UNIVERSITY OF VAASA 

FACULTY OF BUSINESS STUDIES 

DEPARTMENT OF MANAGEMENT 

 

Maxwell Agboveh 

BALANCING CONFLICTING TERTIARY STAKEHOLDERS’ 

EXPECTATIONS: A MANAGEMENT PERSPECTIVE 

 

 

 

 

Master‟s Thesis in 

Management and Organization 

(in) International Business 

  

 

 

 

 

 

VAASA, 2009  



1 

 

CONTENTS                Page 

Table of Content ……………………………………………………………. 1 

List of figures……………………………………..………………………… 4 

List of tables………………………………………………………………… 4 

Table of Abbreviations …………………………………………………….. 5 

Abstract…………………………………..…………………………….…… 6 

1. INTRODUCTION        7 

1.1. Background         7 

1.2. Research gap, problem and objective      9 

1.3. Definition, scope and limitations of the study    11 

1.4. Structure of the study        13 

 

2. LITERATURE REVIEW       15 

2.1. Theory of corporate social responsibility and ethical management  15 

2.2. Stakeholder theory        17 

2.3. The external stakeholders       21 

2.3.1. The Public Groups (Special Interest Groups)    21 

2.3.2. The Environmentalist Groups      21 

2.3.3. The Consumerist Groups      23 

2.4. An Alternative Stakeholder Model – tertiary stakeholders   24 

2.4.1. The Tertiary Stakeholder Model     25 

2.4.2. Level of proximity       27 

2.4.3. Degree of autonomy       33 

2.4.4. Degree of influence       35 

2.5. Organization vs External stakeholder‟s conflict     39 

2.5.1. Overview of conflict       39 



2 

 

2.5.2. Sources and Nature of Organizational-External Stakeholders‟   

Conflicts        42 

2.6. Balancing organization-tertiary stakeholder conflicts – management 

perspective         46 

2.6.1. Stakeholder mapping       46 

2.6.2. Conflict Management Strategies     48 

2.6.3. Pressure Response Strategies      50 

2.6.4. Literature summary       54 

2.6.5. Conclusion of Literature Review     58 

 

3. RESEARCH METHODOLOGY      59 

3.1. Research strategy        59 

3.1.1. Qualitative research       60 

3.1.2. Case study approach       61 

3.2. Research design        62 

3.2.1. Data collection       63 

3.2.2. Data Analysis        64 

3.3. Validity and Reliability of the study      65 

 

4. CASE DESCRIPTION AND ANALYSIS     67 

4.1.   Background  of  Case Company - Botnia Metsa    67 

4.2. Corporate strategy issues of case companies     67 

4.2.1. Botnia‟s corporate social responsibility issues   67 

4.2.2. Discussion of the CSR issues - of case company   68 

4.3. Conflict Management Strategies       69 

4.3.1. Assessing Botnia‟s conflict management strategies   69 

4.3.2. Discussion of Botnia‟s conflict management strategies  73 



3 

 

4.3.3.  Comparison of empirical evidence from secondary data sources   

 – Balancing Organization-Tertiary stakeholder conflicts  76

    

5. DISCUSSION         84 

 

6. SUMMARY AND CONCLUSION      88 

6.1. Theoretical and empirical findings      88 

6.2. Theoretical contributions       90 

6.3. Managerial implications       91 

6.4. Future Study         93 

References:          94 

Appendix 1          99 

 

 

 

 

 

 

 

 

 

 

 

 



4 

 

LIST OF FIGURES  

Fig.1.  Ethical Management – Carrol and Buchholtz (2003)    16 

Fig. 2. R.E Freeman, Strategic Management: A stakeholder Approach, 

 Pub. Pitman Copyright, 1984.       18 

Fig.3. The stakeholder constellation - Adapted from Mike W. Peng, (2006)  19 

Fig4. Eric Rhenman‟s (1968) classification of stakeholders – Internal & External 20 

Fig.5. Comprehensive Stakeholder Model       26 

Fig.6. The level of distance between the stakeholders and the firm   31 

Fig.7. The level of distance between the stakeholders    32 

Fig.8. The degree of autonomy between the various stakeholder groups  34 

Fig.9. The degree of influence of the broad stakeholder groups.   37 

Fig. 10. The power/interest matrix.  Source, Johnson et al, 2008   47 

Fig.11. Conceptual framework and summary of literature review   50 

Fig. 12. Conceptual Framework and summary of Literature Review  57 

 

LIST OF TABLES  

Table 1. Various stakeholders and their interests.      42 

Table 2. Samples of emerging standards, codes, and Principles that are                                                                      

mounting pressures on organizations – adapted from      44 

Table 3.  Summary of conflict management and response strategies   56 

Table 4.  Previous and current environmental management paradigms at Walki-Pack. 78 

Table 5. Botnia‟s Conflict Response Strategies     81 

Table 6. Summary of findings on organisation-tertiary stakeholder conflict       

response strategies         82 

 

 

 



5 

 

TABLE OF ABBREVIATIONS 

ABBREV. MEANING 

CSR/CR Corporate (Social) Responsibility 

CEO Chief Executive Officer 

MNCs Multi-National Corporations 

SIG Special Interest groups 

FoE Friends of Earth 

ILO International Labor Organization 

OECD Organization for Economic Cooperation and Development 

ISO International Organization for Standardization 

 

 

 

 

 

 

 

 

 

 

 

 

http://en.wikipedia.org/wiki/International_Organization_for_Standardization


6 

 

UNIVERSITY OF VAASA 

Faculty of Business Studies 

Author:     Agboveh Maxwell 

Topic of the Thesis:  Balancing Conflicting Tertiary Stakeholders‟ 

Expectations – A Managerial Perspective 

 Name of the Supervisor:   Prof.  Henrik Gahmberg 

Degree:     Master of Science in Economics and Business 

Administration 

Department:     Management 

Major Subject:    Management and Organizations 

Degree Program:   International Business 

Year of Entering the University:  2007 

Year of Graduation:    2009    Pages: 100                                                

 

Abstract 

 

A firm is affected by various stakeholders in varying degrees.  These stakeholders are 

located within the immediate operational and also external environment of the firm. 

The survival of the firm is highly dependent on the entire stakeholder constellation; 

the firm cannot survive in isolation. These stakeholders have various expectations in 

the firm which frequently conflict with the objectives of the firm.  

 

This study identifies the level of these conflicts and the strategies adopted by 

management in balancing such expectations. However, some researchers believe that 

conflicts are managed (Amason, 1996), others argue that conflicts are resolved (Wall 

and Callister, 1995). However, this study addresses the issue of „balancing‟ conflicts. 

The study further attempts to probe what choices are available to management when 

faced with incongruent expectations from various stakeholder groups like increasing 

pressure on the firm from especially, the external environment (tertiary stakeholders). 

The study assumes that in spite of the perceived remoteness of these tertiary groups 

from the immediate boundaries of the firm, these stakeholder groups can cost the 

organization huge financial losses and bad publicity when their interests are 

underrated. Finally, pressure-response strategies that are adopted by management 

when confronted with organization-stakeholder conflicts are examined. Some of these 

strategies include: reactive, defensive, accommodative, problem-solving and proactive 

(Barki and Hariwick, 2001; Peng, 2006). Consideration is given to an alternative 

stakeholder model – tertiary stakeholders.  

 

Keywords: Stakeholders, constellation, expectation, conflicts, balance, interest 

groups, tertiary stakeholders. 



7 

 

Chapter one 

1. INTRODUCTION 

This section gives an overview of the content and the nature of the problem to be 

studied.  A preview of the literature review is discussed as well.  

1.1. Background 

Managing conflicts between the firm and its stakeholders has gained much attention 

recent times (Amason, 1996; Wall and Callister, 1995; Rahim, 2002). This 

phenomenon is perceived to be the results of the fact that the firm is surrounded by 

numerous stakeholder constellations that are connected throughout the value chain.  

Moreover, it is questionable whether managements are balancing all the expectations 

of these numerous stakeholders equitably. This study attempts to probe into 

stakeholder conflicts from the viewpoint of management, that is, how management is 

able to balance conflicts that constantly appear on their tables for a win-win 

expectation.    

The interest on this subject was heightened by the facts that, firstly, in spite of the 

numerous studies into conflict management, conflicts between organizations and their 

stakeholders are ever on the increase (Atkinson et al, 1997).  Secondary, there is an 

ever-increasing pressure on shareholder value maximization thus leading to 

management paying more than the usual attention to the expectations of the 

shareholders than the rest of the stakeholders (Lazonick and O‟Sullivan, 2000). 

Thirdly, certain members within the stakeholder constellation appear at the extreme 

end of the business operations – the external environment. These groups of 

stakeholders are often perceived by management to be of less value. Meanwhile, they 

are sources of great threat to the smooth operations of the firm and often engage in 

countless legal battles with the firm (Mcphaul, 2005).  Finally, corporate 

responsibility and „ethical business‟ appear to be mere theories without application in 

most organization especially, in developing countries (Christian Aid, 2004).  To most 

organizations responsible business is a matter of choice and not an obligation. 

Therefore, it merits attention to know the effects of irresponsible business practices 

and the subsequent implications to both the firm and the affected stakeholders. 



8 

 

Additionally, research indicates that managers spend major amount of their time 

dealing with conflicts (Pondy, 1992; Brown, 1993; Thomas & Schmidt, 1976).  

Ansoff (1984 cited in Harrison and Freeman, 1999) added that managing competing 

stakeholder interests is a primary management function.  Furthermore, many studies 

outline numerous types, nature and sources of conflicts. On the other hand, 

management also has to choose from different pressure-response-strategies (response-

strategy-mix) available to them (Barki and Hartwick, 2001).   The objective of this 

study is to examine conflicts from management-tertiary stakeholders‟ perspective and 

how management attempts to [balance] such delicate and regular conflicts. An attempt 

to take closer look at the expectations of the tertiary stakeholders that conflict with 

that of the firm‟s is made. 

