Skip to main content

Advertisement

SpringerLink
Log in

The Principle of Good Faith: Toward Substantive Stakeholder Engagement

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Although stakeholder theory is concerned with stakeholder engagement, substantive operational barometers of engagement are lacking in the literature. This theoretical paper attempts to strengthen the accountability aspect of normative stakeholder theory with a more robust notion of stakeholder engagement derived from the concept of good faith. Specifically, it draws from the labor relations field to argue that altered power dynamics are essential underpinnings of a viable stakeholder engagement mechanism. After describing the tenets of substantive engagement, the paper draws from the labor relations and commercial law literatures to describe the characteristics of good faith as dialogue, negotiation, transparency, and totality of conduct; explains how they can be adapted and applied to the stakeholder context; and suggests the use of mediation and non-binding arbitration. The paper concludes by addressing anticipated objections and shortcomings and discussing implications for theory and research.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

Notes

  1. Labor stoppages in the U.S. are greatly diminished over the last 30 years. From 2001 to 2010, there were approximately 17 major work stoppages (1,000+ workers and lasting at least one shift) per year, compared with 34 per year from 1991 to 2000, and 69 from 1981 to 1990. Most unfair labor practice complaints are settled by agreements between the parties. Bureau of Labor Statistics 2011. News Release: Major Work Stoppages in 2010. Washington D.C.: U.S. Department of Labor. National Labor Relations Board: Charges and Complaints. Retrieved December 19, 2011: http://www.nlrb.gov/charges-and-complaints.

  2. National Labor Relations Act (1935), Section 8(a)(5).

  3. NLRB v. Reed & Prince Mfg. Co., ii8 F.2d 874, 88 s (ist Cir.), cert, denied, 313 U.S. 595 (1941).

  4. Uniform Commercial Code. Posted by Legal Information Institute. Retrieved December 6, 2011: http://www.law.cornell.edu/ucc/1/article1.htm.

  5. Detroit Edison Co. v NLRB, 440 US 301, 314-17 (1979). NLRB v First National Maintenance Corp., 627 F2d 596, 601-02 (1980).

  6. NLRB v Truitt Manufacturing Corp., 351 U.S. 149 (1956).

  7. Curtiss-Wright Corp. v NLRB, 347 F2d 61, 71 (3d Cir 1965).

  8. Labor Board v. Virginia Elec. & Power, 314 U. S. 469 (1941).

  9. Arbitration & Mediation. http://www.finra.org/ArbitrationAndMediation/.

References

  • Atlas, N. F., Huber, S. K., & Trachte-Huber, W. (2000). The insurance industry. Chicago: American Bar Association.

    Google Scholar 

  • Barnett, M. N., & Finnemore, M. (2004). Rules for the world: International organizations in global politics. Ithaca, NY: Cornell University Press.

    Google Scholar 

  • Baur, D., & Palazzo, G. (2011). The moral legitimacy of NGOs as partners of corporations. Business Ethics Quarterly, 21(4), 579–604.

    Article  Google Scholar 

  • Baur, D., & Schmitz, H. P. (2012). Corporations and NGOs: When accountability leads to co-optation. Journal of Business Ethics, 106, 9–21.

    Article  Google Scholar 

  • Bemmels, B., & Foley, J. (1996). Grievance procedure research: A review and theoretical recommendations. Journal of Management, 22, 369–384.

    Article  Google Scholar 

  • Bogg, A. L. (2011). Good faith in the contract of employment: A case of English reserve? Comparative Labor Law and Policy Journal, 32(3), 729–772.

    Google Scholar 

  • Boyle, A. (1999). Some reflections on the relationship of treaties and soft law. International and Comparative Law Quarterly, 48(4), 901–913.

    Article  Google Scholar 

  • Brownsword, R. (1996). Good faith in contract revisited. Current Legal Problems, 49, 111–117.

    Google Scholar 

  • Burchell, J., & Cook, J. (2011). Banging on open doors? Stakeholder dialogue and the challenge of business engagement for UK NGOs. Environmental Politics, 20(6), 918–937.

    Article  Google Scholar 

  • Bureau of Labor Statistics. (2011). News release: Major work stoppages in 2010. Washington D.C.: U.S. Department of Labor.

  • Burton, B. K., & Dunn, C. P. (1996). Feminist ethics as a moral grounding for stakeholder theory. Business Ethics Quarterly, 6(2), 133–147.

    Article  Google Scholar 

  • Calton, J. M. (2006). Social contracting in a pluralist process of moral sense making: A dialogic twist on the ISCT. Journal of Business Ethics, 68(3), 329–346.

    Article  Google Scholar 

  • Carroll, A. B. (1989). Business and society: Ethics and stakeholder management. Cincinnati, OH: SouthWestern.

