








































11 
 

 

 
 
 

Managing Stakeholder Demands: Governance 
Decisions and Stakeholder Standing 

 
Daniel C. Evans 

University of Montana 
 

Gerald Evans 
University of Montana 

 
Michael V. Harrington 

University of Montana 
 
 

 
In an empirical study, this paper used John Rawls’ idea (1971) of justice as fairness to rank 
competing stakeholder interests in governance decisions. Undergraduate students were asked to rank 
the power or responsibility of six stakeholder groups on twelve governance decisions. The results 
indicate that the participants meaningfully ranked the various stakeholder groups on the governance 
decisions as evidenced by t-tests.  These results indicate that using the Rawlsian mind experiment of 
a veil of ignorance and an original position was an effective means of unraveling competing 
stakeholder interests in governance decisions.  The implications of the results were discussed for 
stakeholder legitimacy and ethical decision-making.  
 
Keywords: Stakeholder ethics; Stakeholder standing; Stakeholder legitimacy; Fairness; Governance; 
Social responsibility  
 

Introduction 
 Stakeholder theory addresses the influence of and obligations owed to various internal and 

external constituencies of the organization  (Mitchell et al., 1997 and Phillips, 1997). A broad 
definition of stakeholders is “any individual or group of individuals that is the legitimate object of 
managerial or organizational attention” (Phillips, 2003, p. 25). This conception understands 
stakeholders as individuals or groups to which management must attend. The direction of interest in 
this conception is from the organization and its management toward the various stakeholder groups 
and focuses on the nature and degree of attention given to the stakeholders. The Mendelow Matrix 
(Mendelow, 1991; Olander & Landin, 2005) is a tool used to determine the type of attention given to 
different stakeholders based on their power and interest. Stakeholder legitimacy, as articulated by 
Freeman (1984), is based on relative rather than absolute power: “Do all stakeholders have an 

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ADVAN CE S IN B U SI N E SS R ESEAR CH   
2021, Volume 11, pages 11-27 

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equally ‘legitimate’ claim on the resources of the corporation?” (p. 45). While Freeman (1984) sets 
aside this ranking of legitimacy, the problem this paper addresses is the ranking of stakeholder 
power in various governance decisions. It is theorized that the relative legitimacy of various 
stakeholder groups depends on the corporate or organizational issue under consideration.  

There has been a broad and protracted theoretical discussion in the literature on stakeholder 
legitimacy and stakeholder ranking from the perspective of several academic disciplines. This 
discussion has ensued in the stakeholder theory and governance literature as represented by Klein et 
al. (2019). who suggest that formal governance structures should be adapted in response to the 
external social, political, and legal environments. This adaptation of governance structures can 
follow four pathways: continuity, architectural change, enfranchisement change, and redistribution. 
Previously, Sirgy (2002) articulated a contractual stakeholder model that included internal, external, 
and distal stakeholders. The relationships among these stakeholder groups were operationalized as 
internal service quality, external service quality, and company goodwill, respectively.  

In the economics literature, Rajan and Zingales (1998) proposed a model of stakeholder 
transactions based on access to resources rather than allocation of ownership interest. This model 
was posited as superior to contractual models because it contended that power is derived from 
making good investments in resources while ownership interest discourages specialization. Another 
economic model, developed by Grandori (2010), focused on how heuristic knowledge is acquired 
and applied to organizational decision-making. This heuristic or research-based model of decision 
making was posed as more adept than traditional rational choice and behavioral decision models in 
encouraging innovation in a knowledge-based economy.  

A model in organizational theory was developed by Evans and Evans (2014) for unraveling 
the competing interests of stakeholders when facing various situations in corporate governance. This 
conceptual framework examined the interests held by stakeholders of an enterprise and their 
relationships with other stakeholders also involved in the enterprise. Phillips (1997) proposed a 
conception of “obligations of fairness”, which includes “mutual benefit” and “justice” as part of 
corporate governance. In an enterprise with multiple stakeholders, it is challenging to identify the 
appropriate relative ranking of stakeholder interests for any specific action (p, 30). Phillips (1997) 
attributes this difficulty to “an approach [that] is based on the idea that all stakeholder groups are, to 
varying degrees, involved in the same economic cooperative scheme” (p. 52) and thus have equal 
voice and consideration in governance decisions. In this context, the term “stakeholder” is used to 
describe all the people interested in or contributing to a corporation’s success. Freeman (1994) 
characterizes this relationship as the “Stakeholder Enabling Principle”: “Corporations shall be 
managed in the interests of its stakeholders, defined as employees, financiers, customers… and 
communities” (p. 417). This principle assumes there is congruence among the interests of the 
stakeholders because all want the firm to thrive and to share the results of that success with the 
respective stakeholders. However, stakeholders can also have interests that are in conflict with one 
another since the interests of some stakeholders can be adverse to the interests of other 
stakeholders.  