It is also still a matter of research to be able to establish the real interdependencies 

that exist between the organization and the tertiary group of stakeholders. It is 

obvious, though, that the organization sometimes perceives their interdependence as 

indirect and less profitable in economic sense. Consequently, the expectations of the 

interest groups are ignored, leading to conflicts. The term balance is appropriately 

used in the study since the organization is confronted with various unmet 

stakeholders‟ expectations.  Although many studies discuss management and 

resolution of conflicts (Rhenman et al, 1970; Wall and Callister, 1995), the expression 

balancing is considered appropriate in such multi-party conflicts.  The study assumes 

that in situations where stakeholders vary and where their interdependencies 

sometimes appear unclear, management needs to balance such conflicts mutually.   

Davidson, (2002) concludes this way ―Robust linkages (exist) between customer 

commitment, employee motivation and shareholder value, something many business 

leaders already understood. However, understanding stakeholder linkages is not 

enough. They must be managed and aligned. To successfully manage conflicting 

stakeholder needs, organization leaders need to unite them through strong vision and 

values‖.  In effect, Davidson is emphasizing the complexities that exist between the 

organization and its numerous stakeholder and their expectations. He concludes that, 

management need to align these conflicting interests. Aligning these conflicting 

interests is introduced in the study as ‗balancing‘ which of course; carry the same 

sense proposed by Davidson.    



9 

 

Rahim, (2002) on the other hand argues that resolving conflict implies reduction, 

eliminating or terminating the conflict.  This conclusion suggests a reactive approach 

to conflicts. Balancing therefore carry the sense of management being proactive to 

possible conflicting expectations, integration of respective parties and attuning 

emerging and emerged conflicts to achieve win-win interest for both parties. It is 

believed that the integration of mutual interests for a win-win solution is the best way 

to prevent conflicts since they develop quickly and escalates fast.    

1.2 Research gap, problem and objective 

The real value of the tertiary group of stakeholders to the organizations is missing in 

most studies since the theory of „tertiary stakeholders
1
‟ has not received enough 

attention.  Therefore, considering the concept will be fitting for the purpose of the 

study to help managers see the value and interdependencies between the primary 

(organization) and the tertiary group of stakeholders.  It is believed that establishing 

this link can help management to put extra value on the tertiary group of stakeholders 

and to see their impact to the performance of their organization.  It is however, not 

merely an issue of establishing the extent of interdependences, but also, how their 

unmet expectations can harm the success of their business operations especially, in 

economic and legal sense. The study further assumes that meeting the expectations of 

this group will enhance the smooth operations of the organization. Smooth operations 

means free of regular legal battles, free environmentalist actions, and other possible 

actions that often result in tarnished image of the firm.  

Harrison and ST. John (1996), Argued that “An inherent assumption in the drawing of 

organizational boundaries was that external stakeholders could not be managed, in 

the traditional sense of the word, because they were not a part of the management 

hierarchy.”  For example they added that ―Traditionally, at least in the United States, 

the focus in management has been on internal (e.g. employees) rather than external 

stakeholders, with organization boundaries drawn around the individuals and groups 

over which managers had direct supervisory control‖. As a result, most studies pay 

                                                           
1
 Tertiary stakeholders are identified in the study as the environmentalist, special interest group, and the 

consumerists among others.  A different   ‘tertiary stakeholders’ model was considered in this study. The theory 

emerged from the secondary group of stakeholders. 



10 

 

little attention to the interest of the tertiary group of stakeholders at large. Volumes of 

studies focus more on management-employee, primary-secondary stakeholders 

relationships and how best to improve organizational performance using the 

immediate stakeholders or those stakeholders within the management hierarchy.  

These groups of stakeholder involve: shareholders, employees, customers and 

suppliers. Few attempts have been made trying to outline distinct guidelines toward 

meeting the expectations of the tertiary stakeholders.  

Furthermore, management often perceives this group as merely an irrelevant, 

expensive and money-wasting  business to deal with (Bishop, 2004). The implications 

being that, the tertiary stakeholders are of no economic significance to the firm and 

efforts cannot be wasted on their interests. This unclear link and seemingly indirect 

connection between the organization and the tertiary groups of stakeholder especially, 

has lead to many firms and their managements neglecting the potential harm that 

these stakeholders can cause to their business interests. The growing interest in 

maximizing shareholder value (Carrillo, 2007) is yet a contributing factor to this 

phenomenon. This is the issue of interest in the study, to help bring to light how this 

group of stakeholders affects the firm and how the firm in turn should perceive the 

groups‟ interests. 

 Additionally, it is evident that the plights of the tertiary stakeholders are heightened 

only when they voice their demands through actions.  Therefore, a study into the 

situation, where this group of stakeholders is seemingly left out of the table, their 

potential harm and lastly, how management can effectively handle such conflicts 

arising from them will be studied.  A closer look at these gaps prompts the following 

questions: How does the organization depend on the external stakeholders - more 

specially, the tertiary groups and vice versa? Secondary, what are the nature of the 

conflicts that exist between the organization and the tertiary group of stakeholders? 

Finally, how can management balance the conflicting expectations between the firm 

and the tertiary stakeholders effectively? 

Answering these questions will help us achieve the objective of the study – how 

management can successfully co-operate with the tertiary stakeholders. It is assumed 

that unearthing the hidden dangers that this group of stakeholders possess and 



11 

 

balancing their expectations against that of the organization can help not only 

management, but the success of the firm at large. When management narrows their 

interest to just the economic benefits of their operations, they are being myopic, 

(Mizik and Jacobson, 2007). This happens when the expectations of some groups of 

stakeholders are perceived as unrelated to the firm‟s interest (economic).  Meanwhile, 

the concept of the triple bottom-line: economic, environmental and social interest 

demands that management gives serious attention not only to economic performance 

of the firm but also the entire antecedents to firm‟s survival.  Thus management-

myopicism related to the impact of the external stakeholder group is unjustifiable and 

is assumed to be harmful to the firm.  

According to Peng, (2006) a firm being truly responsible means “the consideration of, 

and the response to, issues beyond the narrow economic… requirements of the firm 

but also social benefits along with the traditional economic gains which the firm 

seeks‖.  His conclusion implies that any lag in the scope of the firm that is; ignoring 

the expectations of any member of the stakeholder group can lead to potential damage 

to the firm since not all members of the stakeholder constellation have economic 

interest in the firm.  In effect, the study focuses more on how to avoid the concept of 

myopicism and to campaign for a perfect balance of the firm‟s stakeholders‟ 

expectations especially, that of the tertiary. 

Another major objective of the study is to develop an alternative stakeholder model – 

the tertiary stakeholder - that fits the purpose of the study.  This model will help to 

gain an insight into the tertiary groups of stakeholders who are often classified among 

the secondary. Since the study focuses on this type of stakeholders and their impact 

on the organization‟s performance it will be worthwhile considering their value to 

management as the primary and other members of the secondary stakeholders are to 

the organization. 

1.3 Definition, Scope and limitation of the study 

The term stakeholders denote all parties that have interest in the operations of the firm 

and can affect or be affected by the operations of the firm (Freeman, 1984).  

Stakeholder constellation lays emphasis on the fact that; the stakeholder groups vary 



12 

 

and can be compared to a group of network - constellations. Within this constellation 

of stakeholders are the interest groups, the activists, the pressure group and the most 

famous - the environmentalists.  These groups are perceived to be indirectly 

connected to the firm (Harrison and ST. John (1996).  Certain notable members of 

these groups include: pressure groups like the media, the consumerist, and the 

environmentalists like: the Friends of Earth, Greenpeace, Friends of Water Bodies, 

Wild-Life Conservationist, and Action Aid among others. 

On the other hand, a closer look at the primary groups also shows yet another huge 

constellation of stakeholders involving management, shareholders or owners and 

employees (Whysall, 2000).  Notably, the interests, demands or the expectations of 

these numerous stakeholder groups vary greatly.  From the organization‟s point of 

view, some of these expectations may be primary (more important) whiles the rest 

are.   The primary interests are those „inside‟ the organization which the day-to-day 

operations of the business greatly depends on. The organization may consider 

secondary interests as those whose dependence by the organization is occasional or 

remote from the boundaries of management.  Therefore, various expectations of these 

secondary interest groups are judged according to how management perceives them to 

be of significance especially towards their interest.   

According to Roloff (Cited in Rahim 2002) and Rhenman et al (1970:57-70) 

organizational conflict occurs when members engage in activities that are 

incompatible or incongruent with those of colleagues within their network, members 

of other collectivities, or who utilize the services and products of the organization.  

Balancing conflicts assumes that in typical multi-party conflicts management must 

attune (balance) conflicts in other to arrive at an equitable solution and in most cases 

prevent the conflict from arising or escalating. Management must avoid merely 

attempting to quell the conflict from the surface through temporal mechanism 

designed to satisfy the expectations of the dissastisfied parties. Attuning the conflict 

for an equitable solution will lead to preventing recurring and expensive legal battles 

that are characterized by most conflicts of such nature (McLibel Trial, 1997). The 

terms:  pressure groups, advocacy group, lobby group or special interest group, 

activist and environmentalist are used interchangeably in the study to mean members 

of the tertiary groups of the traditional external stakeholders‟ constellation.  



13 

 

Although most the nature of the conflicts between the organization and its numerous 

stakeholder constellations are discussed in the study, attention is given to the nature of 

conflict between the organization and the tertiary groups and in the empirical data 

collection process.  The purpose of addressing the nature of  the conflicts between   

some of the members of the  – primary and secondary stakeholders as well is to help 

throw light on the day-to-day  conflict management efforts that management of the 

firm have to go through. The empirical study does not cover those conflicts.    

This focus on the tertiary group of stakeholder was heightened due to the fact that 

these groups (tertiary stakeholders) are diverse, but, do not received exclusive 

attention and are  merely listed among the secondary stakeholders (Freeman, 1984). 

Additionally, the groups have considerably a wide-range of expectations in the 

business operations of the firm even to the point of engaging in frequent legal battles 

when necessary, especially when their expectations are underrated, yet they are 

regularly ignored by some firms.  For this reason, focusing on this group in the study 

will help unveil how management perceives them as distinct and in a more practical 

sense how they handle most of their (tertiary) groups‟ expectations since these groups 

seemingly are of no economic significance to the firm.   

