Evaluating stakeholder theory in a developing country context: a case of the upstream sector of the oil and gas industry in Nigeria

Abstract

Since Freeman’s seminal work on stakeholder theory, there has been increased scholarly focus on developing the stakeholder concept as a theory of the firm. While the stakeholder concept is an established theory, the approach has been instrumental with much attention on the needs and responsibilities of the firm; leaving little consideration for other stakeholders (Wood, 2010). Scholarly work that focuses on the perspectives of stakeholders instead of the firm alone would help enhance the normative and strategic basis of the theory. Informed by seventy-five semi-structured interviews, this study elucidates broad and specific stakeholder perspectives using the upstream sector of the oil and gas industry in Nigeria as the context. The research finds that some of the assumptions underpinning stakeholder theory are Western-centric and cannot be applied unchanged in a developing country context. Based on the insights generated from the data collected, this research suggests a refined stakeholder framework which has society at its centre and focuses on all stakeholder objectives (including that of the firm), hence, not only focusing on that of the firm’s objectives as is presently the case.

A synthesis of the findings from the stakeholders interviewed for this research revealed that focusing on the wellbeing of all stakeholders in society as the overarching goal would lead to symbiotic outcomes for all stakeholders. Also, interviewees argued that focus of all stakeholders in the society would result in an unconditional consideration of each stakeholder’s rights and responsibilities, plus safeguard each stakeholder’s survival. One section of the society that this research focuses on is the local community (and to a lesser extent temporary employees). This focus was informed by the empirical data, which revealed that local communities were consistently ranked as the most negatively impacted stakeholders in the oil and gas industry in Nigeria.

The limitation of assuming that stakeholders have a consensus as to what standards of values are considered to confer legitimacy is addressed, providing insights into a normative approach to understanding stakeholder theory particularly as it relates to developing countries. This research has revealed that multinational oil companies have strong control of Nigeria’s oil and gas industry via partnerships with many influential stakeholders, such as the government, some civil society organisations and the press. The drivers of multinational oil companies power (such as historical hangover and intra-stakeholder conflict) which result in the local communities’ vulnerability are discussed. The imbalanced power differential informed the need to consider an alternative conceptualisation of stakeholder theory which has society at its centre.

A second research outcome is contextual. Although anticorruption laws exist both in Nigeria and in the home countries of the multinational oil companies, the opaque nature of the oil and gas industry allows high levels of corruption to thrive in the industry and has an impact on stakeholder expectation and engagement. The existence of stakeholder relativism or double standards in multinational oil companies’ practice in Nigeria, compared to their operations in developed countries, is articulated.

Thirdly, this research highlights the need to extend past academic studies, which have focused only on corporate social responsibility to include a conceptualisation of stakeholder responsibility. A theoretical underpinning of stakeholder accountability is necessary due to some stakeholders, such as some Government officials, some Naval officers and certain members of local communities being accussed of sabotaging, stealing and engaging in illegal mining of oil products from oil facilities operated by the multinational oil companies. This research has revealed that stakeholder social irresponsibility could also lead to more corporate social irresponsibility and vice-versa.

The implication of this research for practitioners and policy makers is that it offers insights into how not to allocate scarce resources in a developing country context. Another implication of this research for practitioners and policymakers is that it discusses the institutional and managerial challenges relating to engaging stakeholders and how they could be addressed in a developing country context. Also, some of the findings of this research could be useful for managers and policy makers in developed countries, if and when they experience crisis situations in their home countries (e.g. terrorist attacks, wars or natural disasters) and/or decide to expand their operations into Sub-Saharan Africa.

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Identifiers

ORCID for Ian Harwood: orcid.org/0000-0002-8647-2169

ORCID for Denise Baden: orcid.org/0000-0002-2736-4483

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