    Google Scholar 

  • Clarkson, M. B. E. (1994). A risk based model of stakeholder theory, working paper. Toronto, ON: University of Toronto.

  • Clarkson, M. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1), 92–117.

    Google Scholar 

  • Cox, A. (1958). The duty to bargain in good faith. Harvard Law Review, 71(8), 1401–1442.

    Article  Google Scholar 

  • Dahan, N. M., Doh, J. P., & Teegen, H. (2010). Role of nongovernmental organizations in the business-government–society interface. Business & Society, 49(1), 20–34.

    Article  Google Scholar 

  • Dahl, R. A. (1961). Who Governs? Democracy and power in an American city. New Haven, CT: Yale University Press.

    Google Scholar 

  • Darrow-Kleinhaus, S. (2001). Good faith: Balancing the right to manage with the right to represent. Labor Law Journal, 52(1), 10–33.

    Google Scholar 

  • Day, V. B. (1968). Bad faith bargaining. In W. Fogel & A. Kleingartner (Eds.), Contemporary labor issues (pp. 288–392). Belmont, CA: Wadsworth.

    Google Scholar 

  • Donaldson, T., & Dunfee, T. (1999). Ties that bind. Boston: Harvard University Press.

    Google Scholar 

  • Dubroff, H. (2006). The implied covenant of good faith in contract interpretation and gap-filling: Reviling a revered relic. St. John’s Law Review, 80, 559–619.

    Google Scholar 

  • Duhigg, C., & Barboza, D. (2012, January 25). In China, human costs are built into an iPad. The New York Times.

  • Egels-Zaden, N., & Hyllman, P. (2007). Evaluating strategies for negotiating workers’ rights in transnational corporations: The effects of codes of conduct and global agreements on workplace democracy. Journal of Business Ethics, 76, 207–223.

    Article  Google Scholar 

  • Elkouri, F., & Elkouri, E. A. (2003). How aritration works (6th ed.). Edison, NJ: BNA Books.

  • Evan, W. M., & Freeman, R. E. (1993). A stakeholder theory of modern corporation: Kantian capitalism. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Farnsworth, E. A. (1990). Contracts (2nd ed.). Boston: Little, Brown.

    Google Scholar 

  • Feuille, P. (1999). Grievance mediation. In A. E. Eaton & J. H. Keefe (Eds.), Employment dispute resolution and worker rights in the changing workplace (pp. 187–217). Champaign, IL: IRRA.

    Google Scholar 

  • Financial Times. (2001). Greenpeace takes carrot and stick to multinations. London: Financial Times.

    Google Scholar 

  • Finnemore, M., & Sikkink, K. (1998). International norm dynamics and political change. International Organization, 52, 887–917.

    Article  Google Scholar 

  • FINRA. (2013). Financial industry regulatory authority: FINRA dispute resolution. Retrieved April 8, 2013 from http://www.finra.org/ArbitrationAndMediation/.

  • Fiorito, J. (2001). Human resource management practices and worker desires for union representation. Journal of Labor Research, 22(2), 335–354.

    Article  Google Scholar 

  • Folger, R., & Cropanzano, R. (1998). Organizational justice and human resource management. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Fox, A. (1974). Beyond contract: Work, power and trust relations. London: Faber.

    Google Scholar 

  • Fox-Decent, E. (2005). The fiduciary nature of state legal authority. Queens Law Journal, 31(1), 259–310.

    Google Scholar 

  • Frederick, W. C., Post, J. E., & Davis, K. (1992). Business and society: Corporate strategy, public policy, ethics (7th ed.). New York: McGraw-Hill.

    Google Scholar 

  • Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman.

    Google Scholar 

  • Freeman, R. E. (1994). The politics of stakeholder theory: Some future directions. Business Ethics Quarterly, 4, 409–421.

    Article  Google Scholar 

  • Frooman, J. (1999). Stakeholder influence strategies. Academy of Management Review, 24(2), 191–205.

    Google Scholar 

  • Gaal, J. (1987). The disclosure of financial information: Competitiveness and the current requirements of the duty to bargain in good faith. Labor Law Journal, 38, 562–573.

    Google Scholar 

  • GCORP. (2011). BP and the Gulf of Mexico Alliance announce implementation of BP’s $500 million independent research initiative Gulf Coast Operations, Response, and Policy. Retrieved December 30, 2011 from http://gcorp.tamu.edu/news/753-bp-and-the-gulf-of-mexico-alliance-announce-implementation-of-bps-500-million-independent-research-initiative.

  • Greenwood, M. (2007). Stakeholder engagement: Beyond the myth of corporate responsibility. Journal of Business Ethics, 74(4), 315–327.