1.4. Structure of the study 

The study primarily addresses four theories:  the theory of corporate responsibility, 

the stakeholder theory, the theory of ethical management, and the theory of conflict 

management. The first three theories are related to the organization‟s corporate 

responsibility issues whereas the theory of conflict management serves as the basis for 

assessing the organization-stakeholder pressure response strategies. These theories are 

categorized to harmonize the objective of the study as outlined in the previous pages. 

As to CSR and ethical management, these are considered from the firm‟ or 

management point of view whereas the stakeholder theories became necessary 

because of the tertiary groups that the study focuses on.  Finally, how the firm is 

connected to the external stakeholders is addressed in the conflict management 

theories. In all, extra emphasis is given to the organization-tertiary stakeholder 

conflicts and conflict management theories. 



14 

 

The two important theories relevant to the study are evident in terms of the depth of 

their analysis.  This is necessary since the stakeholder groups of the case firm used in 

the study were too many and hence may likely face various conflicting expectations.  

It is therefore not necessary to study the expectations of all the members of the 

stakeholders. Thus the focus of this study gives impetus to the external stakeholder 

group. Within this group, the study further addresses one unique type of external 

stakeholder – the tertiary stakeholder. 

Various studies point to different types, nature, conflict management and conflict 

response strategies that management adopts when dealing with organization-

stakeholder conflicts (Barki and Hartwick, 2001; Peng, 2006).   Therefore, it is 

necessary to know which of these response strategies are adopted by management 

when dealing with organizational-tertiary stakeholder conflicts.   

Additionally, most studies seek to explain why and how conflicts occur (Wall and 

Callister, 1995). The study seeks to address one specific reason– “when two parties 

have incongruent interests or expectations” (Rahim, 2002).  This scope lays emphasis 

on the type of conflict that exists between the organization and the tertiary. Focusing 

on this specific nature and type of conflict will help to achieve the objective of the 

study - ―how management can successfully co-operate with the tertiary group of 

stakeholders whose expectations are often perceived as irrelevant since they fall 

outside their managerial boundaries‖ (Carrillo, 2007). 

The study proceeds to gather and analyze empirical data from the case company using 

qualitative and semi-structured questions.  This will help to gain insight into the real-

world situation - how management truly perceives the expectations of the tertiary 

group of stakeholders and how management in the practical world approach conflicts 

of such nature. The data collection process will focus primarily on how management 

responds when there are conflicts or anticipated conflicts. Also, which particular 

„strategic-response-mix‟ they adopt for any given type of tertiary stakeholders‟ 

conflict. This is necessary to know because there are different types of stakeholders 

within the tertiary groups implying that there are different expectations as well. Most 

of these conflict-response-strategies to be addressed are based on studies conducted 

by Barki and Hartwick (2001) and Peng (2006). 



15 

 

2. LITERATURE REVIEW 

This section reviews all relevant theories and models for the study. The following 

theories will be considered: CSR, ethical management, stakeholder and conflict 

management. 

2.1 Theory of Corporate Social Responsibility and ethical management 

Corporate Social responsibility (CSR) refers to „the consideration of, and the response 

to, issues beyond the narrow economic, technical, and legal requirements of the firm 

to accomplish social benefits along with the traditional economic gains which the firm 

seeks‟ (Peng, 2006).  From this definition, we can establish the fact that, the 

traditional reason for the existence of most organizations is economic or profit-

making. However, the concept of CSR according to Peng, implies that every profit-

making organization must go beyond the profit-making boundary, often argued as the 

triple bottom line. CSR must instill in organizations the sense of gradually leaping 

towards the other two lines: social and environmental issues along with their primary 

objective (economic).   Doing so will imply that the firm seeks to satisfy the interest 

of all the stakeholders surrounding the firm whose interest may not necessarily be 

economic. 

Johnson et al (2008:146) concludes this way: CSR “is activities that are concerned 

with the ways in which an organization exceeds its minimum obligations to 

stakeholders specified through regulations”. Corporations are obliged to take 

sustainable actions and accept that they are responsible to their stakeholders: 

customers, suppliers, employees, shareholders, communities and the environment who 

often become victims of their profit-making interests. However, there are certain 

actions that may not be specified through regulations (ethical actions). Clearly then, 

when management by their natural inclinations exceed what the law stipulates (taxes, 

green business, human rights etc), they climb further along the CSR ladder.  

Notably, true CSR in modern business practices can be considered as a strategic tool 

for gaining competitive advantage, winning the heart of the customers and the entire 

stakeholders both those directly and indirectly related to the firm (Peng, 2006).  Ethics 



16 

 

on the other hand is natural, a sense of feeling - the ability to see the difference 

between right and wrong actions.   

However, responsibility on the other hand is not natural but is catalyzed by ethics.  

Moss (2002) argues that “business ethics and corporate social responsibility both 

exists under the umbrella of ethics”.   In a sense, he implies that ethics is the fuel of 

corporate responsibility and not vice versa. Moreover, CSR and ethics are concepts 

that are applied hand in hand. Ethics as standalone discipline is inherit (natural 

conscience) and can be used as a guard-post to shape the organization‟s sense of 

responsibility even without an external pressure.  In businesses where ethical stance 

(how far the organization will go in ethical sense) is low, irresponsible business 

operations are high. Then legal enforcement and stakeholder pressures are rampant. 

Understandably, blending ethics and business (ethical business) rules out legal actions 

and consequently, limits stakeholder conflicts. 

Carroll and Buchholtz (2003 cited in CIM, 2008) argued this way: “businesses, and 

the managers and staff who work within them, have responsibilities not just to 

shareholders but to stakeholders as well”. Such sense of responsibility requires 

management to integrate ethical management with their businesses which will finally 

be felt by their stakeholders – including the tertiary groups. 

The diagram below summarizes the components of ethical management: 

 

 

 

 

 

 

 

Fig. 1.    Ethical management, adapted from Carrol and Buchholtz, 2003  

ECONOMIC 

Is what we are doing 

profitable? 

LEGAL 

Is what we are doing 

legal? 

ETHICS 

Is what we are doing 

Right, fair and just? 

Ethical/Legal/Profitable 



17 

 

The diagram above clearly identifies the relationship between ethics, the 

organization‟s primary objective (economic) and the role of the law (legal).  In 

practice, it means that: 

 Ethical – the need to act morally in line with corporate values. 

 Legal – the requirement to observe the law. 

 Economic – the need to generate profits and returns to shareholders, or in the 

case of not-for- profit businesses to achieve objectives. 

Ethical management aligns all the three disciplines along with the organization‟s 

strategic objectives.  Although ethics is closely related to legal, ethical practices are 

far from legal ones and are usually considered to override legal issues (Carrol and 

Buchholtz, 2003). 

In practicing „ethical business‟, corporations should morally and naturally feel the 

sense of right and wrong and see the extent to which their primary objective (profit-

making) cuts across the boundaries of humanity – (irr) responsibility. Conclusively, 

ethical behavior is natural yet the operations of most organizations at one point in 

time make this claim arguable (Christian Aid, 2004)
2
. This leads to a very important 

question: should corporations be forced or reminded to be responsible in their 

operations? Finding answers to this question leads to yet another important theory – 

stakeholder theory. This theory throws light on who the firm‟s stakeholders truly are; 

the different types of stakeholders, their relative power, their interests, and the nature 

of pressure that they put on businesses who act irresponsibly.    

2.2. Stakeholder theory 

Freeman (1984) in his concepts of stakeholder theory argues that “stakeholders are 

those group or individuals who can affect, or are affected by, the achievement of a 

corporation‟s purpose”. The term can affect, or is affected by denotes the 

interdependences of all interested parties within and around the operations of the 

                                                           
2
 Christian Aid is a non-governmental organization based in the UK that terms the real face of 

Corporate Responsibility activities of MNCs as “Mask”. Implying that MNCs do not practice real 

‘ethical business’. 



18 

 

organization. Additionally, it suggests that the survival, strategic goals and objectives 

of the organization are linked to organization-stakeholder relationship, 

interdependency and co-operation. He lists the following as a firm‟s stakeholders: 

supplier firms, customer segments, employee segments, various members of the 

financial community, several levels and branches of government, consumer advocate 

groups and other activist groups, trade associations, political groups, unions, and 

competitors among others .   

 

 

 

 

 

 

 

 

Fig. 2.  Source: R.E Freeman, Strategic Management: A stakeholder Approach, Pub. 

Pitman Copyright, 1984 

Freeman‟s model is very comprehensive. The consumerists were identified as the 

“customer advocate group” whereas the “activist groups” (advocates groups) of the 

external stakeholders were also listed. These groups were identified in this study as 

members of the tertiary stakeholders.  His finding adds more value to this study.  

A different model proposed by Peng (2006), clearly identified the environmentalist as 

stakeholders who merit attention. Although the model in relative sense is not as 

comprehensive as Freeman‟s, it is interesting to see how his classification ties in with 

existing models to enable us have a broader picture of this „tertiary‟ group of 

stakeholders. 

Owners/ 
Shareholder

s 

Suppliers 

Competitors 

Trade  

Associations 

Employees 

     Unions 

Activist 

Group 

THE FIRM 

Managers 

 

Financial 

Community 

Customers 

Customer 

Advocate Group 

Governmen

t 

Political 

Groups 



19 

 

The diagram below depicts a typical stakeholder constellation proposed by Peng, 

(2006). 

 

 

 

 

 

 

Fig.3. The stakeholder constellation - Adapted from Mike W. Peng, (2006) 

The diagram points out the connection between the firm and its stakeholder groups. 

The firm is connected to every member of the stakeholder groups and vice-versa. In 

this respect the individual stakeholders can be affected by the firm‟s operations and 

the stakeholders in turn can affect the firm (Freeman, 1994).  Since the 

communication is two-way and all the members of the stakeholders can affect and be 

affected by the firm, it implies that the firm cannot justifiably ignore any of the 

members (they are interdependent). Both members of the primary, secondary and the 

tertiary can affect or influence the organization in one way or the other due to this 

interdependency.  However, all the members of the stakeholders do not have the same 

power and interest in the organization. (See Fig 10. Power/Interest Matrix). The 

power and interests of the stakeholders may be relative to that of the firm. 

