Stakeholders

What is a stakeholder?
There are several definitions. The most common ones are:

Those groups without whose support the organization would cease to exist
Any group or individual who can affect or is affected by the achievement of
the organization's objectives

From these definitions that a lot of people can be a stakeholder to an organization.

The most common groups who are considered to be stakeholders are following:

Managers
Employees
Customers
Investors
Shareholders
Suppliers

Then there are some more generics groups who are often included:

Government
Society at large
The local community

Many people consider that only people can be stakeholders to an organization.

Some people extend this and say that the environment can be affected by
organizational activity. These effects of the organizations activities can take many
forms, such as:

the utilization of natural resources as a part of its production processes

the effects of competition between itself and other organizations in the same
market
 the enrichment of a local community through the creation of employment
opportunities
transformation of the landscape due to raw material extraction or waste
product storage
the distribution of wealth created within the firm to the owners of that firm
(via dividends) and the workers of that firm (through wages) and the effect
of this upon the welfare of individuals
pollution caused by increased volumes of traffic and increased journey times
because of those increased volumes of traffic

Thus many people also consider that there is and additional stakeholder to an
organization, namely:

The environment

Stakeholders and Their Interests with Organization

Stakeholders are those who may be affected by or have an effect on an effort. They may also include
people who have a strong interest in the effort for academic, philosophical, or political reasons, even
though they and their families, friends, and associates are not directly affected by it.

Characterization of stakeholders
Primary stakeholders are the people or groups that stand to be directly
affected, either positively or negatively, by an effort or the actions of an
agency, institution, or organization. In some cases, there are primary
stakeholders on both sides of the equation: a regulation that benefits one
group may have a negative effect on another. A rent control policy, for
example, benefits tenants, but may hurt landlords.
Secondary stakeholders are people or groups that are indirectly affected,
either positively or negatively, by an effort or the actions of an agency,
institution, or organization. A program to reduce domestic violence, for
instance, could have a positive effect on emergency room personnel by
reducing the number of cases they see. It might require more training for
police to help them handle domestic violence calls in a different way. Both
of these groups would be secondary stakeholders.
 Key stakeholders, who might belong to either or neither of the first two
groups, are those who can have a positive or negative effect on an effort, or
who are important within or to an organization, agency, or institution
engaged in an effort. The director of an organization might be an obvious
key stakeholder, but so might the line staff those who work directly with
participants who carry out the work of the effort. If they dont believe in
what theyre doing or dont do it well, it might as well not have begun.
Other examples of key stakeholders might be funders, elected or appointed
government officials, heads of businesses, or clergy and other community
figures who wield a significant amount of influence.
While an interest in an effort or organization could be just that
intellectually, academically, philosophically, or politically motivated
attention stakeholders are generally said to have an interest in an effort or
organization based on whether they can affect or be affected by it. The more
they stand to benefit or lose by it, the stronger their interest is likely to be.
The more heavily involved they are in the effort or organization, the stronger
their interest as well.
Stakeholders interests can be many and varied. A few of the more
common:
Economics. An employment training program might improve economic
prospects for low-income people, for example. Zoning regulations may also
have economic consequences for various groups.
Social change. An effort to improve racial harmony could alter the social
climate for members of both the racial or ethnic minority and the majority.
Work. Involving workers in decision-making can enhance work life and
make people more satisfied with their jobs.
Time. Flexible work hours, relief programs for caregivers, parental leave,
and other efforts that provide people with time for leisure or taking care of
the business of life can relieve stress and increase productivity.
Environment. Protection of open space, conservation of resources, attention
to climate change, and other environmental efforts can add to everyday life.
These can also be seen as harmful to business and private ownership.
 Physical health. Free or sliding-scale medical facilities and other similar
programs provide a clear benefit for low-income people and can improve
community health.
Safety and security. Neighborhood watch or patrol programs, better policing
in high-crime neighborhoods, work safety initiatives all of these and many
other efforts can improve safety for specific populations or for the
community as a whole.
Mental health. Community mental health centers and adult day care can be
extremely important not only to people with mental health issues, but also to
their families and to the community as a whole.