Thus, while these groups are important to the corporation, they do not always have aligned 
interests on every issue. Freeman (1994), using the idea of “director responsibility,” states: 
“Directors of the corporation shall have a duty of care to use reasonable judgment to define and 
direct the affairs of the corporation in accordance with the stakeholder enabling principle” (p. 417). 
The principle of director responsibility attempt to establish rational and coherent behavior among 
the stakeholders. Behavior that appears rational and coherent to one stakeholder may, however, 
seem exactly the opposite to others. The fact that stakeholders have congruent interests, as well as 
conflicting interests, prompted Hendry (2001) to observe that normative stakeholder theory was in 
disarray. To clarify this issue, he suggested three kinds of normative stakeholder theories: 



13 
 

descriptive, instrumental, and normative. From the perspective of ethics, normative theories address 
“how should firms be governed, and to whom should managers be responsible?” (p. 162). Given the 
potentially conflicting interests among various stakeholder groups, identifying the level of 
responsibility owed to each stakeholder group can be challenging for decision-makers. The current 
research proposes that different decisions in the governance process may place different weights on 
the interests of one group of stakeholders relative to the interests of other stakeholders.  

Because the claim of a stakeholder can influence the degree of legitimacy that a stakeholder 
enjoys, the nature of the stakeholder’s connection to the enterprise and what is wanted from the 
enterprise are what determine the legitimacy of a claim. Phillips (2003) introduced the concept of 
stakeholder legitimacy.  Normative and derivative stakeholders are different with different claims to 
legitimacy. According to Phillips (2003, p. 26), normative stakeholders “are those stakeholders to 
whom the organization has a moral obligation, an obligation of stakeholder fairness, over and above 
that due other social actors simply by virtue of their humanity”. Normative stakeholders have 
stronger ties to the organization and thus deserve greater consideration in governance decisions. 
Identifying normative stakeholders answers the question: “for whose benefit should the firm be 
managed? “ (Freeman, 1984, p. 30). 

Although derivative stakeholders do not have normative interests, they should be treated like 
stakeholders because their actions could affect normative stakeholders and the organization. The 
impact of these derivative stakeholders can be positive or negative for the normative stakeholders or 
the organization, and these potential impacts must be considered. The media, competitors, and 
terrorists are considered derivative stakeholders since they can influence the organization, but they 
lack a compelling moral argument that the organization should be managed for their benefit.  

The conflict between normative and derivative stakeholders indicates that fairness requires 
some way to rank or weight stakeholder interests and that this “pecking order” will depend on the 
governance decisions (Renouard, 2011). The stakeholders often make their claims from a 
perspective that focuses on their interests. This creates a complex web of claims that can be difficult 
to unravel. Stockholders and management want increased profitability which tends to lead to higher 
dividends for stockholders and performance bonuses for management. Employees want higher 
wages and benefits; the government wants to collect taxes owed and apply appropriate regulatory 
oversight; consumers want products that are safe and priced fairly; the community wants a clean 
environment and jobs; and everyone wants social responsibility. These stakeholder interests are 
often mutually exclusive (Neville & Menguc, 2006). Because of these conflicting claims, Enyinna 
(2013) questioned the adequacy of stakeholder theory to adjudicate such conflicts. Stakeholder 
theory posits broad suggestions for ethical decisions because of its philosophical nature. Specific 
guidance on practical decisions requires a theory to be prescriptive. Normative theories cannot be 
merely hypothetical, they must guide specific actions. Unraveling conflicting stakeholder interests 
requires a thorough and practical application of the concept of fairness.  

 Although several ways exist by which to rank the legitimacy of stakeholders, one way is to 
evaluate the various groups using a legitimacy metric. Santana (2012) proposed three facets of 
stakeholder legitimacy: the legitimacy of the entity, the legitimacy of the stakeholder’s claim, and the 
legitimacy of the stakeholder’s behavior. Santana (2012) applied this metric to eight situations to 
arrive at varying degrees of stakeholder legitimacy based on some combination of these three facets. 
This approach advanced the understanding of stakeholder legitimacy but it did not address the more 
difficult issue of fairness when equally legitimate stakeholders have competing interests.  

The idea of fairness (Rawls,1964) has been used in the discussion of competing stakeholder 
interests (Phillips, 2003; Gilbert & Rasche, 2008; Jensen & Sandström, 2013; Jones & Felps, 2013; 
Mansell, 2013). Justice as fairness (Rawls, 1971) has generated considerable ethical discussion in 
modern philosophy. For example, when applying social contracts to a corporation, Rawls postulated 



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a network of implicit and explicit agreements to which individuals must adhere in their relationships 
with one another. Social contracts are so pervasive that they form the foundation of the modern 
republic, borrowing principles from Smith (1776) and Rousseau (1950). Cragg (2000) built on this 
foundation using social contract theory to link together business ethics and human rights. 