Concerning stakeholders, Rhenman (1968 cited in Freeman, 1984:41) argued that 

“We shall be using the term stakeholders to designate the individuals or groups which 

depend on the company for the realization of their personal goals and on whom the 

company is dependent. In that sense employees, owners, customers, suppliers, 

creditors as well as many other groups can all be regarded as stakeholders in the 

company”  Here, he identifies the level of interdependency between the organization 

and its stakeholders. He connects both the organization‟s goals (economic) to that of 

the stakeholders. However, it is clear that not all the stakeholders have similar goals 

Shareholders 

Government 

Suppliers 

Environmentalist 
Groups 

Employees 

Communities 

Consumers 

THE FIRM 

Managers 

 

Customers 



20 

 

as the organizations. The goals of the stakeholders that he (Rhenman) referred to as 

personal goals may vary from social to environmental goals. However, unless the 

organization respects these (personal goals) of its numerous stakeholders, there will 

always be conflict of interest.  These goals as used by Rhenman are termed 

expectations in this study.  

Rhenman‟s classification of stakeholders based on internal and external groups can be 

depicted as: 

 

 

 

 

 

 

 

Fig 4.  Source: Based on Eric Rhenman’s (1968) classification of stakeholders – 

internal and external 

Meanwhile, the concept of tertiary stakeholders has its root from knowing that there 

are primary and secondary groups. In Fig. 3, we clearly identified the 

environmentalist as part of the stakeholder group. Freeman (Fig.2) broadly classified 

this group as activists.  The term activists can be used in a broad sense to represent 

pressure groups, interest groups, the environmentalist groups and any other members 

of the public stakeholder groups (Special Interest Groups) like ILO, EU and OECD.  

The tertiary groups of stakeholders fall outside the boundary of the organization and 

are not part of the internal class of stakeholders. Existing studies classify them as 

secondary or external stakeholders (Freeman, 1984). 

 



21 

 

2.3. The External Stakeholders 

In this section, attention is given to the various stakeholder constellations that 

surround the firm.  No attempt however is made assessing the relationship between 

the organization and the internal stakeholders. The public groups receive fuller 

attention; also, the environmentalist groups and the consumerist groups. 

Subsequently, attention is given to the proposed model – tertiary stakeholders. 

2.3.1 The Public Groups (Special Interest Groups) 

The public group of stakeholders are often referred to as: advocacy groups, lobby 

groups, pressure groups, special interest groups or the activist groups.   In a broader 

sense, they act against organizations that behave irresponsibly, exerting pressure on 

the businesses (Waddock et al, 2002). Such pressures may be in the form of codes, 

principles, regulations and law enforcement (Refer to Table 2 for some emerging 

codes, standards, principles and regulations from this group of stakeholders).  They 

often fight for justice and compliance of regulations. 

In the US, Canada, Britain and Germany for instance, there are countless number of 

established non-governmental bodies who battle with organizations on daily basis
3
. 

These groups do not directly engaged in transactions and usually have no business 

interest with the corporations. However, they regularly monitor the activities of the 

organisations and display various degrees of interest in the life of the businesses. It is 

therefore convincing knowing how they can affect or influence the organisations 

(Freeman, 1994) and how they and the organisations are interdependent (Rhenman, 

1968). The pressures that they exert on the businesses may include: eco-battles, legal 

battles and sanctions among others.   

2.3.2 The Environmentalist Groups 

The environmentalist groups are sometimes referred to as Eco-friends. Some notable 

environmentalist groups include: Greenpeace, Friends of river and water bodies, 

Friends of wildlife, Friends of Earth, Wild-Life Conservationists among others. The 

                                                           
3
 See  (http://www.urban75.com/Links/contacts.html) for list of some of these groups in the 

specially, UK and the US. 



22 

 

environmentalist activist groups of stakeholder often engage in various eco-battles, 

direct confrontations and lobbying activities against organisations and on behalf of 

disadvantaged stakeholders – including the environment itself (Joustenvirta, 1997).  

They Lobby to influence public officials to take actions on a giving subject 

(Macmillan Dictionary, 2009). They can halt the operations of a firm through 

demonstrations, legal backing and press activities. Moreover, they try to tarnish the 

image of irresponsible organizations through their activities.  These groups range 

from international to national and to community levels.  To ensure that their interests 

are met and to identify a pre-text against businesses, they often scrutinize the 

organizations‟ activities to see how favorable their activities are towards the interests 

of the rest of the stakeholders.  They conduct surveys, publish journals and at times 

engage in face-to-face confrontations with the firms. For instance, GreenPeace and 

ActionAid international activist groups have their offices in many countries
4
 

presenting themselves to the world as „friends of the under-privileged‟ or „the voice-

of-the-people.  

These two bodies have influenced and affected the operations of many corporations 

by publishing comprehensive reports (often offensive) about businesses especially, in 

developing countries. Sometimes, they go further to solicit government and legal 

support/justice against corporations. One of such example is the report on the effect of 

mining activities of AngloGold Ashanti (British-Ashanti) - A Gold mining company 

in Obuase, a local community in Ghana. Several journals and international articles by 

[Greenpeace and ActionAid - Ghana] have been published featuring adverse effects 

and images of locally affected stakeholders from the activities of the mining 

company.  The adverse effect of this mining activities were listed in their journals 

which include: land pollution, water pollution, leaching of toxic chemical into the 

soil, air pollution and less concern for the properties of the local farmers and the 

community settlements.  This course exerted intensive pressure on the performance of 

the company. Managers of the business were forced to defend their actions which 

consequently lead the company to abandon certain mining sites and to compensate 

                                                           
4
 Go to (http://www.greenpeace.org/international/) to see the number of countries where 

Greenpeace have their offices, 



23 

 

heavily for affected local inhabitants in other to exonerate their damaged image 

brought before the international community (ActionAid, 2006) 

From the above example, it is clear that there are stakeholders whose interest in an 

organization is merely to seek-justice and advocate rightful courses.  Also, to ensure 

that firms are responsible and are brought to actions if found practicing 

irresponsible/unethical business.  It is also evident that the firm sometimes may know 

the rightful course to take yet, they regularly ignore the plights of affected 

stakeholders to enable them achieve their interests (me-first). It is noteworthy also 

that at times the firm being irresponsible is not merely triggered by the quest for 

survival or to achieve the organizational goals but simply due to negligence and 

greedy economic pursuit.  Therefore, if management of firms ignores the potential 

threats that these pressure groups can cause to them by looking at them with blind 

eyes, their profit making operations and image would severely be brought to question 

since these stakeholders are very influential but do not pursue the same economic 

interest as the firm.   

One popular term connected to the environmentalist groups‟ actions is environmental 

movement. This term sometimes includes the conservation and green movements - a 

broad scientific, social, and political movement. In general sense, the 

environmentalists advocate sustainable management of resources, the protection and 

restoration of the eco-system and sometimes human rights through changes in public 

policy and individual behavior. 

2.3.3 The Consumerist groups 

Kotler (1976) defines consumerism as the "social movement seeking to augment the 

rights and power of buyers in relation to sellers."  This definition implies that the 

consumerists are included in the activist groups of stakeholders who are pioneering 

and supporting consumer-rights and interests. The relationship between consumerism 

and the consumerist however, is that consumerism is an outward manifestation of 

consumerists' actions (Bourgeois and Barnes, 1979).  As example, members of the 

Consumers' Association of Canada (CAC) were selected as representative voices of 

consumerists. Membership in the CAC represents a behavioral measure of the 

http://en.wikipedia.org/wiki/Green_movement


24 

 

consumerist - "a voluntary, non-sectarian and non-governmental organization that 

provides a strong and reliable voice for consumers” (Brobeck, 2006). 

It is clear then that, consumerism is a „movement‟ whiles „consumerists‟ are the 

activist groups who represents the consumer movements.  The consumerist fight for 

the interest of the consumers sometimes referred to as Consumer Rights Advocates 

(ARA). The interest of the consumers include quality products, accessibility,   

affordable pricing, innovative products, convenience, customer care, ethical products, 

among others (Waddock et al, 2002; Brobeck, 2006). The consumerist actions are 

necessary due to the greedy interest of some businesses that often ignores the interests 

and rights of the consumers. Defective products are intentionally released for sale at 

times, cut-throat pricing are seen in most parts of the world where the consumers have 

no option and when the products are a bit innovative and rare.   

In other instances, genetically modified foods are produced and sold for consumers
5
.    

There are many instances where the consumerist groups have interfered with the sales 

and export of Genetically Modified (GM) foods to and from many countries. For 

example, in the year 2000, Greenpeace took several actions against shipment of GM 

foods to Brazil, UK and many other countries (Greenpeace, 2000).  This example 

further implies that many non-governmental organizations can exert effective pressure 

on businesses and on behalf of the consumers just like the legal system can do.  

Usually, such pressures can even be more effective than legal enforcement, the reason 

being that these actions are quicker and produces effective results than long-legal 

battles that are often „lobby-able‟.  Pressures from the tertiary groups cannot be 

lobbied - not easily, thus making it even more effective in achieving its objective.   

 2.4. An alternative stakeholder model – tertiary stakeholders. 

A look into an alternative stakeholder model as mentioned earlier is considered in this 

section. The model is proposed after carefully considering existing theories of 

Rhenman (1968) and Freeman, (1984). The model considers three important factors: 

the degree of autonomy, the level of proximity and the degree of influence possessed 

                                                           
5
 For more details on movements against GM foods visit 

(http://www.urban75.com/Action/genetix12.html) 



25 

 

by a particular group of stakeholder. These criteria are used to identify the tertiary 

groups of stakeholders as the study progressively touches on the term. 

2.4.1 The Tertiary Stakeholder model 

Many studies into stakeholder theories classified stakeholders into Primary and 

Secondary (Rhenman, 1968), and internal and external (Freeman, 1984).  These two 

primary groups are further sub-categorized into various stakeholder constellations. 

Freeman, in his theory defines stakeholders as “those group or individuals who can 

affect, or is affected by, the achievement of a corporation‟s purpose”.  Rhenman 

(1968) on the other hand argues that stakeholders are groups that depend on the 

organization and the organization in turn depends on them. 

 Primary or internal stakeholders are those within the immediate 

surrounding/boundary of the firm including: managers, shareholders/owners and 

employees. The secondary or External, are those who operate outside the immediate 

boundaries of the firm – customers, suppliers, Government, community, NGOs, 

Environmentalist etc. 

