by bad publicity, British Petroleum, Unocal, Freeport-McMoRan, and
almost every natural resource company now embrace it. Academics and
journalists – including Ethical Corporation magazine – extol it. Gatekeeper
NGOs such as Human Rights Watch, Friends of the Earth, and Sustainability
Multi-stakeholder dialogue: It’s the hot buzz concept, promoted as
a sure balm for resolving environmental disputes.
The politically correct consensus is that transparency demands that
multinational corporations engage advocacy groups to mediate hot-button
issues: global warming, GMOs, resource exploration, globalization,
human rights disputes. But let’s not sing Kum-Ba-Ya ‘round the campfire
just yet. The dirty little secret is that stakeholder dialogue is
wildly overrated and often counter-productive––for businesses and
even for their advocacy antagonists, who frequently back policies
that hurt the very stakeholders that they presume to represent.
This paradoxical reality is rooted in the vague notion of what defines
a stakeholder. No company can thrive in today’s ultra-competitive
world market without catering to those with obvious stakes in its
prosperity–customers, employees, and business partners as well as
the government and communities in which it operates. But that’s not
what ethical fashionistas have in mind when they promote stakeholder
dialogue. Today’s zeitgeist, articulated in 1984 by University of
Virginia’s Ed Freeman, defines stakeholders as “any group or individual
who can affect or is affected by the achievement of an organisation’s
purpose.” That loosey-goosey definition has opened the door for any
advocacy group to demand a place at the negotiating table, even those
openly hostile to the values of a company’s primary stakeholders.
Consider the brouhaha in 1995 over the scuttling of the Brent Spar
oil platform. Before the blow-up, Shell was thought of by environmentalists
as being among the most proactive resource companies. After four years
and 30 studies, and in consultation with scientists and government
agencies, Shell chose what most everyone agreed was the most environmentally
and economically responsible disposal option: sink the rig in a deep
North Sea channel.
But as a richly funded NGO, Greenpeace had its own agenda and the
power to shape events. It demanded that Shell capitulate to its plan
to dismantle the Spar on land. When Shell held firm, Greenpeace launched
a holy war marked by guerilla raids (which were satellited around
the world by journalists who later confessed they were duped), provoking
service station bombings.
Did Greenpeace embody the best interests of the “natural environment.”?
Did it exercise its responsibilities as a stakeholder partner?
History has not been kind to Greenpeace. To subvert public debate,
it issued estimates of the toxic dangers of sinking the rig that it
later admitted were wildly exaggerated. But in the hysteria of the
moment, they had the intended effect of turning the public and harried
government officials against Shell’s more environmentally reasonable
plan. By the time Greenpeace publicly acknowledged that it falsified
data, the damage was done.
Based on confessions from Greenpeace officials, it appears its campaign
of misinformation and confrontation were not driven by a desire to
protect the marine environment–virtually everyone now agrees that
Shell’s option was far more environmentally responsible than Greenpeace’s–but
by internal politics, particularly its need for a publicity-generating,
Those who piously claim that Shell failed because it didn’t consult
with a key stakeholder don’t appreciate the dynamics of dialoguing
with an implacable ideologue. (See my essay “Shell, Greenpeace and
the Brent Spar: The Politics of Dialogue” in Case Histories in Business
Ethics, Megone & Robinson, Routledge, 2002). In the end, the biggest
loser was a key stakeholder: the environment.
As a rule of thumb, the more ideologically divisive the issue, the
more likely this degraded version of stakeholder dialogue will prevail.
NGOs that claim to represent broad “ethical principles”–for example,
the interlinked groups that have coordinated sometimes violent protests
against the World Bank and International Monetary Fund as representatives
of the developing world–justify their tactics by claiming to be stakeholders.
Certainly advocacy groups can play invaluable roles in illuminating
overlooked social problems and stirring public and even government
oversight. But that’s a far cry from granting stakeholder status and
inviting them into the boardroom for “negotiations”.
Not only do traditional stakeholders suffer but so do the causes NGOs
purport to represent. As often happens when the global limelight shines
brightest, Western NGOs, desperate to break through the noise clutter
and appeal to donors in wealthy nations, exaggerate causes (black
and white plays better than shades of gray) and distort their own
principles. As Clifford Bob notes in Foreign Affairs (“Merchants of
Morality”, March/April 2002), “multinational corporations and international
financial institutions have repeatedly served as stand-ins for obscure
or recalcitrant local enemies. … [A] movement … can project an effective
if sometimes misleading snapshot of its claims by identifying itself
as the anti-McDonald’s movement, the anti-Nike movement, or the anti-Unocal
movement.” In other words, NGOs often willfully cast corporations
as a villain to pursue its aims–even though in many cases, as with
Greenpeace and Brent Spar, its goals hurt the real “stakeholder”.
Unsavory tactics by over-the-top antagonists (animal right, anti-free
tradenik, and genetic engineering extremists come to mind) have radically
recast the notion of stakeholder engagement. What at its best is a
constructive way to build consensus among primary stakeholders often
devolves into an activist tactic reflecting an almost reflexive anti-multinational
bias. Greenpeace and other NGOs that engage in non-negotiable ultimatums,
deceit and even violence while demanding a slot in the boardroom should
be marginalized as faux stakeholders––or “dangerous stakeholders”
(see Mitchell, Agle, Wood, “Toward a Theory of Stakeholder Identification
and Salience: Defining the Principle of Who and What Really Counts,”
Academy of Management Review, October 1997).
Shell, Unocal, and other companies who have faced well-publicized
confrontations are slowly absorbing this lesson. They have emerged
as major proponents of stakeholder dialogue, but of a limited sort:
information-disclosing websites and innocuous, but well-publicized
meetings designed to diffuse issues before they boil. British Petroleum
has embarked on the same strategy in its “dialogue” with NGOs over
its Bintuni Bay project in West Papua, Australia.
So when, if ever, is stakeholder dialogue with advocacy groups appropriate?
History has shown that dialoguing encourages consensus when expectations
are modest–and usually as part of the healthy give-and-take between
legitimate stakeholders. At best, dialoguing with NGOs may diffuse
tensions early in a messy situation before ideological factions have
hardened. Beyond that, beware: Dialoguing can be dangerous to stakeholder