Most businesses have a variety of stakeholder groups which can be broadly

categorized as follows:

Stakeholder groups vary both in terms of their interest in the business activities
and also their power to influence business decisions.
Here is a useful summary:

Stakeholder Main Interests Power and influence

Shareholders Profit growth, Share price Election of directors
growth, dividends
Banks & Interest and principal to be Can enforce loan covenants
other Lenders repaid, maintain credit rating Can withdraw banking facilities
Directors and Salary ,share options, job Make decisions, have detailed
managers satisfaction, status information
Employees Salaries & wages, job security, Staff turnover, industrial action,
job satisfaction & motivation service quality
Suppliers Long term contracts, prompt Pricing, quality, product availability
payment, growth of purchasing
Customers Reliable quality, value for Revenue / repeat business
money, product availability, Word of mouth recommendation
customer service
Community Environment, local jobs, local Indirect via local planning and
impact opinion leaders
Government Operate legally, tax receipts, Regulation, subsidies, taxation,
jobs planning

Stakeholder power is an important factor to consider whenever you are asked to

write about the relationship between a business and its stakeholders. In the context
of strategy, what is important is thepower and influence that a stakeholder has
over the business objectives.
Business Ethics
The term ethics refers to accepted principles of right or wrong that go Vern the
conduct of a person, the members of a profession, or the actions of an organization.
Business ethics are the accepted principles of right or wrong go verning the
conduct of b businesspeople. Ethical decisions are those that are in accordance
with those accepted principles of right and wrong, whereas an unethical decision is
one that violates accepted principles. This is not as straightforward as it sounds.

Managers may face ethical dilemmas ,which are situations where there is no
agreement over exactly what the accepted principles of right and wrong are, or
where none of the available alternatives seems ethically acceptable.

ETHICAL ISSUES IN MANAGEMENT

The ethical issues managers confront cover a wide range of topics; but most arise
due to a potential conflict between the goals of the organization, or those of
individual managers, and the fundamental rights of important stakeholders.

Stakeholders have basic rights that should be respected, and it is unethical to

violate those rights.

Shareholders have the right to timely and accurate information about their
investments (in accounting statements).

Customers have the right to be fully informed about the products and services they
purchase, including how those products might harm them or others, and it is
unethical to restrict their access to such information.

Employees have the right to safe working conditions, to f air compensation for the
work they perform, and to be treated in a just manner by managers.

Suppliers and distributors have the right to expect contracts to be respected, and
a firm should not take advantage of a power disparity to opportunistically rewrite
contracts.

Competitors have the right to expect that a firm will abide b y the rules of
competition and not violate the basic principles of antitrust laws.
Communities and the general public, including their political representatives in
government, have the right to expect that a firm will not violate the basic
expectations society places on enter prizes.

THE ROOTS OF UNETHICAL BEHAVIOR

First, business ethics are not divorced from personal ethics. As it is wrong and
unethical to lie and cheat and that it is right to behave with integrity and honor and
to stand up for what we believe to be right and true. The personal ethical code that
guides our behavior comes from a number of sources, including our parents,
schools, religion, and the media. Our personal ethical code exerts a profound
influence on how we behave as businesspeople. An individual with a strong sense
of personal ethics is less likely to behave in an unethical manner in a business
settingand in particular is less likely to engage in self-dealing and more likely to
behave with integrity.

Second, many studies of unethical business behavior have concluded that

businesspeople sometimes do not realize they are behaving unethically, primarily
because they simply fail to ask the relevant question: Is this decision or action
ethical?
Roots of Unethical Behavior
BEHAVING ETHICALLY
What is the best way for managers to make sure ethical considerations are taken
into account when decisions are made? In many cases there is no easy answer to
this question: Many of the most vexing ethical problems arise because they contain
real dilemmas and no obvious right course of action. Nevertheless, managers can
and should do many things to ensure that basic ethical principles are adhered to
and that ethical issues are routinely inserted into business decisions.

1. Favor hiring and promoting people with a well-grounded sense of personal

ethics.
2. Build an organizational culture that places a high value on ethical behavior.
3. Make sure that leaders within the business not only articulate the rhetoric of
ethical behavior, but also act in a manner that is consistent with that rhetoric.
4. Put decision-making processes in place that requires people to consider the
ethical dimensions of business decisions.
5. Develop strong governance processes.
6. Appoint ethics officers.
7. Act with moral courage.
Building a Positive Ethical Climate