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Responsible Leadership, Stakeholder Engagement, and the Emergence of Social Capital Thomas Maak

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Responsible Leadership, Stakeholder Engagement, and the Emergence of Social Capital Thomas Maak View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by RERO DOC Digital Library Journal of Business Ethics (2007) 74:329–343 Ó Springer 2007 DOI 10.1007/s10551-007-9510-5 Responsible Leadership, Stakeholder Engagement, and the Emergence of Social Capital Thomas Maak ABSTRACT. I argue in this article that responsible 2001) of multiple stakeholders, which enhance social leadership (Maak and Pless, 2006) contributes to build- capital and thereby contribute to both a sustainable ing social capital and ultimately to both a sustainable business and the common good. business and the common good. I show, first, that responsible leadership in a global stakeholder society is a KEY WORDS: responsible leadership, social capital, relational and inherently moral phenomenon that cannot stakeholder relationships, leadership ethics be captured in traditional dyadic leader–follower relationships (e.g., to subordinates) or by simply focusing on questions of leadership effectiveness. Business leaders have to deal with moral complexity resulting from a The quest for responsible leadership multitude of stakeholder claims and have to build enduring and mutually beneficial relationships with all One of the key lessons to be learnt from Enron relevant stakeholders. I contend, second, that in doing so and other corporate scandals in recent years is leaders bundle the energy of different constituencies and enable social capital building. Social capital can be arguably that it takes responsible leadership and understood as actual or potential resources inherent to responsible leaders to build and sustain a business more or less institutionalized relationships of mutual that is of benefit to multiple stakeholders (and not recognition (Bourdieu 1980). By drawing on network just to a few risk-seeking individuals). The cor- analysis I suggest, third, that responsible leaders weave porate scandals have triggered a broad discussion durable relational structures and ultimately networks of on the role of business in society, that is to say, on relationships which are rich in ties to otherwise its legitimacy, obligations, and responsibilities. As a unconnected individuals or groups. Against this back- result, businesses and their leaders are increasingly ground I argue, fourth, that responsible leadership may held accountable for what they do – and fail to do result in the creation of value networks (Lord and Brown, by multiple stakeholders and society at large. Gi- ven the power of large corporations in particular, Dr. Thomas Maak is a Research Director at the Institute for stakeholders e.g., expect that business leaders take Business Ethics and a Reader in Corporate Responsibility at a more active role and thus acknowledge their co- the University of St. Gallen (Switzerland) and Visiting responsibility vis-a`-vis the pressing problems in the Senior Research Fellow at INSEAD, France, where he co- world such as protecting and promoting human directs a research stream on ‘‘Developing responsible leader- rights, ensuring sustainability, contributing to ship for sustainable business’’ within the PwC-INSEAD poverty alleviation and the fight against diseases initiative on high-performing organizations. He recevied his Ph.D. in Business Ethics, Summa Cum Laude, from the like HIV/AIDS. There is agreement in both University of St. Gallen and held visiting appointments at business and society that multinational corporations Columbia University and Georgetown University. Cur- and their leaders have both power and rently, he is a member of the executive committee of the potential for contributing to the betterment of the European Business Ethics Network EBEN. Among his world. many publication is the recent ‘‘Responsible Leadership,’’ However, this endeavor requires responsible published by Routledge in 2006. global leaders – leaders with responsible mindsets 330 Thomas Maak who care for the needs of others and act as global and (Donaldson and Preston, 1995; Freeman, 1984, responsible citizens. Yet, with few exceptions 1994; Post et al., 2002; Svendsen, 1998; Wheeler (Ciulla, 1998; Doh and Stumpf, 2005; Maak and and Sillanpa¨a¨, 1997). Still, there are both theoretical Pless, 2006a) we still have little knowledge about and practical challenges with respect to stakeholder responsible leadership and even less about how to salience in general (Jones et al., 2007; Mitchell et al., develop responsibility in leaders to prepare them for 1997), and evaluating and balancing the various and the challenges of a global and interconnected often conflicting claims of multiple stakeholders stakeholder society. Still, recent developments