The Clarkson Principles of Stakeholder Management

Origin and Purpose .   The year after his retirement from the faculty of the University of Toronto in 1988, Max Clarkson (1922-1998) founded the Centre for Corporate Social Performance and Ethics in the Faculty of Management, now the Clarkson Centre for Business Ethics & Board Effectiveness, or CC(BE) 2 .   Four conferences hosted by the Centre between 1993 and 1998 brought together management scholars to share ideas on stakeholder theory, an emerging field of study examining the relationships and responsibilities of a corporation to employees, customers, suppliers, society, and the environment.   The Alfred P. Sloan Foundation funded the project, from which the Clarkson Principles emerged.  

Critical Content.   After an introduction to the stakeholder concept with comments on shareowners and the legal and moral duty of managers, seven (7) principles of Stakeholder Management are set forth, each with a paragraph or two expanding on its meaning.   These principles represent an early stage general awareness of corporate governance concerns that have been widely discussed in connection with the business scandals of 2002.

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.

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 all stakeholders, and should address such conflicts through open communication, appropriate reporting and incentive systems and, where necessary, third party review.

Implementation.   In many ways, the Clarkson Principles are “meta-principles” that encourage management to embrace specific stakeholder principles and then to implement them in accordance with the norms listed above.   Their current use seems largely hortatory, unlike principles or codes that call for formal adoption by managers or corporations.

To view this code in its entirety, please visit: http://www.mgmt.utoronto.ca/~stake/Principles.htm 

19 December 2002