A more comprehensive stakeholder model attempts to categorize a third group the 

“tertiary” stakeholders.  Existing categorization based on the external stakeholders is   

questionable since such categorization is too broad to merely put it as “external”. The 

expression „external‟ is infinitive/broad and demands narrowing. Consequently, re-

focusing on the original Rhenman‟s theory of internal and external stakeholders 

makes the study very easy to comprehend. Moreover, his definition that stakeholders 

“surround” the firm leads us to investigate the level – how close or farther away that a 

particular stakeholder is to the firm (proximity).  Moreover, Freeman‟s argument that 

stakeholders can affect and be affected demands that we examine the question „to 

what degree can they affect and be affected?” Can knowing the extent of “can affect 

be affected” help us to re-focus on the stakeholders at large?  These   questions are 

investigated.   

  

 

 



26 

 

Three criteria or characteristics possessed by a particular stakeholder are considered 

in this categorization: 

 

1. The degree of autonomy (of the stakeholder(s)) 

2. The level of proximity (of the stakeholder(s)) 

3. The degree of influence (of the stakeholder(s)) 

 

A. Primary stakeholder:  Management, shareholder/owners, employees 

B. Secondary stakeholders: customers, suppliers, government and communities    

C. Tertiary stakeholders: pressure groups, consumerists, environmentalists, 

advocacy groups, lobbyist groups, NGOs and Special Interest groups (SIG) -  

public or  International bodies (EU, ILO, OECD) etc. 

 

 

 

 

 

 

 

 

 

 

              Fig. 5. Comprehensive Stakeholder Model 

 

ANALYSIS OF STAKEHOLDER CHARACTERISTICS 

 

A. Degree of autonomy 

 

The degree towards absolute autonomy „stand-alone‟ in terms of power  and level 

of operation (autonomous) as well as the degree to which it cannot be  affected so 

much by other stakeholders especially, the firm.   The degree of autonomy is sub-

categorized based on how autonomous the stakeholders are: 

 

A 

B 
C 



27 

 

1. Primary  stakeholders -  high autonomy 

2. Secondary stakeholders – higher autonomy 

3. Tertiary  stakeholders  -  highest autonomy 

 

B. The level of Proximity 

 

1. From the immediate business environment 

2. From the core business boundaries 

3. From the operational decisions 

 

C. Degree of influence 

1. On managerial decisions 

2. On management or firm expectation/interests 

  

2.4.2 The Level of proximity 

The level of distance describes how in-depth: closer or farther away that the 

stakeholder is towards the core or centre of the business operations – 

„surrounding‟ the business (Rhenman, 1968). Within this category we identify 

how close the stakeholder is:  

 

i. From the immediate business environment 

ii. From the social environment 

iii. From the operational decisions 

 

i. From the immediate business environment 

 

The business environment involves frequency of interactions with employees and 

management, ability to depend on the business for any benefit or help, the degree to 

which  both the: economic, social and environment settings of the firm is close or can 

impact on a particular stakeholder. For instance, in these categories, shareholders and 

employees are very close to the economic environmental in a sense, the performance 

of the firm really affects them than any other imaginable stakeholder(s). Since 

employees and shareholders depends on the revenue generated from the firm on daily, 



28 

 

weekly, monthly or yearly basis.  Thus, the very economic performance of the firm 

can greatly affect these stakeholders. The tertiary may not be close to the firm in this 

sense. 

 

The core business environment of the firm can also be termed jurisdictional 

boundaries or level of control that managers have both in their departments and 

outside their departments. This basis can also be used to categorize stakeholders.   For 

instance, management does not have control over the external stakeholders because 

the tertiary groups do not fall within their „boundaries‟ – jurisdiction or control.  In a 

sense, if a stakeholder is out of the boundaries of a functional departments, boundaries 

of board of directors or the physical boundaries of the firm the level to which the 

stakeholder is affected (Freeman, 1984) is questionable. The closer of farther away 

that a stakeholder is depends on the type of stakeholder in question.   It also affects 

and explains the degree of control and influence that the organization can have on its 

stakeholders at large. The level of distance from the core environment of the business 

operations of the firm is highly felt by both the employees and the communities in this 

regard. In this sense, the members of the secondary stakeholder like suppliers and 

consumers are seen to be closer than the tertiary, environmentalist or consumerist. 

Thus, the environmental groups are out of the reach or control of the firm completely 

as a group unlike the members of the traditional secondary stakeholders. 

 

ii. From the social environment 

 

The level of distance in social environment relates to the interdependencies between 

the organization and its immediate stakeholders. The business greatly affects the 

community in the sense that not only does the environment becomes an issue, but also 

the „profitability‟ of the firm to the society. To what extent do the communities 

surrounding the firm benefit from the business? Are employment privileges created? 

Have the business provided any social benefit to the community or it is just a business 

fulfilling its legal obligations? Answering these question can help understand the level 

to which the community in particular benefits from the existence (proximity) of the 

firm. In most developing countries and as well developed countries, firms are 

considered to be part of developmental projects. Developing countries expects firms 



29 

 

to provide good roads, education or library for poor communities, provide 

employment and at times financial support (sponsorship) towards any rightful cause, 

like education. 

 

In the same sense, the physical environmental impact of the operations of the firm is 

highly affected by the communities than any other stakeholders, say the tertiary. 

Although the internal physical environment is firstly, greatly affected by the 

employee, the secondary physical environment is also a major concern for the society. 

Air pollution, water pollution, noise, lost of property like the lost of farmland due to 

mining and road construction activities are highly felt by the communities. Aside, in 

many mining centers where community settlement is close, houses are cracked due to 

mining activities, foundations of houses are shaken on day-to-day basis, and night 

sleeps are disturbed. Dangerous flying stones and objects out of blasts among others 

can even be lethal to unfortunate persons within the vicinity.  In other parts of Africa, 

stray objects from blasts sometimes fly high enough and penetrate roofs of houses 

within the community settlements.  

 

iii.   Level of management decision 

 

Some stakeholders may appear literally far away from the core business decisions. 

For example the receptionists may appear far from management decisions - but in 

reality have greater impact on the implementation of management decisions. 

Although they (receptionists) control most of the communications from the external 

environment, they must not be perceived as merely information-controllers.  For 

instance, if management plans to increase profitability by 15% in 6 months time, this 

strategic decision could possibly ignore the impact of the receptionist towards the 

implementation completely. However, the receptionist as a gatekeeper (controls flow 

of information) and has the possibility of driving away potential customers and 

profitable clients who may want to do business with the organization through the 

phone or at the entrance. In effect, the receptionist is technically closer to 

management decision (corporate objective) than can be imagined. However, hardly 

does management think of the impact of the receptionist when deciding and 

implementation strategic goals.   



30 

 

Therefore, the question “who among the stakeholders are really close to managerial 

decision?” is not easy to answer.  Similarly, management may not necessarily, 

incorporate some of the employees into their strategic business decisions. So goes 

with some members of the external stakeholders. At times management can easily 

forget about the impact, influence and degree of connection (interdependencies) 

between their decision and certain stakeholder groups or the entire tertiary groups. 

This has been the causes of most stakeholder-organizational conflicts.  This 

phenomenon has led to various conflicts, huge image damage and cost to some 

corporations. 

 

Likewise, due to profit-at-all-cost policies that some organizations adopt, their 

operations may involve greedy pursuit of certain activities that result in the oversight 

of the potential power of the environmentalist, for example, mining or mineral 

extraction companies, some wood processing and fishing companies.  

 

The likely impact of the environmentalist when underrated can lead to unrest and 

actions against the businesses. This might lead to the halt of the business for some 

time at least resulting in failure to achieve corporate objectives. Also, for the same 

purpose, an organization may choose to work overnight in order to meet demands and 

schedules; this could lead to noise in nearby communities. Legal battles may be taken 

by these stakeholders – the community. Consequently, this may lead to   court 

injunction to stop night production.  In such an instance, the organization had failed to 

see „who really was close to management or business decisions‟. Therefore, the 

consideration of the degree of proximity of potential stakeholders toward the level of 

business decisions that are taken by management is necessary when setting strategic 

decisions.  Thus, the tertiary stakeholders are not left out during management 

decisions as regards any other stakeholders groups.  Similarly, a mineral extraction 

company may be affected by some of the tertiary stakeholders to a greater extent than 

other members of the same tertiary group. For instance, the environmentalist can 

really affect management decision than the consumerists since the mineral extraction 

company does not deal directly with the consumers. But the impact of the company 

on the environment can result in closer interest of the environmentalist, the 

government and the society at large. 



31 

 

The table below depicts the imaginary level of proximity of each stakeholder group 

towards the business. 

 

 

 

 

 

 

 

 

 

     Fig 6.  The relative distance between the stakeholders and the firm 

 

The thick dark line denotes the boundaries of the firm - the immediate business 

environment, the core business boundaries and management decisions.  The 

distant between the secondary stakeholders and the firm‟s boundary (dotted 

arrow) is seen to be closer than the distance between the tertiary group and the 

firm‟s boundary.  The firm or primary stakeholder at large is surrounded by both 

the secondary and the tertiary stakeholders. These distances denote how close a 

particular stakeholder is to the so-called boundaries of the firm (thick line).  

 

From the bottom (assumes) that all the stakeholders are obviously close to the 

firm. But from the top (in literal sense) the tertiary appears to be farther away 

from the core, social and decision boundaries of the firm than the secondary and 

the primary.  In practice, no firm would agree that none of the tertiary 

stakeholders are farther away from their business decisions (practical sense). 

Hence there are many rules, guidelines, principles, standards etc. passed by the 

members of the tertiary groups that the firms need to incorporate during the 

inception of their business ideas - thus aligning their strategic objectives against 

that of the members of the tertiary groups (interdependency). Moreover, virtually 

no firm would agree that underrating the tertiary stakeholders‟ expectations would 

be harmless in their business decisions, since the impact of the stakeholders in 

totality can be felt when conflicts occur between the organization and any member 

Primary 

Secondary 

Tertiary 

The firm’s boundaries 



32 

 

of the stakeholder constellation. Therefore, in terms of expectations, all the 

stakeholders are close to the firm - denoted by the close or overlapping bottom 

boundaries or lines. 

