Starik is an Associate Professor of Strategic Management and Public Policy in the George Washington (GW) University School of Business and Public Management (SBPM), in Washington, D.C. His research, teaching, and service interests are in the integrated areas of global strategic environmental management and policy, and sustainable energy and tourism stakeholder management. He has published widely in academic and practitioner information sources and has consulted with a number of business, government, and nonprofit organizations.

Cathy Driscoll Mark Starik

KEY WORDS: environment, relationships, stakeholder, sustainability

Primordial – 1. Being or happening first in sequence of time; original 2. Primary or fundamental The American Heritage Dictionary of the English Language (2000)

The concept of “stakeholder” has been used as a heuristic in the management literature for nearly two decades. The stakeholder framework has been forwarded to help managers to both define an organization’s social obligations and manage relationships with its respective stakeholders. While most stakeholder theories have progressed to the point in which the natural environment is given stakeholder status, some academics continue to be reluctant to include the natural environment as one of the firm’s primary stakeholders. Although an increasing number of scholars are now focusing their attention on management – natural environment relationships and a growing number of conference and publication outlets for research in this area (e.g. the increasing membership of the Organization and the Natural Environment interest group in the Academy of Management and the increasing number of related journals such as Organization & Environment), most management theories continue to have a very limited concept of “environment” (Gladwin et al., 1995; Shrivastava, 1994, 1995a). Similarly, although many companies are increasingly upholding environmental sustain-

Journal of Business Ethics 49: 55–73, 2004. © 2004 Kluwer Academic Publishers. Printed in the Netherlands.

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ability as a value (Berry and Rondinelli, 1998), some practitioners have been reluctant to consider the natural environment as a primary stakeholder. Some research has shown that when companies make trade-offs among stakeholders, the natural environment is often placed low on the list (Bendheim et al., 1998; Nasi et al., 1997). Other scholars have suggested that companies overlook strategic environmental considerations, believing that the global economic system is somehow independent of the Earth’s ecological system (Gladwin et al., 1995; Jennings and Zandbergen, 1995; Schmidheiny and Zorraquin, 1996; Shrivastava, 1994; Stead and Stead, 1996). Therefore, although many business organizations apparently are attempting to green themselves through self-regulation, technological innovation, industry-wide codes, and certifications, these voluntary mechanisms are being implemented slowly, and their record has not been overly successful in halting environmental damage caused by business activity (King and Lenox, 2000). This article advances the conceptual consideration of the natural environment’s status as a stakeholder of the firm. For purposes of this article, we distinguish between environmental institutions (groups, organizations, associations, or networks) as stakeholders and the natural environment as one or more stakeholders. In this sense, the natural environment is seen as a stakeholder entity in the same sense as the local community, the general public, future human generations, and developing countries might be. Carroll (1993) has described these generic stakeholders as those common to all types of enterprises. Here, natural environment encompasses the atmosphere, hydrosphere, lithosphere, ecosystem processes, and all human and nonhuman life forms. First, we briefly review the literature on stakeholder theory and the debate on who or what should count as a stakeholder, in particular focusing on the Mitchell et al. (1997) stakeholder framework. Then, applying the case of the natural environment, we critique the beliefs and assumptions underlying the stakeholder attributes of power, legitimacy, and urgency that are an integral part of the Mitchell et al. framework. In addition, we suggest additional stakeholder

criteria, thereby providing a stronger basis to argue that the natural environment should be included as one or more primary stakeholders of the firm. This article focuses on the development of the attribute of proximity and we build on the work of Mitchell and his colleagues, contributing to a normative theory of stakeholder identification and salience. Our goal is to expand their framework to argue that the natural environment can be identified as the primary stakeholder of the firm in its own right and that it should have salience for all managers.

I. The stakeholder concept Stakeholder theory concerns the nature of the relationships between organizations and their respective stakeholders and the processes and outcomes of these relationships for organizations and their stakeholders ( Jones and Wicks, 1999). The manager is typically placed at the center of the contractual relationship between a business organization and its stakeholders (Hill and Jones, 1992). Definitions of stakeholder in the literature range from the broad and inclusive to the narrow and exclusive. The inclusive definition is typically prescriptive, adopting a public relations or moral focus. For example, stakeholders have often been considered to include any groups or individuals who can significantly affect or be affected by an organization’s activities (Evan and Freeman, 1988; Freeman, 1984; Donaldson and Preston, 1995; Greenley and Foxall, 1997), but has been broadened to include non-humans (Buchholz, 1993; Starik, 1995; Stead and Stead, 2000). More narrow definitions include or exclude stakeholders based on managerial perceptions of stakeholder power, resource dependence, or risk (e.g., Barney, 1997; Clarkson, 1994; Greenley and Foxall, 1997; Harrison and St. John, 1996; Nasi, 1995; Nasi et al., 1997). In for-profit corporations, maximization of shareholder wealth is typically considered to be the primary stakeholder goal (Shrivastava, 1995a). To avoid “excessive complications”, conventional management encourages managers to limit the number of stakeholders and focus primarily on financial indicators (e.g., Barney, 1997; Grant,

The Primordial Stakeholder 1995, p. 34). Mitchell et al. (1997, p. 857) suggest that the broad view of stakeholders is “bewilderingly complex for managers to apply.” Normative stakeholder theory focuses on defining the basis of stakeholder legitimacy, whether it is risk, property rights, or moral claims (Mitchell et al., 1997). For example, Donaldson and Preston (1995) contend that managers should enter into a mutually supportive relationship with their stakeholders because it is morally right. A “social contract” exists between business and society. According to these authors, “stakeholders are identified through the actual or potential harms and benefits that they experience or anticipate experiencing as a result of the firm’s actions or inactions” (1995, p. 86). Normative stakeholder theory has been criticized, however, for the lack of a specific framework and for problems in identifying stakeholders (Frederick, 1998; Jones, 1980; Mitchell et al., 1997; Rowley, 1998; Thompson et al., 1991). Mitchell et al. (1997) attempted to address this gap by specifying theoretically “who [or what] really counts” as a stakeholder in management thinking. According to these authors, stakeholders have one or more of the following attributes: power to influence the firm; legitimacy of a relationship; and/or urgency of a claim. They predict “the salience of a particular stakeholder to the firm’s management is low if only one of these attributes is present, moderate if two attributes are present, and high if all three attributes are present” (p. 879). “Definitive stakeholders” have not only power and legitimacy, but also an urgent claim on the firm, which gives these stakeholders managerial priority. According to their framework, the natural environment is a “dependent stakeholder” or one that depends on other dominant stakeholders “for the power necessary to carry out [its] will” (p. 877). In their view, nature’s claims are often seen as legitimate and urgent; however, the natural environment is not salient to managers unless other dominant stakeholders exercise their power to support the natural environment or unless managerial values lean in a “green” direction. Although some scholars have asserted that various aspects of the natural environment can be considered as one or more primary stakeholders of the firm (e.g.,