As a foundational premise, Rawls (1971) used “justice as fairness,” to describe a contract 
acceptable to society and its members. The rules and principles of a social contract must be 
universally agreed upon: “They are the principles that free and rational persons concerned to further 
their own interests would accept… as defining the fundamental terms of their association. These 
principles are to regulate all further agreements” (p. 10). This idea is referred to as “agreement” or a 
“meeting of the minds” in contract law.  Any compromise would require that all disagreeing parties 
feel an agreement was a “good deal” for their stakeholder group, gaining at least as much as what 
was sacrificed. The difficulty in using “justice as fairness” as a foundation for ethical reasoning is 
that “fair” is often viewed through the lens of one’s self-interest. To address this problem, Rawls 
(1971) used a thought experiment to engender empathy between individuals, a “veil of ignorance” 
(p. 118) to eliminate inherent biases that may cloud decisions about ethical principles. The veil of 
ignorance allows individuals to make a judgment about an issue or decision without depending on 
their current position in society as the basis for their judgment. In this research, this veil of 
ignorance is adapted to unravel conflicting stakeholder interests for specific governance decisions. 

The corporation’s connection to various stakeholder groups creates interconnecting duties. 
But potential conflicts between groups remain for specific decisions and actions. Stockholders have 
risked capital for the creation of the corporation and will care more about the initial revenue and 
profit. Customers will have less influence in governance decisions since there are fewer of them in 
the beginning and they lack a voice in the decision process. The veil of ignorance allows each 
stakeholder group to empathize with the others and view the long-term fortunes of the company as 
important for all. Rawls uses the veil of ignorance to promote fairness and social justice, but it is 
used and adapted here as a way for stakeholder groups to view an issue from the perspective of all 
the stakeholders. This empathy is a necessary step to understand and unravel the complex interests 
among many stakeholders.  

Because any individual interest will often conflict with the interests of others, some ethical 
principles on which all stakeholders can agree must be established. All stakeholders are required to 
behave by the principles of society and sound governance. Rawls attempts to resolve conflicts by 
placing individuals behind the veil of ignorance where they assume an “original position” of not 
knowing which place in society they will ultimately occupy. Rawls’ framework is adapted here as the 
stakeholder's original position and will be used to resolve or unravel conflicting stakeholder interests 
for specific governance decisions and issues.  

The theoretical linkage progresses from stakeholder theory and legitimacy (Phillips, 2003) to 
competing stakeholder interests in corporate governance (Freeman, 1994) and then to Rawls’ 
thought experiment to unravel the competing stakeholder interests (Evans & Evans, 2014).  To 
provide some empirical evidence for the Rawlsian approach to unraveling the competing stakeholder 
interests, participants were asked to go behind the veil of ignorance and rank various stakeholders in 
the context of specific corporate and organizational issues. Rather than focusing on the legitimacy of 
specific stakeholder groups, equally legitimate stakeholders were ranked relative to different 
organizational issues. It is hypothesized that when self-interest is set aside in Rawls’ original position, 
individuals will rank various stakeholder groups based on legitimacy in light of the issue at hand.  

If participants are successfully stepping behind the Rawlsian veil to evaluate stakeholder 
rankings for each issue, two clear patterns are hypothesized to emerge in the results. The first 
hypothesis is that the rankings of stakeholder power and legitimacy will be different depending on 
the organizational issue being considered.  In addressing this issue-focused stakeholder management 



15 
 

Roloff (2008) stated, “Multi-stakeholder networks are issues-driven…” (p 238). This concept was 
employed as an approach to manage competing stakeholder demands as stated by Roloff (2008): 
“…or on an issue that affects their relationship with other societal groups and organizations (issues-
focused stakeholder management)” (p. 233). How issues are defined will vary with the organizational 
context, but different issues may require different rankings of stakeholder power or influence. The 
null hypothesis, in this case, would be that the rankings of stakeholders would be the same 
regardless of the corporate governance issue being considered.  

The second hypothesis concerns the rankings within each of the issues.  It is hypothesized 
that the ranking of each of the six stakeholder groups will be statistically significant from each other 
within each of the twelve corporate governance issues. Furthermore, it is hypothesized that these 
rankings within each corporate governance issue will be a rationally defensible ordering as Dawkins 
(2014) proposed as an “altered power dynamic” (p. 283).  Stakeholder relative power changes 
depending on the issue at hand.  Thus, directional tests will reveal statistically significant differences 
among the stakeholder rankings.  The null hypothesis is that the rankings within each issue will be 
random with little rational support for the ordering and no statistically significant difference among 
the ranked stakeholder groups. 