 

Depicting the level of distance between the secondary, tertiary and primary 

stakeholders (the firm). 

 

 

 

  

 

 

 

 

 

 

 

 

 

Fig.7. The level of distance between the stakeholders 

 

The intersection AB denotes that sometimes members of the secondary stakeholders 

are connected closely to the firm towards the same economic benefits or mutual 

support for survival (interdependency). For instance, suppliers may at one point 

integrate with the firm in other to survive or have a competitive edge (economic 

interdependency). Likewise, the government and the communities at times depend on 

the income of the firm. However, C – the tertiary has no economic interest in the firm   

whatsoever.  It must be noted that the level of connection (AB) between any members 

of the primary and the secondary stakeholder is characterized by equitable economic 

cooperation. This is nonexistent in the primary-tertiary cooperation. 

 

 

 

Tertiary 

Primary 

Secondary 

A,B 

C:    Special Interest Groups 

 environmentalist 

 EU regulations 

 OECD 

 ILO etc 

A:   The Firm 

 

 

B    Secondary 

 Customers 

 Suppliers 

 Community 

 Governments   etc 

  

  

  



33 

 

2.4.3 The degree of autonomy 

 

Management is at the core of the business decision performing all the managerial 

roles: controlling, planning, coordinating, decision making among others. As a result, 

management can be compared to the driver of a commercial vehicle; they have the 

most autonomous power over the vehicle (the firm). This autonomous power includes 

movement, stopping, and directions to take.  The government as the second most 

autonomous stakeholder enforces the legal issues and ensures that taxes are paid 

appropriately. The firm is not isolated from the government in that sense.  The 

employees do not have complete autonomy although their strikes can halt the 

operations of the firm, their dos and don‟ts are regulated by management. Employee 

empowerment is made possible by management. With shareholder, they possess both 

power and autonomy, making them one of the important stakeholders to the firm.  

 

Almost all the members of the secondary groups are autonomous but do not set rules 

and enforce them like the government. Customers, suppliers, communities and trade 

unions among others are autonomous, but closer to the firm than the tertiary groups – 

as established in the previous concept of proximity.  However, the tertiary groups has 

unique degree of autonomy, there is no business link (economic interdependency) 

between them and the firm, neither are the tertiary stakeholders beneficiaries of the 

organization‟s pursuits in any imaginable way. The environmentalists for instance do 

not appear to show any economic interest in the firm apart from compliance to their 

expectations and the eco-system at large. This makes them unique since from the 

government to the community level, Supplier to consumers through to the level of the 

employees - all of them have at least little economic interest in the firm.   

  

The tertiary stakeholder groups (environmentalists, the Public - EU and ILO standards 

etc) and the activists (e.g. the consumerist and the pressure groups) have only social 

and environmental interest within the triple-bottom line.  Since these groups have no 

interest in the firm‟s economic activities and performance they cannot be corrupted 

easily; neither will they compromise their course of actions - that will mean conflict 

within themselves and their goals.   Although these groups have less control over the 

firm‟s day-to-day operations unlike the managers, shareholders, suppliers among 



34 

 

others, their degree of control will depend on how influential they are on the 

operations of the firm and management decisions, especially when their expectations 

are not met.   

 

 

 

 

 

 

 

 

 

 

 

Fig.8. The degree of autonomy between the various stakeholder groups 

 

As established earlier, the primary and the secondary groups are interdependent in 

many ways especially, in economic sense. The degree is sometimes 50/50 to be 

precise.   One group may not survive without the other.    The tertiary are not close to 

the firm‟s literal boundaries and neither do they operate under the umbrella of the 

firm. Therefore, they can be seen farther away from A with no interdependency. The 

broken line denotes that occasionally, the tertiary groups fight for their interest.  It 

also denotes that the only interdependency between the tertiary and the firm is on 

compliance issues, for instance: EU regulations, International Labor Organization 

regulations (ILO), OECD guidelines and the Environmentalist groups‟ expectations. 

ILO and EU regulations are binding and must be obeyed by the organization without 

excuses for example ISO standards.  However, the firm‟s dealings with the members 

of the secondary stakeholders are sometimes and often frown; even negotiable e.g. 

customers, suppliers and the communities are often underrated by the firm. 

Governments are sometimes lobbied for a win-loose situation. But the tertiary group 

cannot be negotiated. Conflict with the tertiary groups often results in win-win or 

lose-win; defiant firms are usually the losers.    

 

Tertiary 

Primary 

Secondary 

A,B 

C:    Special Interest Groups 

 environmentalist 

 EU regulations 

 OECD 

 ILO etc 

A:   The Firm 

 Management 

 Employees 

 Owners/Shareholders 

 

B    Secondary 

 Customers 

 Suppliers 

 Community 

 Governments   etc 

  



35 

 

Moreover, it is noteworthy that the main stakeholders on whose behalf the tertiary 

groups operate are often the members of the traditional secondary stakeholders like: 

the consumers, the community and the environment specially and at times some 

members of the primary group. For example, the activists, the environmentalists and 

usually, the pressure groups (media) operate to support the consumers and their rights. 

ILO, the EU and OECD guidelines as well as principles are meant to support the 

natural environment, some stakeholders and the society at large.  

 

2.4.4 Degree of influence    

We will distinguish between the degree of influence on the organization and on 

management expectations or interests. These are discussed below. 

 

i. The Degree of influence on the organization 

 

The degree of influence explains how much impact, power and ability a member of 

the stakeholder group have over the firm. Furthermore, the degree to which a member 

of the stakeholder constellation can influence the organization without the 

organization being able to retaliate. Since it was establish that the tertiary groups have 

no direct interdependency with the firm, management of the firm cannot influence 

them as much as compared to the internal stakeholder and other members of the 

secondary groups (See 2.4.3).  Meanwhile, the tertiary stakeholder can influence the 

organization in many ways.  In a sense, the degree of influence also relates to the level 

of power that a stakeholder possesses.  It is interesting to verify the potency of this 

power because, the tertiary are autonomous and sometimes do not come into the paths 

of responsible firms in anyway neither do they have any economic dealing with the 

firm. So why is it important to address the degree to which the tertiary stakeholders 

are influential? 

 

Due to the nature of the co-existence and mutual economic interest of the primary and 

the secondary groups, it is often the case that any member of the primary-secondary 

groups can easily be coerced or persuaded to corrupt or compromise their interest.  

However, in the sense where the opposite is the case and a particular stakeholder can 

damage the reputation or even attach the firm directly; the relative power of such a 



36 

 

stakeholder must not be underrated (highly influential and have no interest in the 

firm). The tertiary groups possess such traits. The organization has relatively no 

influence, control and power over them in anyway.   

 

It is assumed that for organizations to avoid confrontations with the tertiary 

stakeholders, they 

 

Ought to… 

 

1. Practice „ethical businesses. 

2. Comply with the rules and ethical standards. 

3. Integrate the stakeholders (win-win expectations) 

4. Be proactive  

5. Be accommodative 

6. Avoid greed. 

7. Not replace corporate philanthropy with corporate responsibility 

8. Not replace corporate responsibility with social responsibility 

9. Increase their ethical stance 

10. Learn from mistakes. 

 

The level to which the tertiary group can influence the firm can be seen through their 

mode of actions and operations. These groups at times employ high-profile campaigns 

and direct confrontations (Joutsenvirta, 1997), demonstrations organized by mobs and 

„grassroots‟ activist groups, instigate the media and international bodies against the 

firm, enter into legal and eco-battles with firms, disrepute and tarnish the image of 

organization and in a more contemporary way, use the internet community to spread 

their propaganda against the businesses in a relatively effective, fast, extensive and 

cheaper way.  These are issues that are of serious concern to the firm since they have 

no relative power to fight back.  In fighting with an opponent whom one cannot fight 

back and who cannot be corrupted or influenced, the organization has only few 

options – compromise the request of the opponent and meet the demands of such a 

mighty opponent.  

 



37 

 

ii. Influence on management decision/expectations 

 

The degrees to which the tertiary stakeholder can influence managerial decisions 

(strategic plans, objectives and goals) are often the basis of the clash of interests apart 

from irresponsible business. These result in organization-tertiary stakeholders‟ 

conflict (Rahim, 2002). Management may want to put their economic interest first 

(me-first) and on the other hand, tertiary stakeholders may want to influence 

management to pursue their interest as well (me-too). Whereas the interest of 

management is often economic, that of the tertiary is usually far from economic - 

social and environmental.  To management pursuing environmental interest and 

especially social interest may not be their primary objective and at times may consider 

such pursuit as expensive and of no economic significance. In situations like this, the 

tertiary expect management to rethink their plans and decision before execution them. 

 

The relationship between the levels/degrees of influence between the stakeholders 

groups is depicted below. 

 

 

 

 

 

 

 

 

 

 

 

             

Fig.9. The degree of influence of the broad stakeholder groups. 

 

There exist relatively, close and equal degree of influence between the primary and 

secondary stakeholders (denoted by two short and equal arrows). For instance, a profit 

making organization can be affected heavily by the customers and in turn, affect the 

Tertiary 

Primary 

Secondary 

C:    Special Interest Groups 

 environmentalist 

 EU regulations 

 OECD 

 ILO etc 

A:   The Firm 

 Management 

 Employees 

 Owners/Shareholders 

 

B    Secondary 

 Customers 

 Suppliers 

 Community 

 Governments 

  



38 

 

customers equally. In recent times organizations are cautioned to be customer-centric 

(Morgan and Hunt, 1994; Ryals, 2005; Day, 2004; Verhoef (2003). This is because 

when customers‟ interests are not met, they can stop patronizing the firm‟s products 

through boycotts (this will affect the firm hugely). On the other hand, if for some 

reason the firm stops production or fails to meet the needs of the customers, the 

customers are in turn affected. So goes with the organization-supplier relationships, 

organization-employees relations, organization-shareholder relationships among 

others. Such phenomenon cannot occur between the organization and the tertiary 

groups. 