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Buchholz, 1993; Shrivastava, 1995a; Srikantia and Bilimoria, 1997; Starik, 1995; Stead and Stead, 1996, 2000), traditional stakeholder theory has failed to recognize the Earth and its surroundings as a legitimate stakeholder with intrinsic worth (Nash, 1987; Starik, 1994). In the following section, we consider the theories and assumptions underlying the stakeholder attributes of power, legitimacy, and urgency, and discuss some limitations of the Mitchell et al. framework in determining the salience of the natural environment as the primary and primordial stakeholder of the firm.

II. Power, legitimacy, and urgency a. Power Many conventional management theories emphasize the central role of power in decision-making, focusing on utilitarian resource-exchange and dependence-based relationships (e.g., Blau, 1964; Oliver, 1991; Pfeffer, 1992; Pfeffer and Salancik, 1978). Similarly, most stakeholder models have emphasized managerial perceptions of power in identifying and prioritizing stakeholders (Clarkson, 1995; Greenley and Foxall, 1997; Harrison and St. John, 1996; Mitchell et al., 1997; Nasi et al., 1997). An instrumental stakeholder perspective defines stakeholders as those groups or individuals who are in a mutually dependent or exchange relationship with the firm (Freeman, 1984; Freeman and Evan, 1990; Hill and Jones, 1992; Nasi, 1995; Nasi et al., 1997). Others have suggested that stakeholders have a direct influence on organizational survival (Carroll, 1993; Freeman, 1984; Freeman and Reed, 1983; Nasi, 1995; among others). It is readily recognizable that the natural environment has a mutually dependent, exchangebased relationship with business organizations. The firm depends on local ecosystems, as well as the broader ecosphere, for raw materials, plant, animal, and microbial inputs, and energy (Bateson, 1972; Gladwin et al., 1995; Starik, 1995). In fact, business organizations exchange more with the natural environment than with

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any other stakeholder, interacting through “myriad ecosystem service transactions that ultimately keep organizations alive” (Gladwin et al., 1995, p. 875). Other scholars have described the complex interdependencies among ecosystems, human systems, and business organizations (e.g., Bruntland Commission, 1987; Daly and Cobb, 1994; Jennings and Zandbergen, 1995; Purser et al., 1995; Starik and Rands, 1995). Mitchell et al. (1997) applied Etzioni’s (1964) organizational bases of power to their stakeholder attribute of power. Their application implies that a stakeholder has power to the extent that it can use coercive (force/threat), utilitarian (material/ incentives), or normative (symbolic influence) power to “impose its will in the relationship” (p. 865). While we may never identify nature’s “will”, the natural environment holds coercive and utilitarian power over business organizations as shown by countless examples of the natural environment’s significant influence on industrial activity. The impact of super-storms, hurricanes, and droughts on the agriculture industry shows that the natural environment holds coercive power over business organizations. The impact of the loss of financial resources in the fishing industry due to depletion of fish stocks shows that the natural environment has utilitarian power over business organizations. From the Purple Loosestrife plant infiltrating North American waterways to genetically modified seeds spreading to non-modified crops, the natural environment is powerful in terms of impact. However, the influence of nature, especially the subtle influence over time, such as the effect bodies of water have on their shores and, consequently, on land-based human activities, such as residential developments, is overlooked in most conceptualizations of stakeholder power. Perhaps this is because the essence of power in current organizational and social theories is the influence of one or more social actors (Pfeffer, 1981; Weber, 1947). Similarly, stakeholder theory has traditionally dealt with an organization’s social obligations. For example, Savage et al. (1991, p. 61) suggested that stakeholders have to demonstrate their “ability to influence” the firm. Although Mitchell et al. (1997) expanded stakeholder power to include coercive, utilitarian, and

normative powers; they maintained a social agency-only perspective for explaining stakeholder salience. In other words, in their social perspective “[a]n entity may possess power to impose its will upon a firm, but unless it is aware of its power and willing to exercise it on the firm, it is not a stakeholder with high salience to managers” (Mitchell et al., 1997, p. 868). Accordingly, some stakeholder management theory continues to view only humans as stakeholders (e.g. Szwajkowski, 2000). In other words, shareholders, woodlot owners, and governments, not trees or forest ecosystems, supply timber and influence other stakeholders in the forest industry. Moreover, it has been suggested that the social power of the stakeholder in stakeholder theory is based on economic exchange and that conventional stakeholder theories overlook such topics as asymmetrical relations of power and systemic inequalities, which can lead to environmental injustice (Banerjee, 2000). The natural environment supplies “critical resources” to the firm but usually not through economic exchange relationships. However, it has been estimated that ecological services can be economically valued at approximately $33 trillion a year (Lovins et al., 1999). Still, although regulatory, social, and competitive pressures have forced some companies to internalize some ecological costs (Hart, 1995; Hart and Ahuja, 1996), most companies do not account for ecological exchanges (Lovins et al., 1999).

b. Legitimacy Because the concept of legitimacy is inherently vague, numerous definitions can be found in the management and organizations literature (Hybels, 1995). According to Suchman (1995, p. 573), the character of legitimacy is multifaceted, and “will operate differently in different contexts.” Also, the management literature comprises both strategic and moral bases for legitimacy. In stakeholder theory, these include contractual relationships (based on legal, moral, or ownership rights) (cf. Evan and Freeman, 1988) or exchange-based relationships in which those who