 
Methodology 

 
Participants 
 The participants in this study were 193 undergraduates in a required business ethics and 
social responsibility class. The data were collected anonymously to facilitate participants assuming 
the “original position” as conceived by Rawls so they could do the rankings ignorant of which 
stakeholder group they may eventually represent. There was an approximately equal number of 
males and females, and the students were traditionally aged college students, although some non-
traditional students were also participants. As a required core class in an accredited business 
curriculum, the participants represented several business disciplines including accounting, finance, 
management, marketing, management information systems, entertainment management, and 
international business. Some were business minors and thus represented majors outside the College 
of Business. Although the participants were college undergraduates, they represent a valid sample 
since they were consumers, members of the community, employees of businesses, and some were 
even stockholders and managers. 
 
Procedures 
 A survey instrument was constructed and identified twelve specific business decisions or 
issues. These were (1) the level of compensation of the CEO and other members of top 
management; (2) the number and extent of the health and safety features of the product and services 
offered by the business; (3) workplace health and safety; (4) environmental decisions, including air 
and water discharge and refuse disposal; (5) employee compensation, including wages and benefits; 
(6) work policies and procedures, including disciplinary practices and supervision procedures; (7) the 
amount and frequency of stock dividends; (8) property and income taxes; (9) what products and 
services to offer and at what price; (10) sell or ending the enterprise,  including by declaring 
bankruptcy; (11) employee stock ownership; and (12) responding to sustainability issues and climate 
change. These issues were selected because they were broad enough to represent many governance 
issues for the validation of the model without becoming entangled in the minutia of more detailed 
decisions.  These issues are also consistent with the definition of issues as outlined by Roloff (2008). 
Six equally legitimate stakeholders were identified. These were (1) Stockholders, (2) Management, (3) 



16 
 

Employees, (4) Government, (5) Community, and (6) Consumers. These would all be considered 
legitimate stakeholders by the standards of Freeman (1994), Phillips (2003), and Santana (2012), and 
represent both internal and external stakeholders as defined by Sirgy (2002). 

The instrument required students to weigh or rate each of the six stakeholder groups on 
each of the twelve decisions using a 7-point Likert scale with end anchors. The anchors were 7-
maximum weight and 1-minimum weight. The survey instrument was placed into a learning 
management system (LMS) and students were required to complete the survey anonymously as part 
of the requirement for the class.   Students were given course credit for completing the survey, but 
they were not evaluated on the quality or nature of their responses. The responses were recorded by 
the LMS and downloaded as an Excel file that was analyzed in IBM SPSS Statistics. 

The general instructions were as follows: “Think about stakeholder power regarding issues 
and decisions facing modern businesses. For this questionnaire, you do not know which stakeholder 
group you will belong to. You do not know if you will be a stockholder, an employee, a member of 
the management team, a consumer of their goods and services, a member of the community in 
which they operate (either as an individual or as a member of an advocacy group), or 
a government official levying a tax or regulating the business. For each of the decisions outlined 
below, rate the power each stakeholder group should have, the weight they should have in the 
decision, assuming you are ignorant of which stakeholder group you represent. Groups that should 
have equal weight, high or low, should be rated equally. Your answers will be anonymous, but you 
will receive credit for completing the survey.”  In this manner, Rawls’ mind experiment using an 
original position behind a veil of ignorance is operationalized for an empirical investigation.  

Figure 1 provides an image showing how each question looked for the participants. Each 
question provided the same format, instructions, and response options. The issue being addressed 
changed for each of the twelve questions.  
 

 
 
Figure 1 - Survey Instrument 
 

Results 
 Table 1 shows the average rankings of the various stakeholder groups for decisions involving 
the compensation level of the CEO and top management. Paired t-tests were performed on the 
means of each adjacent stakeholder group in the rankings to test if there were statistically significant 
differences among the ranking of the stakeholder groups. The results of the paired t-test are as 
follows: for the difference between Stockholders and Management t(192) = 2.727, p < .01; for the 



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difference between Management and Employees t(192) = 9.394, p < .01; for the difference between 
Employees and the Government t(192) = 4.189, p < .01; for the difference between the Government 
and Consumers t(192) = 1.887, p < .05; and for the difference between Consumers and the 
Community t(192) = .814, p > .05. All tests are statistically significant except for the difference 
between Consumers and the Community, which is ranked statistically equal. This indicates 
meaningful separation among the rankings of the stakeholder groups.  
 
