Determining Best Practice in Corporate-Stakeholder Relations Using Data Envelopment Analysis

Abstract

This article presents a study of corporate-stakeholder relationships using an empirical technique called Data Envelopment Analysis (DEA) to assess company "best practices" with respect to five primary stakeholders at an industry level of analysis. Five key stakeholder domains are considered: community relations, employee relations, environment, customer (product category), and stockholders (financial performance). These data reflect the relationships between companies and these five primary stakeholders; these relationships are considered to be important elements of corporate social performance. About 15% of companies, on average, are found to be operating at the multidimensional "best practices frontier" that DEA establishes. Differences in treatment of stakeholders within industries and between industries are observed.