The Primordial Stakeholder own the resources supply “critical resources” to the firm (Hill and Jones, 1992, p. 133). According to Hybels (1995), however, resource flows provide the best evidence of organizational legitimacy. Most literature suggests that stakeholder legitimacy is grounded in pragmatic evaluations of stakeholder relationships rather than in normative assessments of moral propriety (cf. Aldrich and Fiol, 1994). For example, Barney (1997, p. 43) asserts that “[t]o be a stakeholder, a party must make important resources (such as labor, money, and loyalty) available to a firm.” Pragmatic approaches to legitimacy assume an instrumental view of the concept, in which legitimacy is seen as a resource that can be manipulated (e.g., Dowling and Pfeffer, 1975; Pfeffer and Salancik, 1978; Suchman, 1995; Zimmerman and Zeitz, 2002). This approach focuses on the “selfinterested calculations of an organization’s most immediate audiences” and has been referred to as “exchange legitimacy” or “influence legitimacy” (Suchman, 1995, p. 578). This instrumental view also parallels the power-dependence and resource-exchange approach to firm-stakeholder relationships discussed in the previous section. Moral legitimacy, on the other hand, is based on normative approval and the rightness or wrongness of organizational actions, downplaying managerial agency and instrumentality (Aldrich and Fiol, 1994; Suchman, 1995, p. 576). Legitimacy either competes or couples with power in many management theories (e.g., agency, behavioral, institutional, population ecology, resource dependence, and transaction cost theories of the firm) (Mitchell et al., 1997). According to Stinchcombe (1968), legitimacy is actually defined by the values of those with social power, a coupling that appears to carry over into stakeholder theories of the firm. Mitchell and colleagues suggest that although legitimacy and power are independent variables (see also Weber, 1947), managers consider how these two attributes interact when determining stakeholder salience. Although managers view some stakeholders as legitimate even though they have no power, these stakeholders will not likely be salient to managers unless they hold either the power to influence the firm or the urgency of a

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claim. In other words, “[l]egitimacy gains rights through power . . .” (Mitchell et al., 1997, p. 870). The natural environment has attained legitimacy from the world’s scientific community, which has reached consensus on the deteriorating state of the environment and the links to human activity (National Academy of Sciences, 2002). For example, global climate change has been associated with human carbon emissions, including business use of fossil fuels, and the loss of biodiversity, again linked to habitat-destroying human economic activities such as fishing, forestry, and residential and commercial construction (Intergovernmental Panel on Climate Change, 2000). Yet, while significant effort has been invested in attempting to slow or reverse global environmental damage and deterioration in the past several decades, a number of world environmental challenges have proved intractable, and several have worsened in that time (Brown, 2000). However, Banerjee (2000) has suggested that, managers are bounded by a legitimacy that has an economic basis and that does not genuinely address ecological concerns. Similarly, whereas risk has been described as a primary basis for stakeholder legitimacy (Clarkson, 1994), some scholars have suggested that conventional management studies focus on a narrow view of riskone dominated by financial risk to the firm (e.g., Shrivastava, 1995a). According to Shrivastava (pp. 124–125), the traditional management paradigm is limited in several ways in its response to ecological risks. These include a “denatured” view of the environment, a production/consumption bias, a financial risk bias, and excessive anthropocentrism. An anthropocentric and egocentric basis for management studies and its humannature dualism have been described and critiqued in detail elsewhere (e.g. Gladwin et al., 1995; Purser et al., 1995; Shrivastava, 1994, 1995a). Like power, the concept of organizational legitimacy has been used primarily in a context of social relations (Hybels, 1995). Human actors are, therefore, required to legitimize organizational activities. However, that the public responds so strongly to images of or actual experience with oil-soaked birds, bloody marine

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mammals, and clear-cut forests indicates that humans feel some emotional connection to nonhuman nature and a sense of moral obligation to the natural environment. In his book, “Should Trees Have Standing? Towards Legal Rights for Natural Objects,” Christopher Stone (1974) describes how an aesthetic and sensory appreciation of the natural environment can lead to socio-emotional responses which bring us “closer” to non-human nature. Moreover, the question of whether animals have legal rights continues to receive significant mainstream attention decades after the concept was first introduced to wide scholarly and practitioner audiences (Hacking, 2000; Zeller, 2000). Even short of legal rights, increasing attention to animal protection can be seen as an evolution in the relationships between humans and nonhumans. For instance, the number of U.S. states with felony animal cruelty provisions more than quadrupled from 7 in 1994 to 31 in 2000 (Kenna, 2000), and the 2000 election in the U.S. included a record number of ballot measures concerning animals (Pacelle, 2000).

c. Urgency Mitchell et al. (1997) defined stakeholder urgency as the stakeholder’s claim for immediate attention based on the ideas of time sensitivity or the “degree to which managerial delay in attending to the claim or relationship is unacceptable to the stakeholder” and criticality or the “importance of the claim or the relationship to the stakeholder” (p. 867). However, a recent review of the strategy literature found that the subjective nature of “time”, including how social processes affect perceptions of time, has been overlooked by researchers (Mosakowski and Earley, 2000). For example, society’s attention is often focused on high profile, large-scale crises, such as the human-made environmental catastrophes of oil and chemical spills, hazardous waste leaks, and industrial explosions. Indeed, Mitchell et al. (1997) use the Exxon Valdez oil spill to show how managers attend to stakeholder issues. During this crisis, the public quickly responded to the media’s portrayal of oil-soaked,

