An Examination of Organisational Trustworthiness and Stakeholder-Organisation Relations in Challenging Contexts – Dr Konstantina Kougiannou and Dr Matthew Wallis

This project investigates organisational trustworthiness and stakeholder relations



This project investigates organisational trustworthiness and stakeholder relations; an investigation of opinions of stakeholders concerning operational decisions made by firms in challenging contexts. With a focus on the firm trustworthiness (Mayer et al., 1995), we can make a contribution by bringing together the stakeholder literature with the literature on trust (Greenwood and Van Buren, 2010).

For firms, engaging in community stakeholder relations offers an opportunity to gain ‘social license to operate’ (Deephouse and Suchman, 2008, Dowling and Pfeffer, 1975) and manage social risk. Another way of conceptualising these issues of legitimacy is through whether organisations possess the trust of relevant stakeholders. Furthermore, it is in the interests of firms operating in close range to communities to understand what impact the perceptions of such stakeholders, with regard to organisational trust, can have on the achievement or otherwise of organisational goals. We focus therefore on the community stakeholder with regard to organisational trustworthiness, specifically the firm’s ability, integrity and benevolence (Mayer et al., 1995). This research brings together the stakeholder literature with the literature on trust, and makes a contribution by empirically exploring the dependent stakeholder of the local community. How organisational trustworthiness unfolds in the organization-stakeholder relationship, and ‘how stakeholders, especially dependent stakeholders, might assess organisational trustworthiness’ (Green and Van Buren, 2010: 436) are under-researched. This paper attempts to shed light upon how decisions perceived as ethically questionable, and which potentially breach trust, change the dynamic of dependent stakeholder to organization relationship. The implications of this change for the firm and the stakeholder-organization relationship are also explored.

Most definitions of trust entail a three-stage process (McEvily et al., 2003): trust as a belief, where one party assesses the other party’s trustworthiness (Lewicki et al., 1998); trust as a decision, where one party, based on its previous beliefs, has ‘the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another’ (Rousseau et al., 1998:395); and trust as an action, where, according to Mayer et al. (1995) the parties engage in risk-taking activities after having evaluated their target’s trustworthiness. They propose that the level of perceived trustworthiness depends on the existence of three factors (i.e. ability, benevolence, and integrity) and emphasize that a lack of any of them would weaken trust.

When examining the trust relationship between the organisation and its stakeholders, such trustworthy behaviour would mean that the company has to demonstrate competency in its operations (ability)(A), awareness and active acknowledgment of the other party’s concerns (benevolence)(B), and adherence to corporate social responsibility principles acceptable by the stakeholder (integrity)(I). According to stakeholder literature, this can threaten the long-term sustainability of firms: the aim of the project is to investigate this assumption.

The literature linking trust and stakeholder-organisation relations is scarce. Greenwood and Van Buren (2010) was one of the few that added trust and trustworthiness to the study of organization-stakeholder relations. In their theoretical paper, they argue that trust is the only option for dependent stakeholders when interacting with an organisation. This project would empirically explore how the stakeholder-relationship unfolds when beneficial, favourable or at least not detrimental behaviour ends, and when a breach of trust is perceived by a stakeholder constituent.