Table 1 – Mean Weighting on CEO Compensation 
 

CEO Compensation 

 N Mean Std. Deviation 

 Stockholders 193 5.10 1.597 
 Management 193 4.63 1.618 
 Employees 193 3.47 1.668 
Government 193 2.78 1.669 
Consumers 193 2.49 1.614 
Community 193 2.41 1.501 

 
Table 2 shows the average rankings of the various stakeholder groups for decisions involving 
product health and safety. The results of the paired t-test are as follows: for the difference between 
Management and the Government t(192) = .369, p > .05; for the difference between the Government 
and Consumers t(192) = 4.147, p < .01; for the difference between Consumers and Employees  t(192) = 
1.129, p > .05; for the difference between the Employees and Community t(192) = .665, p > .05; and 
for the difference between the Community and Stockholders  t(192) = .317, p > .05. The paired t-tests 
indicate no significant difference in the average ranking of Management and Government, 
demonstrating both are considered equally responsible. A statistically significant difference exists 
between Government and Consumers. Consumers, Employees, and the Community show no 
significant separation, but Stockholders are ranked last by a statistically significant difference. 
Comparing Figures 2 and 3, it is apparent that the rankings of the stakeholder groups on these two 
issues are completely different as was hypothesized. 
 
Table 2 – Mean Weighting on Product Health and Safety 
 

Product Health & Safety 

 N Mean Std. Deviation 

Management 193 5.28 1.449 
Government 193 5.22 1.692 
Consumers 193 4.55 1.755 



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Employees 193 4.39 1.759 
Community 193 4.29 1.814 
Stockholders 193 4.23 1.804 

 
Table 3 shows the average ranking of the various stakeholder groups for decisions involving 
employee health and safety. The results of the paired t-test are as follows: for the difference between 
Management and Employees t(192) = .902, p > .05; for the difference between Employees and the 
Government t(192) = 2.550, p < .01; for the difference between the Government and Stockholders 
t(192) = 8.861, p < .01; for the difference between the Stockholders and the Community t(192) = .986, 
p > .05; and for the difference between the Community and Consumers t(192) = 4.235, p < .01. The 
paired t-tests show a significant difference between Management and Employees and no significant 
difference between Employees and Government. All other groups show statistically significant 
separation. Employee health and safety is considered the primary responsibility of Management with 
an important role for Employees and Government. The other groups are ranked lower. Table 3 also 
represents a different set of rankings compared to Figures 2 and 3.  
 
Table 3 – Mean Weighting on Employee Safety 
 

Employee Safety 

 N Mean Std. Deviation 

Management 193 5.69 1.344 
Employees 193 5.60 1.448 
Government 193 5.24 1.576 
Stockholders 193 3.91 1.720 
Community 193 3.75 1.855 
Consumers 193 3.30 1.812 

 
Table 4 shows the average ranking of the various stakeholder groups for decisions involving 
environmental protection. The results of the paired t-test are as follows: for the difference between 
the Government and the Community t(192) = 1.713, p < .05; for the difference between the 
Community and Management t(192) = 3.593, p < .01; for the difference between the Management 
and Consumers t(192) = 2.961, p < .01; for the difference between Consumers and the Stockholders 
t(192) = 1.420, p > .05; and for the difference between the Stockholders and Employees t(192) = 1.455, 
p > .05. The Government and Community are ranked at the top with no statistically significant 
difference between them. Management and Consumers are weighted significantly below the first 
two, and Stockholders and Employees are ranked last and significantly separated from the higher 
groups but not significantly different from each other.  The participants viewed the Government 
and Community as the two most important stakeholders in establishing environmental regulations. 
The rankings in Table 4 are also distinct from the previous figures.  
 
 
 



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Table 4 – Mean Weighting on Environmental Protection 
 

Environmental Protection 

 N Mean Std. Deviation 

Government 193 5.70 1.518 
Community 193 5.47 1.617 
Management 193 4.78 1.713 
Consumers 193 4.28 1.898 
Stockholders 193 4.04 1.837 
Employees 193 3.83 1.730 

 
Table 5 shows the average ranking of the various stakeholder groups for decisions involving 
employee compensation. The results of the paired t-test are as follows: for the difference between 
Management and Employees t(192) = 10.606, p < .01; for the difference between Employees and 
Stockholders t(192) = .299, p > .05; for the difference between the Stockholders and the Government 
t(192) = 2.303, p < .05; for the difference between the Government and the Community t(192) = 9.607, 
p < .01; and for the difference between the Community and Consumers t(192) = 2.546, p < .01. Table 
5 displays yet another unique set of rankings of the stakeholder groups.  
 
Table 5 – Mean Weighting on Employee Compensation 
 

Employee Compensation 

 N Mean Std. Deviation 

Management 193 5.69 1.302 
Employees 193 4.48 1.531 
Stockholders 193 4.42 1.769 
Government 193 4.03 1.715 
Community 193 2.70 1.582 
Consumers 193 2.45 1.537 

 
Table 6 shows the average ranking of the various stakeholder groups for decisions involving work 
procedures. The results of the paired t-test are as follows: for the difference between the 
Management and Employees t(192) = 12.601, p < .01; for the difference between Employees and 
Stockholders t(192) = 6.771, p < .01; for the difference between the Stockholders and the 
Government t(192) = 1.694, p < .05; for the difference between the Government and the Community 
t(192) = 8.077, p < .01; and for the difference between the Community and Consumers t(192) = 2.400, 
p < .05. The differences between all the means are statistically significant.  
 