dying otters and birds. However, Allan et al. (1999) and Smith (2000) have suggested that slowly unfolding stories that deal with scientific uncertainty, such as climate change and biodiversity loss are not given as much attention by the media. More attention is beginning to focus on slow build-ups of environmental problems, however (Beamish, 2001). Human risks associated with critical and chronic long-term environmental problems are becoming increasingly tangible (e.g., increases in heat-related deaths in large cities, in skin cancer, and in super-storms and hurricanes) and more countries are acknowledging the association between human activity and slowly building environmental problems (e.g., the Kyoto Protocol and the U.S. Bush Administration’s recent acknowledgement of the relationship between global climate change and human activity). However, salience is still lacking regarding “slowly evolving issues,” where the impact on humans is not as obvious as environmental catastrophes (e.g., urban sprawl, coastal development, biodiversity loss, and endangerment of species extinction). Like power and legitimacy, urgency has a social and an economic connotation. Although the focus in the Mitchell et al. model is on the stakeholder’s perception of the urgency of the stakeholder’s claim, managers’ perceptions of urgency drive most stakeholder models and those perceptions are biased towards economic shorttermism (Laverty, 1996), which is often precipitated by the use of cost-benefit analysis, rates of return, and changes in stock prices. Agle et al. (1999) have recently found evidence supporting the idea that shareholder urgency drives most corporate managerial strategies. Others have similarly suggested that managers are shortsighted in their planning horizons and focus on short-term profits (Schumacher, 1973; Srikantia and Bilimoria, 1997; Stead and Stead, 1996). The resurgence in the number of mergers, acquisitions, and downsizings in North America and Europe over the past decade, along with the recent cases of fraudulent accounting practices among major North American companies, provides further evidence of a short-term economic focus. Although environmental management strate-

The Primordial Stakeholder gies have been developed to consider environmental impact related to waste and pollution, such as pollution-prevention-pays and the natural resource-based view, less attention is given to longer-term, less observable and incremental impacts, such as those affecting biodiversity and the overall ecosystem. Starik and Rands (1995, p. 920) suggest that, “(g)iven the criticality of economic contingencies, we would not be surprised if most organizations gave insufficient attention to ecological contingencies until they became too dramatic to ignore.” Political ecologist and economist Herman Daly (1997) is also not optimistic that the market system will effectively catch up to ecological realities. Largescale catastrophic events can result in change, as illustrated in the Exxon Valdez and the Union Carbide-Bhopal disasters, but how does ecosystem biodiversity that is critical to the firm’s long-term survival gain managerial attention? Also, how do endangered species and fragile ecosystems increase their salience to managers under current stakeholder frameworks? We assert that other stakeholders are prioritized because managers focus on short-term economic results rather than on the long-term sustainability of their organization. Mitchell et al. (1997, p. 879) suggest that stakeholders can increase their salience if they are clever at “coalition building, political action, or social construction of reality.” If, however, as they (1997, p. 870) conclude, legitimacy gains “voice through urgency,” how do we reconcile this with the idea of a “silent spring” (Carson, 1962)? The Mitchell et al. model does not focus on the subtle, the silent, and the slowly evolving. In many respects, urgency, like legitimacy, appears to gain rights through (economic-based) power.

d. What’s wrong with this picture? While the three criteria for “stakeholderness” that have been forwarded, in whole or part, by Freeman (1984), Carroll (1993), Mitchell et al. (1997) and others appear necessary in determining stakeholder identification and salience, the attributes of power, legitimacy, and urgency as currently conceptualized fail to give the natural

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environment primary stakeholder status. That is, definitions associated with these three constructs and their corresponding bases are inadequate for incorporating the near and the far, the short- and the long-term, and the actual and the potential. However, by reinterpreting these three attributes, we can make the natural environment – primary organizational stakeholder connection more obvious. We are assisted by previous scholars’ work in the areas of eco-sustainability (e.g., Bruntland Commission, 1987; Purser et al., 1995; Shrivastava, 1995b) and the moral standing of the natural environment (e.g., Berry, 1988; Leopold, 1970; Purser et al., 1995; Rolston, 1994).

III. Revisiting power, legitmacy, and III. urgency Mitchell et al. (p. 857) suggested that normative stakeholder theory’s search for stakeholder legitimacy “can be a powerful blinder to the real impact of stakeholder power and claim urgency.” Alternatively, we suggest that the limited conceptions of power that continue to dominate stakeholder thought and practice are a powerful blinder to the importance of many legitimate stakeholders, including the natural environment. The context of the resource-dependent relationship between the firm and the natural environment is different from social theory perspectives under an eco-sustainability paradigm. Here, power is used equitably in accordance with both social and ecological needs. Instead of focusing on social domination and control, the relationships among nature, society, and economy are emphasized, such as those relationships among nature, equity, and development. In this alternate paradigm, power is “gained through the emergence of collaborative assemblies, interdependent domains, and cooperative networks” (Purser et al., 1995, p. 1080). The mutual dependence between the firm and the natural environment is seen as critical to firm survival, and human agency and ability to influence, directly and perceptibly, are not considered necessary attributes for determining stakeholder salience (cf. Brenner, 1993; Starik, 1994). Moreover, it is nature, not the firm

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that holds the balance of power. Firms acknowledge their biophysical foundations and the interconnectedness of all life cycles. To better identify and make salient the longrange threats and far-reaching material impacts related to the business organization – natural environment relationship, we suggest that the concept of pervasiveness (the degree to which stakeholder impact is spread over distance and time) be incorporated into both coercive power and utilitarian power. These are two of the bases for stakeholder power described in the Mitchell et al. model. The nature of legitimacy also changes under an eco-sustainablity perspective, as ecological, economic, and social priorities change, as evidenced by the increased number of legal and moral claims made on behalf of the natural environment. Management theory and practice focus on moral depictions of legitimacy, which are grounded in broader cultural and ecological values. For example, Wood’s (1991) bases for organizational legitimacy to stakeholder identification and salience could be broadened to include ecological as well as individual, organizational, and societal levels. Along similar lines, Gladwin et al. (1995, p. 898) have extended the idea of a “social contract” between the firm and society (Donaldson and Preston, 1995) to the idea of a “natural contract with the biosphere,” to represent the interactive relationship between business organizations and the natural environment. In this regard, property rights would be embedded not only in human rights (Donaldson and Preston, 1995) but also in ecological ethics. Under an eco-sustainability paradigm, ecological risks are at the core of management issues because nature is “the stakeholder that bears the most risk from industrial activities” (Shrivastava, 1995a, p. 127). In this respect, stakeholder theory would focus on the mutual symbiosis between business organizations and their stakeholders. As human individuals develop ever numerous and complex relationships with the non-human natural environment, more human organizations will also begin to explicitly recognize the stakeholder status of non-human nature. Also, as managers change focus from firmcentered to eco-sustainability, urgency would

