STAKEHOLDER MANAGEMENT IN PRACTICE: EVIDENCE FROM THE NIGERIAN OIL AND GAS INDUSTRY

Abstract

Stakeholder management relates to how business organisations manage their relationships not only with their market stakeholders, but also with their nonmarket stakeholders. It requires firms and business managers to identify and develop effective strategies to balance the interests of many diverse groups or constituents. This requirement has of course been judged to be impractical by those who uphold narrow traditional views about how a firm operates; and is unsupported by those who believe that asking managers to focus on the interests or concerns of groups of constituents that do not directly contribute to the economic achievements or strategic objectives of a firm, is a distraction and an attempt to derail corporate objectives. However, in spite of the criticisms levelled against the notion of stakeholder management, firms can no longer ignore the fact that there are constituents who can affect, and are affected by their business objectives.
The aim of this research is to illustrate the practical implications of stakeholder management by exploring how multinational oil corporations operating in the Nigerian oil and gas industry manage their relationships with nonmarket stakeholders; such as the local communities who are affected by their operations. In order to achieve the aims of this research, a case study approach has been adopted; the case study companies include Shell Petroleum Development Company (Shell), Total Exploration and Production (Total), and the Nigerian Agip Oil Company (AGIP). Furthermore, to achieve a balanced perspective regarding the stakeholder management practices of the oil companies, the research incorporates the views of stakeholders from local communities, and those from non-governmental organisations (NGOs). A mixed methods research strategy is employed in the data collection and analysis process to achieve not just triangulation, but also to assist in the comprehension of the research findings.
The research established that each of the companies being studied has employed different stakeholder management strategies in order to manage their relationships with the local communities. The strategies employed by the companies, however, appear not to address the issue of environmental impact; the concern which triggered the breakdown in the relationship between the oil companies and the local stakeholders in the first place. They have instead mostly focused on ameliorating the socio-economic issues resulting from oil exploration and production activities, in part as a consequence of pressure from the local communities themselves. Additionally, the findings indicate that the companies have employed hostile and controlling engagement strategies such as intimidation, appeasement, and manipulation, when dealing with local community stakeholders. These strategies are believed to have undermined the quality of their relationship with the local communities. The most notable consequence of these engagement practices is damaged trust amongst community members, as well as between the communities and the oil companies. The findings of this research have strong implications for stakeholder theory, as well as future research into stakeholder management practices, particularly in relation to non-contractual or nonmarket stakeholders; they also shed light on several important practical issues in business management.