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Table 6 – Mean Weighting on Work Procedures 
 

Work Procedures 

 N Mean Std. Deviation 

Management 193 6.17 1.107 
Employees 193 4.66 1.597 
Stockholders 193 3.51 1.738 
Government 193 3.25 1.788 
Community 193 2.22 1.519 
Consumers 193 2.06 1.396 

 
Table 7 shows the average ranking of the various stakeholder groups for decisions involving stock 
dividends. The results of the paired t-test are as follows: for the difference between Stockholders 
and Management t(192) = .195, p >.05; for the difference between the Management and the 
Government t(192) = 7.196, p < .01; for the difference between the Government and Employees t(192) 
= 2.815, p < .01; for the difference between Employees and Consumers t(192) = 2.627, p < .01; and 
for the difference between Consumers and the Community t(192) = 2.144, p < .05. All the means are 
statistically different from each other except the difference between the top two groups: 
Stockholders and Management. Table 7 displays another unique set of rankings. 
 
Table 7 – Mean Weighting on Stocks Dividends 
 

Stocks Dividends 

 N Mean Std. Deviation 

Stockholders 193 4.89 1.783 
Management 193 4.85 1.747 
Government 193 3.54 1.811 
Employees 193 3.09 1.626 
Consumers 193 2.72 1.688 
Community 193 2.52 1.555 

 
Table 8 shows the average ranking of the various stakeholder groups for decisions involving taxes. 
The results of the paired t-test are as follows: for the difference between the Government and the 
Community t(192) = 8.519, p < .01; for the difference between the Community and Management t(192) 
= 2.716, p < .01; for the difference between the Management and Stockholders t(192) = .943, p > .05; 
for the difference between Stockholders and Consumers t(192) = 3.376, p < .01; and for the 
difference between the Consumers and Employees t(192) = 1.379, p > .05. The rankings in Table 8 
are also different from those in the other figures. 



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Table 8 – Mean Weighting on Taxes 
 

Taxes 

 N Mean Std. Deviation 

Government 193 5.54 1.738 
Community 193 3.85 1.928 
Management 193 3.37 1.906 
Stockholders 193 3.27 1.936 
Consumers 193 2.77 1.803 
Employees 193 2.63 1.660 

 
Table 9 shows the average ranking of the various stakeholder groups for decisions involving product 
and service features and offerings. The results of the paired t-test are as follows: for the difference 
between the Management and Stockholders t(192) = 7.775, p < .01; for the difference between the 
Stockholders and Consumers t(192) = 1.116, p > .05; for the difference between Consumers and 
Employees t(192) = 4.110, p < .01; for the difference between Employees and the Community t(192) = 
1.061, p > .05; and for the difference between the Community and the Government t(192) = 3.954, p 
< .01. Table 9 shows another unique set of rankings of stakeholders. 
 
Table 9 – Mean Weighting on Product Offerings 
 

Product Offerings 

 N Mean Std. Deviation 

Management 193 5.51 1.335 
Stockholders 193 4.39 1.717 
Consumers 193 4.18 1.918 
Employees 193 3.58 1.543 
Community 193 3.42 1.790 
Government 193 2.82 1.611 

 
Table 10 shows the average ranking of the various stakeholder groups for decisions involving 
bankruptcy, sale, or closing of the enterprise. The results of the paired t-test were as follows: for the 
difference between Stockholders and Management t(192) = 2.686, p < .01; for the difference between 
Management and the Government t(192) = 10.672, p < .01; for the difference between the 
Government and Employees t(192) = 1.455, p > .05; for the difference between Employee and the 
Community t(192) = 5.530, p < .01; and for the difference between the Community and Consumers 
t(192) = 2.844, p < .01. The rankings in Table 10 are also different from those in the other figures. 
 



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Table 10 – Mean Weighting on Bankruptcy, Sale, or Closing 
 

Bankruptcy, Sale, or Closing 

 N Mean Std. Deviation 

Stockholders 193 5.74 1.520 
Management 193 5.33 1.588 
Government 193 3.49 1.987 
Employees 193 3.25 1.683 
Community 193 2.56 1.654 
Consumers 193 2.34 1.550 

 
Table 11 shows the average ranking of the various stakeholder groups for decisions involving 
employee stock ownership. The results of the paired t-test are as follows: for the difference between 
Stockholders and Management t(192) = 2.289, p < .05; for the difference between Management and 
Employees t(192) = 6.741, p < .01; for the difference between the Employees and the Government 
t(192) = 7.269, p < .01; for the difference between the Government and the Community t(192) = 4.585, 
p < .01; and for the difference between the Community and Consumers t(192) = .777, p > .05. Table 
11 rankings are distinct from those in the other figures.  
 