take on a different dimension. Under an ecosustainability paradigm, time is assumed to be multiscale (Shrivastava, 1995a). The focus is on both current and future generations and both the short- and the long-term impact of decisions on the natural environment. According to Suzuki (1997, p. 12), “[i]n such an interdependent universe . . . every action has repercussions that reverberate far beyond the moment.” Ecological problems are consequential, if not catastrophic, and require immediate attention and action by managers; financial risks and ecological risks are recognized as being interdependent. As Ryland (2000, p. 397) suggests, “When money is replaced with a concern for life, the time frame for decision making automatically shifts away from the nanoseconds of the financial markets to a concern for future generations.” We suggest that probability (potentiality or likelihood of interaction) be included as a basis for urgency in addition to Mitchell et al.’s bases of time sensitivity and criticality. While actual effects between any two entities can imply a stakeholder relationship, a probable or potential interaction can also imply a stakeholder relationship as in a firm’s customer prospects, its possible suppliers undergoing firm qualification, and its job applicants. In each of these and similar cases, the stakeholder aspect of “affect or affected by” may already be occurring even before the more traditional stakeholder relationships have begun. We assert that the more likely these entities are of being converted from potential to actual customers, suppliers, and employees, respectively, the more likely they can be considered stakeholders. This suggestion follows a wellknown concept in the issues management literature called the probability-impact matrix, in which issues with high probability and high impact are prescribed for the greatest amount of attention (Carroll, 1993). The issues management “impact” variable has already been included or at least implied in the “power” criterion for “stakeholderness.” Therefore, at least those aspects of non-human nature that have high probabilities of affecting business organizations or being affected by them, such as projected shortages of fuel, fish, and forest stocks, might be considered to have firm stakeholder status since

The Primordial Stakeholder cognizant organizations will already factor likelyoccurring environmental phenomena into their respective plans before such shortages occur. For example, the Eastern Atlantic cod fishery only gained managerial salience as a stakeholder once its fish stocks were depleted. As Mitchell et al. (1997, p. 859) have stated, “potential [stakeholder] relationships can be as relevant as the actual one.” Firms might see additional immediate costs as they act to reduce their impact on, for example, global warming, but in terms of future productivity, tourism, international trade, and insurance costs, the potential benefits are huge (World Wildlife Fund, 2002). By our reconceptualizing the attributes of power, legitimacy, and urgency under an eco-sustainability perspective, the natural environment would have power, legitimacy, and urgency and therefore, more likely attain managerial salience and priority. At the same time, we suggest that the development of additional criteria enables academicians and practitioners both to improve on the stakeholder concept generally and to make a stronger case for the natural environment as the primordial and primary stakeholder of the firm.

IV. Expanding the set of stakeholder IV. criteria While much of the stakeholder literature identifies two or more possible stakeholder criteria, a recent work on stakeholder identity by Phillips and Reichart (2000) holds that only a fairnessbased set of criteria is appropriate for ascription of stakeholder status. In our opinion, confining stakeholder determinations to one criterion, such as fairness, reduces the usefulness of the concept, in this case ostensibly applicable only to humans in justice-oriented relationships with one another. Such a limited perspective of “stakeholderness” may not even include those relationships most academics and practitioners have readily accepted, such as the inclusion of national environmental groups among the stakeholders of major multinational companies that have been responsible for major environmental problems (Phillips and Reichart, 2000). Rather, we believe that stakeholder theory needs to reflect more

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rather than fewer stakeholder aspects to make the concept more comprehensive and realistic. In addition, other criteria might further help in developing a stakeholder identification and salience model that considers the non-human natural environment to be one or more key stakeholders of the firm. The concept of proximity seems especially applicable to both defining “stakeholderness” and including the rest of nature in the stakeholder considerations of organizations.

a. Proximity Proximity is suggested here as a possible “stakeholderness” criterion because spatial distance can be as important in stakeholder interactions as is time, which is associated with the urgency criteria suggested by Mitchell et al. (Lee and Robbins, 2000). Others, such as Gladwin et al. (1995, p. 898) have suggested that stakeholder models need to be “more spatially and temporally inclusive”. Proximity, or “the state, quality, or fact of being near or next” in “space, time, or order” (Soukhanov, 1984, p. 948), has been an important concept in a wide variety of scholarly fields, including health care (Benedetti, 2001), the arts (Clark, 2000), the social sciences (Smith, 2000), and business (Park, 1994; Green and McNaughton, 2000). When applied to spatial relationships, proximity allows for the common observation that entities, including organizations that share the same physical space or are adjacent to one another often affect one another. From nation states that share borders through firms whose headquarters are located in the same towns to individuals and households who are residential neighbors, their respective proximity characteristics contribute significantly to their development of stakeholder relationships. As such, spatial nearness is one of many factors that can play a role in stakeholder recognition and interaction. We can, therefore, theorize that the greater the proximity, the greater the likelihood of the development of stakeholder relationships, ceteris paribus. However, this connection between proximity and stakeholder status is highly nuanced, as are

