Stakeholder responses to government austerity: what happens when strong stakeholders fail to react?
| Author | Ken Ogata |
| DOI | 10.1177/0020852315576711 |
| Published date | 01 March 2017 |
| Date | 01 March 2017 |
| Subject Matter | Articles |
Review of
Administrative
Article
Sciences
International Review of
Administrative Sciences
2017, Vol. 83(1) 129–148
Stakeholder responses to
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DOI: 10.1177/0020852315576711
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stakeholders fail to react?
Ken Ogata
School of Administrative Studies, and School of Public Policy and
Administration, Faculty of Liberal Arts and Professional Studies,
York University, Canada
Abstract
Using stakeholder theory and a historical case study, I examine how key stakeholders
failed to challenge the Alberta provincial government’s fiscal reforms, leading to the
emergence of an unlikely champion in the Calgary hospital laundry workers.
Notwithstanding that several prominent and powerful professional groups had the
opportunity to oppose the government’s reforms, these groups either acquiesced or
sought compromise individually with the government. This case calls into question the
professions’ ability to protect public institutions under their domain.
Points for practitioners
In terms of potential implications for public administrators, this case provides an exam-
ple of professional failure to intercede in the public interest, despite having the power
and legitimacy to act according to stakeholder theory. This raises questions as to the
circumstances under which professional groups will exercise their advocacy role.
Unaddressed are the conditions under which relatively powerless demanding stake-
holders can acquire power and legitimacy. Accordingly, administrators ‘relying’ upon
established stakeholders as barometers of public opinion may misread public sentiment.
Keywords
Alberta government, budget austerity, Klein Revolution, professionals, stakeholder
theory
Corresponding author:
Ken Ogata, York University, 282 Atkinson 4700 Keele St., Toronto, Ontario M3J1P3, Canada.
Email: ogata@yorku.ca
130
International Review of Administrative Sciences 83(1)
Introduction
In the wake of the 2008 global financial crisis, several European governments
instituted austerity programs to address their ballooning deficits and unsustainable
debt loads. These austerity programs provoked a series of citizen protests and
general strikes (Al Jazeera, 2014; BBC News, 2011a, 2011b, 2011c, 2012;
Euronews.com, 2011; Guardian, 2011; Gulfnews.com, 2011; Minder, 2012;
Savaricas, 2013), led by strong, prominent stakeholders (e.g. public sector
unions, student groups, professional associations). Despite strong opposition
and high unemployment levels (25 percent in Spain and Greece), politicians in
these countries have been ‘forced’ to follow through with these measures (The
Economist, 2013).
However, strong stakeholders may also choose not to react, leaving opposition
to heretofore unknown stakeholders. The dilemma for public administrators then
becomes one of predicting which stakeholders will become prominent and what
tactics they may employ (Elsbach and Sutton, 1992). Using Mitchell et al.’s (1997)
stakeholder typology and a historical case study, I examine how key stakeholders
failed to challenge the Alberta provincial government’s fiscal reforms, leading to
the emergence of an unlikely champion in the Calgary hospital laundry workers
(CHLW).
The Progressive Conservative Klein government instituted a series of sweeping
reforms between 1993 and 1996 (Lisac, 1995; Martin 2002). The government
announced that it would eliminate its $2.5 billion budget deficit within four
years (1993–94 spending of $13.5 billion) by revising the scale, scope and role
of government. Ministry budgets were cut by an average of 20 percent,
the public service reduced by about 25 percent, services were privatized or termi-
nated, and several user fees (health premiums, tuition, licensing) increased (Alberts,
1994; Crockatt, 1994; Government of Alberta, 1993a, 1993b, 1994, 1995, 1996a).
These actions combined with economic recovery produced a budget surplus
by June 1996 (Government of Alberta, 1996b), although many Albertans
agreed that the quality of public services had been significantly damaged
(Hughes et al., 1996).
There are two key findings for public administrators. First, there may be occa-
sions where professional stakeholders fail to intercede, leaving public institutions
like education and healthcare vulnerable to austerity attacks. Second, relatively
unknown stakeholders may serendipitously fill the void, adding an element of
uncertainty.
