The structure and dynamics of the CEO's “small world” of stakeholders. An application to industrial downsizing

Stakeholder theory highlights that a CEO must perform a social responsibility toward multiple stakeholders (employees, politicians, journalists, citizens, etc.). These stakeholders constitute a political system and the CEO develops a political strategy to deal with the claims of the different actors. This article mobilizes social network analysis and complex networks theory to build a dynamic theory of stakeholders' networks. One approach to business networks highlights a “small world” structure characterized by dense clusters of stakeholders connected by very few ties. To varying degrees corporate leaders are embedded in clusters of stakeholders, and such clusters are subject to systemic shocks that can be random or intentionally provoked by the CEO. This framework is used to analyze the evolution of the employment relationship during an industrial restructuring. The employment contract is not limited to a relationship between an employer and an employee. Rather this relationship is embedded in a network that may involve several stakeholders. The strategic decision to downsize an organization in response to a systemic shock destabilizes the cluster of stakeholders and leads the CEO to define a political strategy to manage the layoff crisis.