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perhaps other stakeholder criteria. In addition to physical proximity, organizations can be said to be proximate if they share the same or similar ideas, approaches, and actions, that is, they are proximate to one another in concept or practice or that they occupy the same “field” (Bansal and Roth, 2000). For example, firms in the same industry (defined here as a “product-market”) are well-accepted stakeholders of one another, particularly if they are members of the same or of allied industry associations. In addition, firms that share stakeholders, say retail customers, or firms that consider themselves buyers or suppliers of one another are considered proximate stakeholders in their shared value chains. Thus, proximity may be associated with the well-researched business variable of relatedness (Tsai, 2000; Fan and Lang, 2000), as well as with the emerging idea of stakeholder networks (Heuer and Starik, 2002), in which the relevant context is a set or system of inter-connected stakeholders (i.e. a business’ stakeholders which also have stakeholders, etc.). Two relevant variables of networks that are related to the proximity concept are centrality and density (Rowley, 1997), in which entities such as organizations can be considered to be controlling hubs if they are located more centrally among a group of other network entities especially when these entities are positioned in networks “thick with” nodes, that is, the linkages among these entities are numerous and interactive. A special case of the application of proximity is that in which an entity lies within, or is embedded in, the other entity, that is, they share a physical space. Organizational facilities located within the physical boundaries of an organization; companies located in specific neighborhoods, cities, and states; and firms that operate within national government jurisdictions are examples of stakeholder embeddedness. Such embeddedness sets the stage for stakeholder interaction since the embedded entity cannot help affecting, at least marginally, the larger entity it is within, since the former is a component of the latter larger entity (Uzzi, 1997). Similarly, the concept of ubiquity, in which an entity is not only surrounded by another, but one

in which a stakeholder is so multi-faceted as to be virtually omnipresent, also applies to the attribute of proximity. Here the mutuality of the co-existence between, say, an organization and its stakeholders, such as the organization’s members, is the relevant stakeholder criterion. Yet another special case of proximity might be described as intimacy or affinity, depending on the degree of attraction, especially between humans or between humans and other species or parts of nature. Organizational relationships are not typically discussed in intimacy terms, but those with an affinity for one another, perhaps because of complementarity of organization missions, strategies, structures, resources, or organizational members, are commonly so described in organizational alliances and partnerships. Since non-human nature surrounds all human business and is the ultimate context in which all human business is conducted, it would qualify as one or more firm critical stakeholders under the sub-criterion of embeddedness. The case for considering nature as one or more organizational stakeholders includes each of the aspects of proximity discussed above. The most obvious connection between the proposed proximity stakeholder criterion and our assertion that organizations and the natural environment interactions can be considered stakeholder relationships (especially in eco-sustainability perspectives) is the immediate local impacts produced by organizations that pollute or deplete local ecosystems, and the local impacts the natural environment, such as weather patterns, can have on organizations in or nearby affected areas. For a combined example, coal-fired power plants in the U.S. Ohio river valley often create smog over wide swaths of the national parks located just east of that region as prevailing winds transport various airborne pollutants from one region to the next, reducing the visibility of national park tourists and the financial health of tour operators (National Parks and Conservation Association, 1994). Many similar locally proximate organization and natural environment interactions in which industrial facility emissions were found to significantly affect contiguous neighborhoods, also support this argument (e.g., Bolin, 2000; Morello-Fosch et al., 2001).

The Primordial Stakeholder The proximity of organizations to various natural environments establishes a stakeholder connection between the two since these entities continually affect one another in the physical world. The network aspects of centrality and density, for example, play key roles in this argument, since most considerations of the natural environment are place based. Organizations that produce contaminants, such as small farms that allow their nitrogen wastes to run off into nearby streams, are not quite as central and are much less dense than larger, more urban feedlot operations with inadequate livestock waste control. In this case, both small and larger businesses may be stakeholders of the proximate water bodies, but the latter might be considered to have the stronger stakeholder “effect” (Centner, 2001). The network aspect of connected systems is another argument for considering the natural environment as an organizational stakeholder. Global warming causes, processes, and results, for instance, are apparently evident planetwide, with some regional variations. For example, although a carbon dioxide and electricity producing coalfired power plant in the U.S. Midwest is not contiguous to the multiple species that inhabit Earth’s polar regions, given the planet’s air circulation patterns, in concert with other large carbon-emitters, this power plant can still affect the habitats of these species, thereby leading to an ascription of a stakeholder relationship. Similarly, transboundary transfers of water pollution from industrial “hot-spots” in some Eastern European and Asian countries threaten global biological diversity. Proximity is still involved in these stakeholder interactions, but the connection is a subtle one in that proximity can connote, especially in dynamic natural environments such as these, not only nearness in space but also interaction in an ever-changing system, though this interaction may be non-exclusive, cumulative, and temporary. Similarly, ubiquity as a special case of stakeholder proximity certainly applies to the natural environment and the organizations that interact with it. At least in the physical world, all things human including our organizations exist in nature and consist of nature (Wilson, 1992). This obvious statement implies

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that organizations must interact with the natural environment for their physical survival, making nature a ubiquitous stakeholder of all human organizations. If all stakeholders exist in the natural world and all are physically composed of natural matter and energy, only one logical conclusion is possible – nature, too, is a stakeholder of organizations. Regarding the proximity aspects of intimacy and affinity, once again, organization and natural environment stakeholder interactions can be widely identified. For example, organizations that hold periodic retreats for their members and other human stakeholders in various “natural” settings, often encourage retreat attendees to “get close to” or “become one with” nature. Also, firms that locate their headquarters or other facilities in regions in or near attractive natural areas are also examples of organizations selecting to interact with the natural environment because of their own or other human stakeholders’ affinity for various place-based aspects of nature. For example, Patagonia has established its main office within blocks of the surfing beaches of Ventura, California, which are enjoyed by the firms’ managers, employees, and other stakeholders (Patagonia, 2002). In suggesting proximity as a stakeholder status criterion, in addition to power, legitimacy, and urgency, and applying it to the natural environment, we do so as non-naively as possible. First of all, we recognize that not all stakeholder relationships whether human or non-human are collaborative and mutually-supporting (Bengstsson and Kock, 2000). In the environmental realm, even human coexistence with some non-human entities, such as many life-threatening bacteria and viruses, will not be possible. Here, we allow for the Freeman (1984) concept that competitors can be stakeholders, a categorization extended from human to non-human stakeholders. Secondly, we recognize that just as in considerations of human stakeholders, not all nonhuman nature will be stakeholders of all firms everywhere indefinitely. Rather, similar to human stakeholder considerations, only certain aspects of non-human nature may be considered stakeholders by some firms in some locations at various times. Stakeholder status, whether human

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or non-human, needs to be seen on a continuum of each of the suggested criteria, with those entities that have traits that rate highest in each category having attained the highest order of “stakeholderness”. We leave the relative weighting of each of these criteria to future researchers and practitioners. However, we suggest that given that the natural environment not only meets these criteria minimally, but does so on multiple levels of organizational life (individual, team, firm, industry, etc.) implies that its exclusion from the set of entities with significant stakeholder status would be a serious omission in academic and practitioner management perspectives. We also believe that the development of other criteria for both human and non-human stakeholder status might further clarify and strengthen a model of stakeholder identification and salience and so encourage our colleagues to develop them. These may include those concepts that have been considered in assessing interactions among human organizations, such as reciprocity, connectivity, multiplicity, and cohesion (e.g., Kenis and Knoke, 2002).