Table 11 – Mean Weighting on Employee Stock Ownership 
 

Employee Stock Ownership 

 N Mean Std. Deviation 

Stockholders 193 5.47 1.479 
Management 193 5.17 1.512 
Employees 193 4.30 1.736 
Government 193 3.11 1.650 
Community 193 2.53 1.507 
Consumers 193 2.47 1.531 

 
Table 12 shows the average ranking of the various stakeholder groups for decisions involving 
sustainability and climate change. The results of the paired t-test are as follows: for the difference 
between the Management and Stockholders t(192) = 1.404, p > .05; for the difference between 
Stockholders and the Government t(192) = 1.389, p > .05; for the difference between the 
Government and the Community t(192) = .169, p > .05; for the difference between the Community 
and Employees t(192) = 4.534, p < .01; and for the difference between the Employees and 
Consumers t(192) = .476, p > .05. Table 12 displays another distinct ranking of the stakeholders. 
 



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Table 12 – Mean Weighting on Sustainability and Climate Change 
 

Sustainability and Climate Change 

 N Mean Std. Deviation 

Management 193 5.24 1.536 
Stockholders 193 5.06 1.605 
Government 193 4.81 1.828 
Community 193 4.79 1.759 
Employees 193 4.18 1.705 
Consumers 193 4.12 1.854 

 
 

Conclusions 
 Several conclusions result from these data. One conclusion is that participants successfully 
stepped behind Rawls’ veil of ignorance to make judgments about stakeholder legitimacy relative to 
different organizational issues. The effectiveness of this technique is demonstrated in three main 
ways. First, the rankings of the six stakeholder groups were in a different order, depending on the 
issue at hand. The rankings among the six stakeholder groups were vastly different when the issue 
was CEO compensation or product health and safety or environmental issues. The participants did 
not merely take the position of a single stakeholder group and rank the other stakeholders as less 
important in a self-interested manner. Instead, they changed their rankings per the issue being 
addressed, thereby assigning different levels of power to stakeholders depending on the question or 
issue at hand. These results are consistent with the first hypothesis.  

Second, within the ranking for each issue, there was a statistically significant separation 
between the rankings of the various stakeholders. The stakeholder groups that were ranked at the 
top, middle, or bottom were not placed randomly; there was a meaningful distinction among the 
various groups within each issue. When there was an absence of statistical separation between two 
stakeholder groups, it was a reasonable integration of the two sets of stakeholders. For example, the 
bottom two stakeholder groups for CEO compensation (Table 1) were Consumers and Community. 
There was no statistical difference between these two groups simply because they are both external 
stakeholders who arguably should have little consideration in making decisions about CEO 
compensation. The same was true for environmental protection issues. The Government and 
Community were on top with no statistical difference between them as one would argue it should 
be. These results affirm the second hypothesis.  

Finally, the usefulness of this approach and the resulting stakeholder rankings produced a 
rationally defensible scheme of ranking stakeholder legitimacy or power relative to specific 
organizational issues. For example, it makes sense that the top stakeholder group for CEO 
compensation (Table 1) should be the Stockholders, as they are the owners and hence are 
representative of the employer. The bottom stakeholder group for that issue, the Community, 
should have no more of a say in how much the CEO is paid than some curious individual would 
have in determining how much a neighbor pays to have their house painted. The interested neighbor 
is a legitimate stakeholder in the neighborhood but with little legitimate power for that specific 
decision.  



24 
 

Another example of rationally defensible ranking can be found in the results for employee 
health and safety (Table 3). The top two stakeholder groups were Management and Employees. It is 
rationally defensible that employee health and safety is primarily the responsibility of Management 
with considerable input from the Employees who are doing the work. These data further show that 
Stockholders are ranked on top for deciding stock dividends (Table 7), while the Government and 
Community carry the most weight in establishing tax policy (Table 8). For every issue, the rankings 
are rationally defensible and demonstrate the validity of this approach. With a larger sample that is 
demographically more representative of the population, this method can illuminate the issue of 
competing interests among legitimate stakeholder groups. 

One unexpected result was the significant responsibility placed on organizational leadership, 
the Stockholders, CEO, and Management team, for many of these issues.  It could be argued that 
more weight should have been given to Consumers and the Community through markets and 
advocacy groups.  However, these results indicate that most governance issues should be addressed 
through ethical leadership.   Although legitimate questions surround this issue that is worthy of 
exploration, given that this is a novel research approach, conclusions must wait for more data and a 
broader sample of participants.  

An additional unanticipated conclusion from this work is a greater understanding of 
legitimacy. As Santana (2012) pointed out, the legitimacy of a stakeholder is determined by the 
legitimacy of the entity, the claim, and the stakeholder’s behavior.  As demonstrated here, however, 
otherwise legitimate stakeholders may not have the same legitimacy for every issue the organization 
is facing. And thus, their claims, interests, and influence should hold differing weights relative to a 
specific issue in a good-faith manner (Dawkins, 2014). This differing weight depending on the issue 
at hand is an elaboration on the idea of the legitimacy of a stakeholder’s claim. Some stakeholder 
claims carry more weight, and some carry less weight, depending on the decision or issue 
contemplated by the organization, and hence merit greater or lesser consideration by Management.   