 

Hence, tertiary level is depicted to be highly autonomous – the organization has little 

influence on them. The basic influence that the organizations have is through 

engaging, harmonizing or balancing their decisions against that of the tertiary‟s 

expectations. Practically, that is not an influence.  The thick arrow shows the degree 

of influence possessed by the tertiary groups. They can interrupt the business 

activities or the firm in many ways either through their organized campaigns and legal 

battles and other means identified earlier (See 2.4.4 (i)).  Most of the high-profile 

environmentalists have their own media and other journals e.g. Friends of Earth and 

Greenpeace publish many articles about organizations in their own journals using 

their own researchers. Such a decision cannot be influenced. The smaller broken 

arrow pointing from the company towards the tertiary groups depicts the level of 

influence and power that the organization possesses when dealing with the demands 

of the tertiary groups – little and less.  The broken arrow implies that the influence of 

the organization over the tertiary stakeholder may not be direct and as confrontational 

as that of the environmentalists usually is (Joustenvirta, 1997).  The relative power or 

influence on the organization that the tertiary possess at times run parallel with that of 

the governments as law enforcers.  However, the difference is that governments can 

be corrupted by the organization since they express economic interest in the firms 

through taxes and levies. This is not the case with the tertiary. 

 

 

 

 



39 

 

Below are some pressing reasons explaining why the tertiary groups enjoy complete 

autonomy and are highly powerful or influential. 

 

1. They do not engage in direct economic activities with businesses. 

2. They do not receive any practical benefits through their activities.  

3. They fight for the rights of others instead of their personal rights. They are 

merely mouth-piece for the underprivileged and the affected stakeholders.  

4. They sometimes depend on external sources of funding for their cause and 

therefore are obliged to use the money for the intended cause. e.g Greenpeace. 

5. They are obliged to render report on their activities by their donors. 

6. They are representatives for businesses and the economy in general e.g ILO 

and therefore can enforce the principles, guidelines and codes. 

 

Similar reasons explain why management cannot lobby or corrupt the tertiary 

stakeholder groups. 

 

2.5 Organization vs External stakeholders’ conflict 

2.5.1 Overview of conflict 

Rollof, (1987 cited in Rahim, 2002),  argues that organizational conflicts occur when 

members engage in activities that are incompatible with those of colleagues within 

their network, members of other collectivities, or unaffiliated individuals who utilize 

the services or products of the organization.  Rahim, (2002) added that conflicts occur 

when: 

1. A party is required to engage in an activity that is incongruent with his or her 

needs or interests. 

2. A party holds behavioral preferences, the satisfaction of which is incompatible 

with another person‟s implementation of his her preference. 

3. A party wants some mutually desirable resource that is in short supply, such 

that the wants of everyone may not be satisfied fully. 



40 

 

4. A party possess attitudes, values, skills, and goals that are salient in directing 

his or her behavior but are perceived to be exclusive or the attitudes, values, 

skills, and goal held by the other(s) 

5. Two parties have partially exclusive behavioral preferences regarding their 

joint actions. 

6. Two parties are interdependent in the performance of functions or activities. 

From these arguments, incongruent interest (No. 1), behavioral preference (No. 2) 

and interdependences in performance and activities (No. 6) are highly relevant to the 

study - organizational-stakeholder conflict.  The term incongruent interests (No. 1) 

are known to be the basis of so many organization-stakeholder conflicts.  Realistically 

speaking, no two interests are the same and organizational-stakeholder 

interdependences (No.6) cannot be avoided. Consequently, conflicts are inevitable 

from the organization‟s perspectives since it does not operate as an island. 

Rahim, (2002) added that ―conflict management strategies should be designed to 

satisfy the needs and expectations of the strategic constituencies (stakeholders) and to 

attain a ‗balance‘ among them.‖   In effect, he argues   that sometimes multiple 

parties are involved in a conflict. For this reason, it poses challenge to conflict 

managers to involve all the parties in a problem-solving process that will lead to 

collective learning and organizational effectiveness and to achieve satisfactory 

balance for all the relevant stakeholders.   

In their study, Wall and Callister (1995) defined conflict as “a process in which one 

party perceives that its interests are being opposed or negatively affected by another 

party”.  This conclusion supports Rahim‟s study in a sense that one point was 

common “incongruent or opposed interest”.  Furthermore, Wall and Callister listed 

the roots of conflicts as: 

1. Individual characteristics 

2. Interpersonal factors 

3. Communications 

4. Behavior 



41 

 

5. Structure 

6. Previous interactions 

7. Issues 

Detailing down to specific examples giving on the root causes, interpersonal factors 

(No. 1) and behavioral factors (No. 4) appeared to be more relevant to organization-

stakeholder conflicts. They listed the characteristics of such factors that often cause 

conflicts as:  

i. Other‟s intentions counter to party‟ 

ii. Other‟s intentions counter to party‟s fairness norms 

iii. Other‟s behavior seen as harmful 

iv. Distrust of other 

v. Misunderstanding 

The first three points appeared to be closely related to Rahim‟s (2002) arguments – 

“incongruent interests or activities”, also expressed as “opposing interest” (Wall and 

Callister, 1995).  Point (No. i) - other intentions counter to party‟ and point (No. ii) - 

other intentions counter to party‟s fairness norms are notably the causes of 

organization-stakeholder‟s conflicts. More substance is added by point (iii) - other‟s 

behavior seen as harmful, also is known to be the basis for many activist or 

environmental movements against businesses globally. For instance, two organization 

“Lawyers‟ Environmental Action Team (LEAT) and the Environmental Coalition of 

Civil Society Organizations (ECO)” for the last six years have been campaigning for 

the enactment of a framework environmental legislation in Tanzania. They have 

lunched successful campaign against mining companies and have adopted the mission 

“to ensure sound natural resource management and environmental protection in 

Tanzania”
6
.  This means mining activity in Tanzania fits most of the points (i, ii and 

iii) above. 

 

                                                           
6
 For more details on the activities of LEAT and ECO, visit  (http://www.leat.or.tz/) 



42 

 

Understanding the interest of the tertiary groups thus become relevant.  Without 

knowing the interests of the stakeholders, organizations cannot meet them. 

The table below lists various stakeholders and their interests. 

Stakeholder Examples of interests 

P
u

b
li

c 

Government Taxation, VAT, Legislation, Low unemployment 

Trade Unions Working conditions, Minimum wage, Legal 

requirements, Human rights, Fair trade, anti-corruption 

Environmentalist Involvement, Environmental issues, Compliance with 

environmental Principles, regulations and codes. 

Pressure groups/activists Lobbying, adhering, advocacy. 

Consumerist Consumer rights, free and fair trade 

Table 1. Various stakeholders and their interests  

 2.5.2. Sources and Nature of organization-external stakeholders’ conflicts 

External conflicts emerge as a result of incompatible expectations between the 

primary and the secondary or primary and tertiary stakeholder. Davidson (2002) 

identified the expectations of the external stakeholders as „fair treatment‟. Fair 

treatment involves satisfying not only one party‟s interest, but also that of rest of the 

stakeholders. Tertiary stakeholders‟ assaults assume different dimensions and are 

usually, legal battles, media and publicity attach as well as direct campaigns 

involving: demonstrations, mob actions among others.  

Since the level of interdependency between the primary and the tertiary stakeholders 

is wider than the primary-secondary stakeholders (See fig. 6 and 7), it can be assumed 

http://en.wikipedia.org/wiki/VAT
http://en.wikipedia.org/wiki/Legislation
http://en.wikipedia.org/wiki/Minimum_wage


43 

 

that the frequency of frictions and conflicts could be rare. However, studies point to 

the opposite as the case.   

According to Johnson et al (2008), stakeholders depend on the organization to fulfill 

their own goals and the organization, in turn, depends on them. Interdependence was 

identified by Rahim (2002) as the major causes of conflicts.    Although internal 

conflicts are common, regular and frequent, external conflicts on the other hand, is 

occasional and more difficult to handle.  The degree of pressure faced by the 

organization on regular bases is highly associated with regular conflicts. According to 

Waddock et al (2002 the “Environmentalists consistently pressure companies for 

better environmental management and more sustainable practices‖. Additionally, 

they added that ―A major source of pressure on companies' stakeholder-related 

performance (or corporate responsibility) is the numerous ratings and ranking 

schemes that have emerged in recent years. In effect, they are admitting that the 

pressures faced by the organization are constantly emanating from the tertiary 

stakeholders. They enumerated some of the emerging pressures as standards, codes 

and principles from the external environments. 

Below are Selected Sample of Emerging Standards, Codes and Principles 

Environmental Principles and Standards 

 CERES (Coalition for Environmentally Responsible Economies) Principles 

 ISO 14000 and 14001 

 Responsible Care Principles 

Labor Standards and Principles 

 International Labour Organization's (ILO) Fundamental Principles 

 ILO Conventions 

 ILO's Tripartite Declaration of Principles Concerning 

Multinational Enterprises and Social Policy 

 Fair Labor Association Guidelines 



44 

 

Human Rights Standards and Principles 

 UN Declaration on Human Rights and the Environment 

 UN International Convention on Economic, Social and Cultural Rights 

General Business Principles and Standards and Standard-Setting Bodies 

 The UN's Global Compact 

 OECD Guidelines for Multinational Enterprises 

 American Apparel Manufacturers Association 

 Caux Principles 

 Clarkson Principles for Stakeholder Management 

Anti-Corruption Conventions 

 OECD 1997 Convention on Combating Bribery of Foreign 

 Officials in International Business Transactions 

 Transparency International Core Principles and Integrity 

 System 

Table 2.  A selected sample of emerging standards, codes, and Principles that are 

mounting pressures on organizations – adapted from Waddock et al, 2002. 

 

Max Clarkson (1993) in his conclusion listed “Principles for Stakeholder 

Management”. These Principles outlines clearly the following seven (7) directives for 

managers: 

Principle 1 

Managers should acknowledge and actively monitor the concerns of all legitimate 

stakeholders, and should take their interests appropriately into account in decision-

making and operations. 

Principle 2 

Managers should listen to and openly communicate with stakeholders about their 

respective concerns and contributions, and about the risks that they assume because of 

their involvement with the corporation. 



45 

 

Principle 3 

Managers should adopt processes and modes of behavior that are sensitive to the 

concerns and capabilities of each stakeholder constituency. 

Principle 4 

Managers should recognize the interdependence of efforts and rewards among 

stakeholders, and should attempt to achieve a fair distribution of the benefits and 

burdens of corporate activity among them, taking into account their respective risks and 

vulnerabilities.  

