See also
Look up stakeholder in Wiktionary, the free dictionary.
- Stakeholder engagement
- Stakeholder theory
- Stakeholder (law)
- UK company law
- Strategy Markup Language, whose core elements include <Stakeholder>
- Multistakeholder Governance Model
In a corporation, a stakeholder is a member of "groups without whose support the organization would cease to exist", [1] as defined in the first usage of the word in a 1963 internal memorandum at the Stanford Research Institute. The theory was later developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, business purpose and corporate social responsibility (CSR). The definition of corporate responsibilities through a classification of stakeholders to consider has been criticized as creating a false dichotomy between the "shareholder model" and the "stakeholder model", [2] or a false analogy of the obligations towards shareholders and other interested parties. [3]
Any action taken by any organization or any group might affect those people who are linked with them in the private sector. For examples these are parents, children, customers, owners, employees, associates, partners, contractors, and suppliers, people that are related or located nearby. Broadly speaking there are three types of stakeholders:
A narrow mapping of a company's stakeholders might identify the following stakeholders: [4]
A broader mapping of a company's stakeholders may also include:[ citation needed ]
In the field of corporate governance and corporate responsibility, a debate [5] [6] is ongoing about whether the firm or company should be managed primarily for stakeholders, stockholders (shareholders), customers, or others. [7] Proponents in favor of stakeholders may base their arguments on the following four key assertions:
A corporate stakeholder can affect or be affected by the actions of a business as a whole. Whereas shareholders are often the party with the most direct and obvious interest at stake in business decisions, they are one of various subsets of stakeholders, as customers and employees also have stakes in the outcome. In the most developed sense of stakeholders in terms of real corporate responsibility, the bearers of externalities are included in stakeholdership.
In the last decades of the 20th century, the word "stakeholder" became more commonly used to mean a person or organization that has a legitimate interest in a project or entity. In discussing the decision-making process for institutions—including large business corporations, government agencies, and non-profit organizations—the concept has been broadened to include everyone with an interest (or "stake") in what the entity does. This includes not only vendors, employees, and customers, but even members of a community where its offices or factory may affect the local economy or environment. In this context, a "stakeholder" includes not only the directors or trustees on its governing board (who are stakeholders in the traditional sense of the word) but also all persons who paid into the figurative stake and the persons to whom it may be "paid out" (in the sense of a "payoff" in game theory, meaning the outcome of the transaction). Therefore, in order to effectively engage with a community of stakeholders, the organisation's management needs to be aware of the stakeholders, understand their wants and expectations, understand their attitude (supportive, neutral or opposed), and be able to prioritize the members of the overall community to focus the organisation's scarce resources on the most significant stakeholders. [8]
Example
The holders of each separate kind of interest in the entity's affairs are called a constituency, so there may be a constituency of stockholders, a constituency of adjoining property owners, a constituency of banks the entity owes money to, and so on. In that usage, "constituent" is a synonym for "stakeholder". [9]
Post, Preston, Sachs (2002), use the following definition of the term "stakeholder": "A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources.
Not all stakeholders are equal. A company's customers are entitled to fair trading practices but they are not entitled to the same consideration as the company's employees. The stakeholders in a corporation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore its potential beneficiaries and/or risk bearers." [10] This definition differs from the older definition of the term stakeholder in Stakeholder theory (Freeman, 1983) that also includes competitors as stakeholders of a corporation. Robert Allen Phillips provides a moral foundation for stakeholder theory in Stakeholder Theory and Organizational Ethics. There he defends a "principle of stakeholder fairness" based on the work of John Rawls, as well as a distinction between normative and derivative legitimate stakeholders. Real stakeholders, labelled stakeholders: genuine stakeholders with a legitimate stake, the loyal partners who strive for mutual benefits. Stake owners own and deserve a stake in the firm. Stakeholder reciprocity could be an innovative criterion in the corporate governance debate as to who should be accorded representation on the board. Corporate social responsibility should imply a corporate stakeholder responsibility.
| Stakeholders: | Stakeholder's concerns: [11] |
|---|---|
| Government | taxation, VAT, legislation, employment, truthful reporting, legalities, externalities... |
| Employees | rates of pay, job security, compensation, respect, truthful communication, appreciation, acknowledgement, recognition. |
| Customers | value, quality, customer care, ethical products. |
| Suppliers | providers of products and services used in the end product for the customer, equitable business opportunities. |
| Creditors | credit score, new contracts, liquidity. |
| Community | jobs, involvement, environmental protection, shares, truthful communication. |
| Trade unions | quality, worker protection, jobs. |
| Owner(s) | profitability, longevity, market share, market standing, succession planning, raising capital, growth, social goals. |
| Investors | return on investment, income. |
One of the central advantages of the market failures approach to business ethics is that, far from being antithetical to the spirit of capitalism, it can plausibly claim to be providing a more rigorous articulation of the central principles that structure the capitalist economy. If firms were to behave more ethically, according to this conception, the result would be an enhancement of the benefits that the market provides to society, and the elimination of many of its persistent weaknesses. It would help to perfect the private enterprise system, rather than destroy it.