and (employees, clients, shareholder, suppliers, NGOs, initiatives such as the multi-stakeholder forum UN communities, government, nature, future genera- Global Compact (which as of 2006 has more than tions, etc.) in particular. It calls for pro-active 1,000 corporate members), the Global Business engagement (Burke, 2005) and requires leaders to Coalition on HIV/AIDS, the Business Leader’s enable inclusive stakeholder engagement and dia- Initiative on Human Rights (BLIHR), the World logue, to facilitate a legitimating discourse (Haber- Business Council for Sustainable Development’s mas, 1981, 1991; Apel, 1988) and to help balance (WBCSD) ‘‘Tomorrow’s Leaders Group,’’ or the diverse claims ensuring ethically sound decision- European Foundation of Management Develop- making. Thus, organizations and their leaders face ment’s (EFMD) ‘‘Call for Responsible Global the challenge of weaving a web of sustainable rela- Leadership’’ are clear indicators that more and more tionships, complex as it may be, navigating in it, and organizations are actively seeking ways to promote engaging a multitude of stakeholders in a dialog responsible leadership in business and that multi- (across differences) to create resonance (Boyatzis and national corporations are willing to accept their McKee, 2005), trust (Nooteboom, 2002), and ulti- responsibilities as businesses in society. Among the mately stakeholder social capital. key questions they are being asked, and ask them- In an interconnected and multicultural global selves, are: How can business leadership become stakeholder society moral dilemmas are almost inev- more responsible? How can businesses contribute to itable. How can one adhere to fundamental moral tackling some of the world’s most pressing problems? principles while still respecting cultural differences What are today’s and tomorrow’s challenges of and taking into consideration different developmen- leading responsibly in a global stakeholder society? tal standards? (Donaldson, 1996; DeGeorge, 1993) In answering these questions, as I will argue in What needs to be done to secure ‘‘uncompromising what follows, business leaders have to deal with integrity’’ (Moorthy et al., 1998), while leaving lee- moral complexity resulting from a multitude of way for discretion in matters such as gifts or appli- stakeholder claims and have to build enduring and cation of corporate values? What is required to secure mutually beneficial relationships with all relevant supply-chain integrity? Leadership failure in any of stakeholders. To succeed, responsible leaders bundle these or any related areas may create significant rep- the energy of different constituencies and enable the utational damage, leading to consumer boycotts or, creation of value networks (Lord and Brown, 2001: even worse, to the loss of the license to operate. 141) of multiple stakeholders, which enhance social Communication technologies and NGO activities capital and thereby contribute to both a sustainable have led to a historically unique level of transparency business and the common good. in matters of (global) business ethics. Against this backdrop leaders have to make sure that both indi- vidual and organizational actions are ethically sound. Challenges of responsible leadership Another equally demanding challenge is inherent in a stakeholder society to the art of leading as such: responsible leadership in business needs leadership ethics. This might seem to be There is widespread agreement that the stakeholder stating the obvious. However, if we look at the framework has proved useful in the analysis of the many scandals and examples of ‘‘bad leadership’’ strategic and normative challenges organizations (Kellerman, 2004) and ethical failures in leadership face, and that good stakeholder relationships are key (Price, 2005) in recent years, and the lack of theories to organizational viability and business success on responsible leadership, then it is not surprising to Responsible Leadership, Stakeholder Engagement, and the Emergence of Social Capital 331 see leaders struggling with questions that make up organization to achieve mutually shared objectives the very core of leadership. Ethics is at ‘‘the heart of based on a vision of business as a force of good for leadership’’ (Ciulla, 1998), but a theory of respon- the many, and not just a few (shareholders, manag- sible leadership has yet to be developed (see Maak ers) (Maak and Pless, 2006b: 103). In fact, I argue and Pless, 2006a). against this background, that leaders need to build, Furthermore, balancing different stakeholder and rely on, social capital, i.e., social structures and claims, including those of the natural environment, resources both, internal and external to the organization, future generations, and less privileged groups ‘‘at the which allow us to facilitate responsible action and which are bottom of
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