    Google Scholar 

  • Habermas, J. (1990). Discourse ethics: Notes on a program of philosophical justification. In M. Kelly (Ed.), Moral consciousness and communicative action (pp. 43–115). Cambridge, MA: MIT Press.

    Google Scholar 

  • Hale, T. N. (2008). Transparency, accountability, and global governance. Global Governance, 14, 73–94.

    Google Scholar 

  • Hammer, T. H. (2000). Nonunion representational forms: An organizational behavior perspective. In B. E. Kaufman & D. G. Taras (Eds.), Nonunion employee representation: History, contemporary practice, and policy. New York: M. E. Sharpe.

    Google Scholar 

  • Hardin, G. (1968). The tragedy of the commons. Science, 162, 1243–1248.

    Article  Google Scholar 

  • Harpum, C. (1997). Fiduciary obligations and fiduciary powers—where are we going? In P. Birks (Ed.), Privacy and loyalty. Oxford: Oxford University Press.

    Google Scholar 

  • Hoagland, W. (2005). Keep employment disputes out of court. Business Insurance, 29. Retrieved April 8, 2013 from http://connection.ebscohost.com.

  • Holzer, B. (2008). Turning stakeseekers into stakeholders: A political coalition perspective on the politics of stakeholder influence. Business & Society, 47(1), 50–67.

    Article  Google Scholar 

  • Kant, E. (1797). The metaphysics of morals (M. Gregor, Trans.). New York: Cambridge University Press.

  • Lampe, M. (2001). Mediation as an ethical adjunct of stakeholder theory. Journal of Business Ethics, 31, 165–173.

    Article  Google Scholar 

  • Laplume, A. O., Sonpar, K., & Litz, R. A. (2008). Stakeholder theory: Reviewing a theory that moves us. Journal of Management, 34(6), 1152–1189.

    Article  Google Scholar 

  • Lewicki, R. J., Saunders, D. M., & Barry, B. (2005). Negotiation. Toronto, ON: Irwin.

    Google Scholar 

  • Lewin, D. (1999). Theoretical and empirical research on the grievance procedure and arbitration: A critical review. In A. E. Eaton & J. H. Keefe (Eds.), Employment dispute resolution and worker rights in the changing workplace (pp. 137–186). Champaign, IL: IRRA.

    Google Scholar 

  • Lewin, D. (2004). Dispute resolution in nonunion organizations: Key empirical findings. In S. Estreicher & D. Sherwin (Eds.), Alternative dispute resolution in the employment arena (pp. 379–403). New York: Kluwer.

    Google Scholar 

  • Lloyd, N. (1994). Management’s duty to back up competitive disadvantage claims. University of Chicago Law Review, 61(2), 675–705.

    Article  Google Scholar 

  • Marcoux, A. M. (2000). Balancing act. In J. R. DesJardins & J. J. McCall (Eds.), Contemporary issues in business ethics (4th ed., pp. 92–100). Belmont, CA: Wadsworth.

    Google Scholar 

  • Margalioth, S. R. (2011). Regulating individual employment contracts through good faith duties. Comparative Labor Law and Policy Journal, 32(3), 663–668.

    Google Scholar 

  • Mather, H. (2002). Searching for the moral foundations of contract law. The American Journal of Jurisprudence, 47, 71–87.

    Article  Google Scholar 

  • Mather, C. (2006). Corporate social responsibility: A guide for trade unionists, Global solidarity: An ICTU Development Education Project. Dublin: Irish Congress of Trade Unions.

    Google Scholar 

  • Matten, D., & Crane, A. (2005). What is stakeholder democracy? Perspectives and issues. Business Ethics: A European Review, 14(1), 6–13.

    Article  Google Scholar 

  • Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.

    Google Scholar 

  • Moriarty, J. (2005). On the relevance of political philosophy. Business Ethics Quarterly, 15(3), 455–473.

    Article  Google Scholar 

  • Moriarty, J. (2012). The connection between stakeholder theory and stakeholder democracy: An excavation and defense. Business & Society. doi:10.1177/0007650312439296.

  • Mosk, M., & Schwartz, R. (2012, November 25). Bangladesh factory inferno witness: Managers ignored fire. ABC News, ABC The Blotter.

  • National Labor Relations Board. (2011). How is ‘good faith bargaining’ determined. N. L. R. Board.

  • Noland, J., & Phillips, R. (2010). Stakeholder engagement, discourse ethics and strategic management. International Journal of Management Reviews, 12(1), 39–49.

    Article  Google Scholar 

  • O’Connell, L. L., Stephens, C. U., Betz, M., Shepard, J. M., & Hendry, J. R. (2005). An organizational field approach to corporate rationality: The role of stakeholder activism. Business Ethics Quarterly, 15(1), 92–111.