These unexpected results indicate a more nuanced understanding of the legitimacy of a 
stakeholder claim.   The concept of standing is adopted here as a possible explanation of the 
observed results. The idea of standing in the stakeholder literature is used primarily in the context of 
considerations of the natural environment and sustainability as a stakeholder of an organization 
(Stead & Stead, 2000; Starik, 1995). The environment as a stakeholder is congruent with the idea of 
the emergence of profit-with-purpose corporations (Levillain & Segrestin, 2019) as well as the 
Rawlsian principle of fairness. The definition of legal standing provides a foundation for stakeholder 
standing. In the law, standing is the term used for the ability of a party to demonstrate to the court 
sufficient connection to and harm from the law or action that allows the party to participate in a case 
(Friedman, 2019). Legal standing exists because the party is directly subject to harm or adverse effect 
by action, and that harm will continue unless the court intervenes. This is referred to as the 
“something to lose” or “injury in fact” doctrine because the party is directly impacted by the action 
(Lee & Ellis, 2012; Winter, 1988).  

This definition goes beyond merely having an interest or curiosity concerning the issue as in 
Mendelow (1991). Some stakeholders who have both interest and power must be managed and 
cultivated carefully by Management because of the potential impact they could exert on the 
organization through formal channels like the courts. But the results here indicate that individuals in 
Rawls’ original state are reluctant to grant significant standing to individuals or groups who have no 
compelling interest or ability to interact for mutual benefit (Phillips & Reichart, 2000).  

Using the legal definition as a foundation, stakeholders have standing when they have assets 
at risk, or as Warren Buffett popularized it: “skin in the game” in the specific decision or issue under 
consideration (Buffett & Cunningham, 2019). Clearly, by this definition, standing can vary for a 
particular stakeholder depending on the issue. The data indicate that participants behind Rawls’ veil 



25 
 

of ignorance understood that the assets at risk vary depending on the issue under consideration. For 
example, for CEO compensation (Table 1), the Stockholders have considerable assets at risk while 
the Community, in general, has little skin in the game for that decision. This is exactly how these 
participants ranked the Stockholders and the Community.  

For consideration of taxes (Table 8), the Government has the greater assets at risk while the 
Employees have considerably less at risk. Likewise, for work procedures (Table 6), Management and 
Employees have the most standing while the Community and Consumers have the least. As with the 
legal definition of standing, this definition is a higher bar than merely being interested, concerned, or 
curious about an issue. For a stakeholder to have standing in a particular decision or issue, the 
decision or resolution of the issue must directly impact the stakeholder’s assets at risk. It must be 
made clear that this conception of stakeholders and their standing in no way precludes a group from 
receiving interest and attention from Management. Indeed, groups such as competitors and the 
media often require significant attention from Management as part of their fiduciary duties. And one 
does not need to be a stakeholder to deserve moral consideration as argued by Phillips and Reichart 
(2000). Primarily, this research answers the question of what is ethically owed to each of the 
stakeholder groups and how much consideration should be given to each group in various 
governance issues.  

How much weight or credence is owed to the claims of each of these stakeholder groups? 
These data indicate that the ethical duty owed a stakeholder is dependent on the issue at hand and 
the assets of the stakeholder at risk in the decision. Understanding this conception of stakeholder 
standing allows owners and managers to attend appropriately to the demands of various stakeholder 
groups and to rank their power and influence based on the issue being considered.  

Future research will focus on expanding the sample to be more generalizable to the larger 
population so that more prescriptive applications can be made from the data. That will allow a more 
definitive explanation of the ethical duty owed to each stakeholder group. Additionally, further 
validation of this approach will allow evaluation of the standing of stakeholder groups not explicitly 
represented in these data. What each stakeholder group owes the enterprise is an equally important 
question since the agency can go both directions (Raelin & Bondy, 2013). Some light is shed on this 
question especially for the internal stakeholders, like the Stockholders acting through the Board of 
Directors, Management, and Employees. Not only do their interests carry weight in the decision 
process, but they also have responsibility. Stockholders, acting through the Board of Directors, 
weigh in to determining the compensation of top management and they also have the responsibility 
to provide for effective managerial oversight. Legal obligations do not clarify these mutual 
obligations (Cragg, 2002), but this same technique could be used to ask what each stakeholder group 
owes the enterprise. The present research establishes that individuals can step behind Rawls’ veil of 
ignorance, assume the original position, and make rational, coherent judgments on the relative 
standing of stakeholders for diverse business governance issues.  

 
 

 



26 
 

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