A board of directors is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organization, or a government agency.
A shareholder of corporate stock refers to an individual or legal entity that is registered by the corporation as the legal owner of shares of the share capital of a public or private corporation. Shareholders may be referred to as members of a corporation. A person or legal entity becomes a shareholder in a corporation when their name and other details are entered in the corporation's register of shareholders or members, and unless required by law the corporation is not required or permitted to enquire as to the beneficial ownership of the shares. A corporation generally cannot own shares of itself.
The reputation or prestige of a social entity is an opinion about that entity - typically developed as a result of social evaluation on a set of criteria, such as behavior or performance.
Corporate governance are mechanisms, processes and relations by which corporations are controlled and operated ("governed").
Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or even industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits.
An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management. A fairly small stake may be enough to launch a successful campaign. In comparison, a full takeover bid is a much more costly and difficult undertaking. The goals of activist shareholders range from financial to non-financial. Shareholder activists can address self-dealing by corporate insiders, although large stockholders can also engage in self-dealing to themselves at the expense of smaller minority shareholders.
Shareholder value is a business term, sometimes phrased as shareholder value maximization. It became prominent during the 1980s and 1990s along with the management principle value-based management or "managing for value".
An agency cost is an economic concept that refers to the costs associated with the relationship between a "principal", and an "agent". The agent is given powers to make decisions on behalf of the principal. However, the two parties may have different incentives and the agent generally has more information. The principal cannot directly ensure that its agent is always acting in its best interests. This potential divergence in interests is what gives rise to agency costs.
The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. It addresses morals and values in managing an organization, such as those related to corporate social responsibility, market economy, and social contract theory.
In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long run. Business value expands concept of value of the firm beyond economic value to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value. Many of these forms of value are not directly measured in monetary terms. According to the Project Management Institute, business value is the "net quantifiable benefit derived from a business endeavor that may be tangible, intangible, or both."
Corporate behaviour is the actions of a company or group who are acting as a single body. It defines the company's ethical strategies and describes the image of the company. Studies on corporate behaviour show the link between corporate communication and the formation of its identity.
Corporate communication(s) is a set of activities involved in managing and orchestrating all internal and external communications aimed at creating a favourable point of view among stakeholders on which the company depends. It is the messages issued by a corporate organization, body or institute to its audiences, such as employees, media, channel partners and the general public. Organizations aim to communicate the same message to all its stakeholders, to transmit coherence, credibility and ethics.
Robert Edward Freeman is an American philosopher and professor of business administration at the Darden School of the University of Virginia, particularly known for his work on stakeholder theory (1984) and on business ethics.
Organizational ethics is the ethics of an organization, and it is how an organization responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although it is to both organizational behavior and industrial and organizational psychology as well as business ethics on the micro and macro levels, organizational ethics is neither organizational behavior nor industrial and organizational psychology, nor is it solely business ethics. Organizational ethics express the values of an organization to its employees and/or other entities irrespective of governmental and/or regulatory laws.
Stakeholder management is a critical component in the successful delivery of any project, programme or activity. A stakeholder is any individual, group or organization that can affect, be affected by, or perceive itself to be affected by a programme.
The Friedman doctrine, also called shareholder theory, is a normative theory of business ethics advanced by economist Milton Friedman which holds that the social responsibility of business is to increase its profits. This shareholder primacy approach views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible. As such, the goal of the firm is to increase its profits and maximize returns to shareholders. Friedman argues that the shareholders can then decide for themselves what social initiatives to take part in, rather than have an executive whom the shareholders appointed explicitly for business purposes decide such matters for them.
Stakeholder engagement is the process by which an organization involves people who may be affected by the decisions it makes or can influence the implementation of its decisions. They may support or oppose the decisions, be influential in the organization or within the community in which it operates, hold relevant official positions or be affected in the long term.
Shareholder primacy is a theory in corporate governance holding that shareholder interests should be assigned first priority relative to all other corporate stakeholders. A shareholder primacy approach often gives shareholders power to intercede directly and frequently in corporate decision-making, through such means as unilateral shareholder power to amend corporate charters, shareholder referendums on business decisions and regular corporate board election contests. The shareholder primacy norm was first used by courts to resolve disputes among majority and minority shareholders, and, over time, this use of the shareholder primacy norm evolved into the modern doctrine of minority shareholder oppression.
In business, a benefit corporation is a type of for-profit corporate entity whose goals include making a positive impact on society. Laws concerning conventional corporations typically do not define the "best interest of the corporation", which has led some to believe that increasing shareholder value is the only overarching or compelling interest of a corporation. Benefit corporations explicitly specify that profit is not their only goal. Their activities may or may not differ much from traditional corporations. An ordinary corporation may change to a benefit corporation merely by stating in its approved corporate bylaws that it is a benefit corporation.
Corporate environmental responsibility (CER) refers to a company's duties to abstain from damaging natural environments. The term derives from corporate social responsibility (CSR).