The rest of the article is laid out as follows. We begin with a discussion
of stakeholder theory (Frooman, 1999; Mitchell et al., 1997), and the ability
of ‘strong’ professionals (Leicht and Fennell, 2001) to influence/respond to
societal change. Next, the methodology is presented, followed by the case
study. The limited response of professional stakeholders in comparison to
the CHLW is then discussed. Implications for public administrators conclude
the article.
Ogata
131
Table 1. Stakeholder response typology
Number of
attributes
Power
Legitimacy
Urgency
Latent
1
Dormant
Discretionary
Demanding
(have coercive,
(CSR groups or
(bothersome but
utilitarian or sym-
corporate
harmless)
bolic power)
philanthropy)
Expectant
2
Dominant
(likely have formal mechanism to exert
influence)
Dependent
(require help of others as advocates to
exert influence)
Dangerous
(+power)
(likely to employ
illegitimate tactics)
Definitive
3
Definitive
(likely part of organizational context and warrant response – e.g.
shareholders)
Based upon Mitchell et al. (1997).
Theoretical background
Stakeholder framework analysis
According to Mitchell et al.’s (1997) stakeholder typology, different stakeholders
will have varying degrees of ability and incentive to act, and thereby attract man-
agement attention (i.e. salience). Stakeholder influence is assessed based upon three
key attributes: power, legitimacy, and urgency. Those with power (ability to act),
legitimacy (of claims in the public’s eye), and urgency (motivation to act) are
the most able and likely to act. Those lacking these attributes are unlikely to be
successful in influencing management.
Mitchell et al. (1997) group stakeholders into three classes (see Table 1). Low
salience classes (latent stakeholders) only possess one of the three attributes, and
are labelled dormant, discretionary, or demanding stakeholders. Those with two
attributes are expectant stakeholders, and include dominant, dependent and dan-
gerous stakeholders. The final group (definitive stakeholders) possesses all three
attributes. Only definitive and expectant stakeholders will possess sufficient stand-
ing to command management attention and influence.
132
International Review of Administrative Sciences 83(1)
Frooman (1999) describes two stakeholder influence strategies based upon
resource dependence theory (Pfeffer and Salancik, 1978). When the firm receives
resources from stakeholders, they may either withhold resources or dictate condi-
tions for their use. These strategies are more effective when there is a direct supply
relationship. Where such a relationship does not exist, stakeholders need to employ
indirect methods to restrict supply (e.g. boycott). The effectiveness of such strate-
gies will vary depending upon firm resource dependence. My focus is upon profes-
sional groups, who not only control the supply of important public services, but
whom I also define as guardians of public institutions.
Professional institutional guardianship
Preservation of institutions such as public education and public healthcare has
traditionally been the shared domain of government and the professions (as
guardians). However, with the rise of neo-conservative policies (Savoie, 1994)
and New Public Management (Hood, 1995) combined with persistent budgetary
deficits, governments now advocate ‘reform’ of these institutions. Correspondingly,
the onus for institutional advocacy has shifted to the professions. According to
the professions literature (Abbott, 1988; Leicht and Fennell, 2001), professionals
have considerable expert power and a certain moral responsibility to shape insti-
tutional structures. As these institutions represent the basis for their professions,
they also have a vested interest in preserving them to maintain their power and
authority.
Acting as guardians involves a dual role for professionals; guarding their claims
to specialized knowledge, and the institution (and correspondingly public interest).
Where the integrity of their field may be threatened, professionals have a respon-
sibility to attempt to safeguard public institutions as part of an implied social
contract (Trainor, 2004). Reay and Hinings (2009) described how physicians
sought to preserve medical knowledge as the dominant logic governing the
Alberta medical system (as opposed to management-based logic). Or as noted by
a newspaper editor, ‘a teacher’s first assignment is to defend the interests of the
child. In a democratic society, that means speaking out when an education minister
lacks the will to do so’ (Edmonton Journal, 1995a: A12).
Professional associations have recognized this responsibility. The Canadian
Medical Association noted that ‘patient advocacy remains an ‘‘essential’’ part of
a physician’s role’ (Komarnicki, 2011). The College and Association of Registered
Nurses of Alberta website notes that ‘its mandate is to protect the public by
ensuring that Albertans receive effective, safe and ethical care by registered
nurses’. Finally, the Alberta Teachers’ Association’s (ATA)...
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