V. Discussions and implications Business organizations interact with both global ecological systems and specific local environments. For example, they interact with nearby wetlands, lakes, or forests or particular animal species. As a result, business organizations impact on, change, and/or interfere with the complexity and interconnectedness found in the natural environment. Some impacts are obvious, direct, visible, tangible, and proximate spatially and temporally, such as pesticides washing off farmers’ fields and killing fish in nearby rivers. However, in some situations the impact is global, subtle, indirect, less visible, less tangible, and less proximate spatially and temporally, such as the contamination of Canadian Arctic animals from PCBs released in Eastern Europe. Theoretical development is needed to reconceptualize the salience of the business organization – natural environment relationship and to demonstrate how managers can integrate this

relationship into managerial decision-making. Some scholars have advanced stakeholder theory by recognizing the multilateral and dynamic nature of stakeholder-firm relations and by describing the socially constructed nature of stakeholder attributes (e.g., Frooman, 1999; Mitchell et al., 1997; Rowley, 1997). However, these stakeholder models are still largely anchored in a social-only paradigm bounded by overly narrow economic rationality and traditional political influence. As the concepts of economy and society have broadened through globalization and an electronically interconnected world, the concept of stakeholder also needs to be broadened to acknowledge the interdependence between business organizations and ecological systems. The lack of managerial salience attributed to the non-human natural environment can be partially explained by the way the stakeholder attributes of power, legitimacy, and urgency have been defined and operationalized. Scholars and practitioners need to acknowledge the limitations to current managerial conceptualizations of power, legitimacy, and urgency as the primary attributes used to determine stakeholder salience. It is not news that legitimacy and power are problematic concepts or that power and legitimacy are often coupled in organizational studies. However, we have pointed out some additional conceptual problems surrounding legitimacy, power, and urgency in relation to stakeholder identification and salience. First, these three stakeholder attributes are defined within a social system-only framework rather than an ecological one, which includes both human and nonhuman nature. This is not surprising given that extreme anthropocentrism is entrenched within management theory and practice (Purser et al., 1995). Although Mitchell et al. (1997) and others have advanced stakeholder thinking by acknowledging that human consciousness and wilful exercise is not a necessary stakeholder feature, they still consider it necessary for stakeholders to gain managerial attention. However, we have argued that a stakeholder theory focusing solely on human-mediated and economic-based stakeholder transactions overlooks ecosystem transactions that organizations require for survival. In

The Primordial Stakeholder addition, we have shown how legitimacy and urgency also appear to be coupled with power in much of current traditional stakeholder thinking. By reinterpreting legitimacy and urgency, therefore, we can, in turn, change managerial perceptions of stakeholder power. Although Donaldson and Preston (1995) asserted that no a priori prioritization of stakeholders exists, we believe that the normative core of stakeholder theory must acknowledge the priority of the natural environment among the firm’s stakeholders. This assertion is in stark contrast to the emphasis on shareholder prioritization underpinning most managerial practice and theory. A particular set of salient stakeholders has been emphasized because managers have been trained and encouraged to prioritize economic indicators and shareholder issues. This is evident in Berman et al.’s (1999) recent study of stakeholder management models used by Fortune 500 companies, which found empirical support for a strategic stakeholder management model (pragmatic approach) but none for an intrinsic stakeholder commitment model (moral approach). Many management theories, including the stakeholder theory of the firm, developed during a time when scholars and practitioners were less aware of the interdependence between the firm and the natural environment. Even today, some managers may still not be aware of the impact of their decision-making on both local and global ecological systems. However, scientific consensus on the deteriorating state of the environment and society’s awareness of it continue to increase. While business organizations could conceivably address environmental problems without considering non-human nature as one or more stakeholders, assigning and accepting stakeholder status for ecosphere entities might increase the likelihood that such efforts be made sooner and more significantly than would otherwise be the case. This ascription of non-human nature as one or more strategic or “definitive” stakeholders could encourage greater familiarity, mutual identification, and action-taking by businesses because many of these organizations are at least beginning to state their intentions to manage human stakeholders more frequently and strategically (Freeman, 1984).

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Many businesses are only one step away from recognizing the natural environment as stakeholder because an increasing number of human stakeholders are affected by business’ impact on the environment. For example, employees laid off due to coal, fishing, and forestry environmental limits can be seen as human stakeholders affected by the loss of non-human natural entities. Similarly, renewable energy and waste recycling businesses can view employees and customers as stakeholders directly and significantly affected by the abundance and efficient use of non-human natural assets (Renner, 2000). As environmental problems are increasingly recognized as persistent, global, and directly connected to a wide range of human stakeholders, businesses adopting stakeholder management orientations will need to view some aspects of non-human nature as root cause entities, which deserve being treated as important organization stakeholders. This will, in turn, assist these firms in predicting changes and reducing uncertainty in their external environment (Harrison and St. John, 1996). While many organizations, academics, and practitioners have adopted more environmentally aware orientations over the past decade, these sources of information have not commonly or expressly included the natural environment, that is, both the human and non-human environment, in their listings of stakeholders. One reason for this exclusion is that the natural environment is presumed to include everything that exists and so is incorporated in all human thinking, including consideration of organizational stakeholders. Other reasons are that environments are contexts and therefore do not “hold” any “stakes”, that the natural environment cannot be managed, and that the natural environment is represented by other stakeholders and needs no particular or separate managerial attention. However, we believe that the general case is that managerial decision-makers need to explicitly treat the human and non-human natural environment as one or more primary stakeholders to enhance the effectiveness of relationships between organizations and the natural environment. In addition, we believe that environments are contexts and more (that is, also processes and “contents”) deserving of adequate