Principle 5 

Managers should work cooperatively with other entities, both public and private, to 

insure that risks and harms arising from corporate activities are minimized and, where 

they cannot be avoided, appropriately compensated. 

Principle 6 

Managers should avoid altogether activities that might jeopardize inalienable human 

rights (e.g., the right to life) or give rise to risks which, if clearly understood, would be 

patently unacceptable to relevant stakeholders. 

Principle 7 

Managers should acknowledge the potential conflicts between (a) their own role as 

corporate stakeholders, and (b) their legal and moral responsibilities for the interests of 

stakeholders, and should address such conflicts through open communication, 

appropriate reporting and incentive systems and, where necessary, third party review.  

All the seven (7) principles stipulate clear guidelines as to what is expected of 

management in terms of stakeholder management.  Principle No. 7 addresses the issue 

of possible conflicts and how the role of management and the stakeholders can   result 

in conflicts as well as how these conflicts should be addressed. 



46 

 

Moreover, most of the pressures faced by management from the tertiary environments 

leave the organization no option than to compromise. Such pressures often result in 

„conflicting interest‟ (from management point of view) as in the case of management-

employee rights, fair labor, bribery, transparency, environmental responsibility among 

others.  These global standards and principles are the major sources of institutional 

pressures faced by most MNCs in recent years. Interestingly, these standards and 

regulations appear to be like a „trap‟ or„bait‟ to most corporations.  Naturally, 

organizations may want to put their interest ahead of regulations and other   tertiary 

stakeholder interests. However, standards adopted have been very difficult for many 

corporations to fully comply – letting them fall into traps of various stakeholders.  

Media like Asian Business, that reports "Asia's Most Admired Companies," 

Management Today's "Britain's Most Admired Companies," and the „Financial Times' 

"Europe's Most Admired Companies, rank companies in terms of both economic and 

responsible performance. On the other hand, these journals serve as the mouth-piece 

of countless researchers and dissatisfied stakeholders, using them as tools to chastise 

irresponsible corporations. For these reasons, most companies are now shifting their 

priorities towards more holistic performance assessment models that encompass 

measures related to both different stakeholders other than financial priorities.  

According to Waddock et al (2002) such journals can easily enlist organizations 

performing irresponsibly at the bottom of the responsibility ranking, thus leading to 

less respected organizational image. 

2.6 Balancing organization-tertiary stakeholder conflicts – management 

perspective 

The concept of stakeholder management is treated in a new perspective – balancing 

stakeholder conflicts. The study discusses different theories that are connected to 

stakeholder management and advocates balancing stakeholder conflict. 

 2.6.1. Stakeholder mapping 

Organizations approach conflicting stakeholders‟ expectations using various tools and 

strategies. Out of these tools, „stakeholder mapping‟ appears to be one of the most 

effective used by managers to evaluate the relate power-interests of the stakeholders. 



47 

 

This tool according to (Johnson et al, 2008) ―helps management to understand and 

select their political priorities‖.  The importance of the stakeholder matrix includes: 

 Understanding how interested each stakeholder group is in impression its 

expectations on the organization‟s purpose and choice of strategies. 

 Whether stakeholders have the power to do so. 

 Below is a diagram depicting stakeholder Power/Interest matrix. 

  

 

 

 

 

 

 

      Fig. 10.   The power/interest matrix.  Source, Johnson et al, 2008 

The matrix helps managers in thinking through stakeholder influences on the 

development of organizational strategies.  It further implies that, managers can 

classify the stakeholders according the power they hold and the extent to which they 

are likely to support or oppose a particular strategy that they adopt. 

In the matrix above, we can understand the type of relationship that an organization 

might typically establish with stakeholder groups in different quadrants. The degree of 

acceptability of the organization‟s strategy is clearly shown in (Segment or Quadrant 

D). The members of the quadrant D can likely be major shareholders or investors in 

the organization (key players) who support the organization‟s interest. The 

stakeholder members of quadrant C is likely to be the most difficult and disastrous, 

especially when their interests are underrated (the tertiary stakeholders). They hold 

Low High 

High 

Low 

Power 

Level of interest 

 

A 

Minimal effort 

 

B 

Keep informed 

 

D 

Key Players 

 

C 

Keep satisfied 



48 

 

high relative power, with low interest in the organization‟s strategies and goals. When 

such ones are underrated, they can be very disastrous to the firm. The pattern 

continues in the opposite directions. Key stakeholders are highly interested in the 

organization‟s strategies but have low power, then the organization must continually, 

keep informing them (B). Because their relative power is low and they appear highly 

cooperative, they may not be sources of potential conflicts. Finally, the organization 

spends minimal efforts on stakeholders that have no interest in their strategies and 

also no power to interfere their strategies (A). 

2.6.2 Conflict Management Strategies 

As long as an organization does not exist as an island, interest and expectations of the 

organizations strategies and that of the stakeholder will conflict (Rahim, 2002).  After   

identifying the most potentially harmful stakeholders who have little interest in the 

operations of the business, it is assumed that management would cooperate with them.   

Barki & Hartwick (2001) identified five different modes or styles of conflict 

management strategies. These include: assertiveness, accommodating, compromising, 

problem-solving, and avoidance. 

Asserting: Conflict, which is considered win-lose situation. Also termed as 

competing, dominating and forcing. 

Accommodating:  Involves individuals obliging or yielding to other‟s positions or 

cooperating in an attempt to smooth over conflicts. This approach to conflict 

management can also be termed cooperating, obliging, yielding and sacrificing. 

Compromising:  The compromising approach to conflict management involves give 

and take behavior where each party wins some and loses some. This strategy can also 

be termed as sharing and splitting the difference. 

Problem-solving: This occurs when individuals in conflict try to fully satisfy the 

concerns of all parties. This approach is also termed as integrating, cooperating and 

collaborative. 



49 

 

Avoiding:  This occurs when individuals are indifferent to the concerns of either 

party and refuse to act or participate in conflict.  This approach is also termed as 

withdrawal, evading, escaping and apathy. 

Fynn (2008) on the other hand identified the criteria necessary for successful conflict 

resolution.   He argues this way: 

i. Organizational learning and effectiveness:   Conflict management strategies 

designed to enhance organizational learning and, enhance critical and 

innovative thinking. Organizational members, including employees and 

managers, are expected to learn the process of conflict diagnosis and 

intervention 

ii. Needs of stakeholders:   Conflict management strategies, must be designed to 

satisfy the needs and expectations of the strategic stakeholders and to attain a 

balance among them, involve these parties in a problem solving process that 

will lead to collective learning and organizational effectiveness. This conflict 

management strategy is intended to lead to stakeholder satisfaction and 

confidence. 

iii. Ethics:   Conflict management must be designed to define organizational 

problems so that it leads to ethical actions that benefit humankind. This is 

referred to as „ethical conflict management‟. 

 

 

 

 

 

 

 



50 

 

2.6.3 Pressure Response Strategies   

The study of Waddock et al (2002) summarized the pressures that the stakeholders 

exert on the organization as:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fig. 11. Stakeholders and social pressured faced by the organization – 

Waddock et al, 2002 

Primary Stakeholder Pressures 

Owners 

 Demand for efficiency/profitability 

 Viability (sustainability) 

 Growth of social investment 

Employees 

 Pay and benefits 

 Safety and health 

 Rights at work/global labor standards 

 Fair/ethical treatment 

Customers 

 Demand for ‘green’ and ‘ethical’ 

products 

 ‘No sweatshop’ movement 

Suppliers 

 Fair trade/meet commitments 

 Continued business 

  

 

Secondary Stakeholder Pressures 

 

NGOs/Activists 

 Demand for better human rights, 

labor rights, environmental 

performance 

Communities 

 Neighbor of choice  

Governments 

 Demand for transparency 

 Anti-corruption movement 

 Compliance with laws and 

regulations 

 Economic development 

Social and Institutional Pressures 

  

 Proliferation of ‘best rankings’ 

o Creates incentives to rank high to enhance corporate reputation 

 Emergence of global principles and standards 

o Changing public expectations  of companies 

 Tripple-bottom-line reporting/accountability 

o Increased demands for accountability 

o Increased demand for transparency 

o Emphasis on financial, social and ecological performance 

Enterprise 



51 

 

The demands of the various stakeholders lead to a form of pressure that the 

organization constantly faces. Since the stakeholders are many with different forms 

and nature of pressures, it would be necessary to consider the various response 

strategies available to the organization and how the organization can response to all 

these pressures that are mounted on them regularly. 

Peng (2006) identified the tertiary stakeholders as institutions that surround the 

organization.  He added that these institutions are made up of both the formal and 

informal groups. The formal institutions are fundamental whereas the informal are the 

pressure or the supporting institutions.  According to him, these institutions regularly 

mount pressures on the organization. The organization however, adopts different 

strategies in responding to these pressures. He identified these response strategies as: 

Reactive 

Reactive strategy denotes that the firms often waits until there is pressure, and then 

respond.  This strategy is often characterized by unethical business practices. Top 

management has little interest initially and may not act at the genesis of the 

complaints. The firm remains cold when the public outcries begin. Often it is the 

formal regulatory bodies that have to enforce firms adopting this strategy to comply. 

This reactive strategy is opposite to the proactive, where organizations foresee and 

draws plans to handle the possible consequences of their actions.  For instance, 

manufacturing firms may know the consequences of their activities on both the 

environment and the health of consumers yet, they often attempt to ignore then.   

The reactive strategy implies that organizations may know through ethical sense what 

is right and wrong, yet they often choose to treat the possible consequences with blind 

eyes until stakeholder pressure is mounted. A typical example is the Coca-Coca El-

Salvador scandal where Coca-Cola employed child labor to work in sugarcane 

plantations. It was clearly stipulated within its policies that Coca-Cola will not use 

Child Labor in any form. Management should have known that pressure group 

institutions will re-act with time to this irresponsible behavior yet, the signals were 

ignored. The issue later became public through various human right institutions, this 

resulted in huge damages. The practice of combining ethics and responsibility are 



52 

 

often overlooked until organizations receive backlashes to activate their ethical 

senses. This reactive strategy is often practiced by companies that lobby the 

governments and authorities to regain favor and power to continue their activities. It 

can be viewed from