    Google Scholar 

  • O’Riordon, L., & Fairbass, J. (2008). CSR: models and theories in stakeholder dialogue. Journal of Business Ethics, 83, 745–758.

    Article  Google Scholar 

  • O’Rourke, D. (2006). Multi-stakeholder regulation: Privatizing or socializing global labor standards. World Development, 334(5), 868–932.

    Google Scholar 

  • Peterson, R. B. (1992). The union and nonunion grievance system. In D. Lewin, O. E. Mitchell, & P. D. Sherer (Eds.), Research frontiers in industrial relations and human resources (pp. 131–162). Madison, WI: IRRA.

    Google Scholar 

  • Phillips, R. A. (1997). Stakeholder theory and the principle of fairness. Business Ethics Quarterly, 7(1), 51–66.

    Article  Google Scholar 

  • Phillips, R., Freeman, R. E., & Wicks, A. C. (2003). What stakeholder theory is not. Business Ethics Quarterly, 13(4), 479–502.

    Article  Google Scholar 

  • Phillips, R., & Johnson-Cramer, M. (2006). Ties that unwind: Dynamism in integrative social contracts theory. Journal of Business Ethics, 68(3), 283–302.

    Article  Google Scholar 

  • Preuss, L. (2008). A reluctant stakeholder? On the perception of CSR among European trade unions. Business Ethics: A European Review, 17, 149–160.

    Article  Google Scholar 

  • Quinn, D. P., & Jones, T. M. (1995). An agent morality view of business policy. Academy of Management Review, 20(1), 22–42.

    Google Scholar 

  • Reed, D. (1999). Stakeholder management theory: A critical theory perspective. Business Ethics Quarterly, 9(3), 453–483.

    Article  Google Scholar 

  • Savage, G. T., Nix, T. W., Whitehead, C. J., & Blair, J. D. (1991). Strategies for assessing and managing organizational stakeholders. Academy of Management Executive, 5(2), 61–75.

    Article  Google Scholar 

  • Sternberg, E. (2000). Just business. New York: Oxford University Press.

    Google Scholar 

  • Stoney, C., & Winstanley, D. (2001). Stakeholding: Confusion or utopia? Mapping the conceptual terrain. Journal of Management Studies, 38(5), 183–201.

    Article  Google Scholar 

  • Suchman, M. C. (1995). Strategic responses to institutional processes. Academy of Management Review, 20(3), 571–610.

    Google Scholar 

  • Summers, R. S. (1969). “Good faith” in general contract law and the sales provisions of the Uniform Commercial Code. Virginia Law Review, 54, 220–232.

    Google Scholar 

  • Unerman, J., & Bennett, M. (2004). Increased stakeholder dialogue and the internet: Towards greater corporate social accountability or reinforcing capitalist hegemony? Accounting, Organizations and Society, 29, 685–708.

    Article  Google Scholar 

  • Utting, P. (2002). Regulating business via multistakeholder initiatives: A preliminary assessment. Geneva: NGLS/UNRISD.

    Google Scholar 

  • Van Buren, H. (2001). If fairness is the problem, is consent the solution? Integrating ISCT and stakeholder theory. Business Ethics Quarterly, 2(3), 481–499.

    Article  Google Scholar 

  • Ventrell-Monsees, C. (2007). Testimony of Cathy Ventrell-Monsees on Behalf of the National Employment Lawyers Association (pp. 1–26). Washington, DC: Subcommittee on Commercial and Administrative Law—House Judiciary Committee.

    Google Scholar 

  • Wall, M. (2000, June 9). Settlements rise as way to avoid court wrangling. Atlanta Business Chronicle.

  • Wicks, A. C., Gilbert, D. R., & Freeman, R. E. (1994). A feminist reinterpretation of the stakeholder concept. Business Ethics Quarterly, 4(4), 475–497.

    Article  Google Scholar 

  • Winn, M. I. (2001). Building stakeholder theory with a decision modeling methodology. Business & Society, 40(2), 133–166.

    Article  Google Scholar 

  • Wolfe, R. A., & Putler, D. S. (2002). How tight are the ties that bind stakeholder groups? Organization Science, 13(1), 64–80.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management and Human Resources, California State Polytechnic University Pomona, 3801 W. Temple Ave, Pomona, CA, 91768, USA

    Cedric E. Dawkins

Authors
  1. Cedric E. Dawkins
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Cedric E. Dawkins.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Dawkins, C.E. The Principle of Good Faith: Toward Substantive Stakeholder Engagement. J Bus Ethics 121, 283–295 (2014). https://doi.org/10.1007/s10551-013-1697-z

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-013-1697-z

Keywords

Search

Navigation