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managerial attention. We also believe that relationships between organizations and the natural environment are managed continuously but would be done so more prudently in one or more stakeholder relationships. Finally, given that the state of the natural environment in many respects is not improving, we believe one obvious reason for these negative trends is that, though environmental NGOs and other environmental representatives are stronger than ever, these environmental stakeholders have not been able to develop enough effective stakeholder relationships with the natural environment to halt or reverse these trends. What appears necessary is that more organizations and individuals treat the natural environment as one or more primary stakeholders, so that the plans and actions of organizations impacting the natural environment are managed more successfully. So how do we integrate ecological impact, ecological interdependence, and longer term planning into the stakeholder model? A stakeholder theory legitimated in an ecological exchange relationship would likely be based more frequently but not exclusively on a mutual and caring relationship than only on a contractual, power, and exchange-based relationship. It would incorporate both ecological and social sustainability criteria. The focus would be on a systems context and network based and would complement current exploratory and manipulation approaches. An ecosystem-centered, networkbased approach allows for the redefinition of power, legitimacy, and urgency and the inclusion of other stakeholder criteria, such as proximity. It has been suggested that there is little development in the field of management on “alternative paradigms, worldviews, images, and metaphors capable of releasing people and other elements of nature from domination” (Forbes and Jermier, 1998, p. 181). How, then, can we incorporate alternative perspectives into stakeholder theory? One example is the intimate and sustainable relationships many Aboriginal peoples have had with nature, which could bring additional insight into stakeholder theory. For example, some indigenous knowledge holds that the natural environment, not the firm or its

managers, is the central metaphor (Whiteman, 1997). Rather than our owning the resources of the Earth, traditional ecological knowledge suggests that we borrow it from our ancestors and must protect it for future generations. This largely untapped knowledge base could inform stakeholder theory by recasting the firm as a stakeholder of nature, similar to an open system approach that views the natural environment as the open system and with organizations as some of the components. The theoretical question becomes “who or what really counts in nature”? What are other alternatives to Western ideas of progress and development that frame our current understanding of stakeholders and nature (cf. Banerjee, 2000)? Some of the world’s religious leaders have addressed the need for humans to reduce their impact on nature as well. For example, Pope John Paul II recently referred to humanity living an “environmental emergency” and emphasized that protecting the environment is a “moral and spiritual duty” (Reuters, June 25, 2002). The business community needs to listen to the perspectives of diverse stakeholders to learn of different standards of moral behavior related to stakeholder management. The integration of Aboriginal, traditional, and spiritual forms of knowledge into stakeholder theory may help management scholars and practitioners to re-evaluate many of the short sighted assumptions that accompany our stakeholder theories and practices. It has been suggested that some management theories have provided “dangerous normative implications” (Ghoshal and Moran, 1996, p. 15). Normative stakeholder theory should address the question of who “should” have power and legitimacy. The way that organizational researchers frame issues, such as stakeholders and stakeholder attributes, guides both stakeholder management and future research on the topic. A possible research area would be the study of similarities between other marginalized stakeholders, such as future generations, elderly, children, disabled, developing countries, and the natural environment. The stakeholder – natural environment relationship has some obvious ties to the topics of endangered human species, environmental racism, and intra- and inter-generational distrib-

The Primordial Stakeholder utive justice, as well as to environmental scarcity and violent conflict (Homer-Dixon, 1994).

VI. Conclusion In this article, we have argued that the natural environment should be seen as the primordial and primary stakeholder of all firms, deserving of immediate attention by management researchers and practitioners. We have suggested some ways to incorporate eco-sustainability criteria into the stakeholder concept by reframing the stakeholder attributes of power, legitimacy, and urgency and by adding the stakeholder attribute of proximity. We encourage further development of both normative and descriptive theories of stakeholder identification and salience, which view the natural environment as one or more primary stakeholders of the firm. We believe that it is no longer sufficient to simply equip managers with a “systematically comprehensible” set of stakeholders (Mitchell et al., 1997, p. 857). Managers have to embrace “bewildering complexity” and “excessive complications” related to stakeholder management the same way they accept complexity and uncertainty related to “the behavior of the market, the deliveries of suppliers, the attitudes of shareholders, the behavior of competitors, the future actions of governmental agencies, and so on” (Cyert and March, 1992, p. 166). We recognize that the complexity and interconnectedness of global ecosystems make it difficult for managers to determine specific impacts on these systems. However, as scientific evidence increases and fills more of these gaps in our knowledge, ignorance and scientific uncertainty can no longer be used as excuses for denial or inaction. Although acting on behalf of the natural environment daily may be difficult for managers, aspects of non-human nature can be and in many cases need to be prioritized as one or more primary stakeholders by business organizations. Although environmental advocates such as the Sierra Club, the World Wildlife Fund, the Canadian National Round Table on the Environment and the Economy, the U.S. President’s Council for Sustainable Development, and many others have

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been active and effective in bringing ecological issues before corporate decision makers, managers must consider the natural environment as a salient stakeholder. By including nature as a stakeholder deserving of managerial salience, we recognize the inherent interdependency between the global economy and the global ecology and promote longer-term, more ecologically responsible thinking and action in business organizations. In the meantime, the stakeholder status of the natural environment continues to be a salient topic for discourse among management scholars and practitioners. This article has advanced the conversation and our hope is that others will continue to develop it.

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Cathy Driscoll Saint Mary’s University, Halifax, Nova Scotia, Canada E-mail: [email protected] Mark Starik The George Washington University, School of Business and Public Management, Department of Strategic Management and Public Policy, Washington, D.C. 20052, U.S.A. E-mail: [email protected]