Stakeholder (corporate)

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For other uses, see Stakeholder (disambiguation).

Internal and external stakeholders of a company

A corporate stakeholder is a party that can affect or be affected by the actions of the
business as a whole. The stakeholder concept was first used in a 1963 internal
memorandum at the Stanford Research institute. It defined stakeholders as "those groups
without whose support the organization would cease to exist."[1] 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 term has been broadened to include anyone who has an interest in a matter.

Contents
[hide]

• 1 Applications of the term

o 1.1 Examples of a company's stakeholders
o 1.2 Types of stakeholders
o 1.3 Company stakeholder mapping
o 1.4 In management
o 1.5 In corporate responsibility
• 2 Stakeholder view theory
• 3 As jargon in local government
 • 4 See also

• 5 References

[edit] Applications of the term

[edit] Examples of a company's stakeholders

Stakeholders Examples of interests

Owners Profit, Performance, Direction, Reputation, Truthfull
private/shareholders Reporting
Taxation, VAT, Legislation, Low unemployment, Truthfull
Government
Reporting
Senior Management staff Performance, Targets, Growth, Compensation
Rates of pay, Job security, Compensation, Respect, Truthfull
Non-Managerial staff
Communication
Trade Unions Working conditions, Minimum wage, Legal requirements
Customers Value, Quality, Customer Care, Ethical products
Providers of products and services used in the end product for
Suppliers
the Customer. Equitable Business Opportunities
Creditors Credit score, New contracts, Liquidity
Jobs, Involvement, Environmental Protection, Shares,
Community
Truthfull Communication

[edit] Types of stakeholders

• People who will be affected by an endeavor and can influence it but who are not
directly involved with doing the work.

• In the private sector, People who are (or might be) affected by any action taken by
an organization or group. Examples are parents, children, customers, owners,
employees, associates, partners, contractors, suppliers, people that are related or
located near by. Any group or individual who can affect or who is affected by
achievement of a group's objectives.

• An individual or group with an interest in a group's or an organization's success in

delivering intended results and in maintaining the viability of the group or the
organization's product and/or service. Stakeholders influence programs, products,
and services.
 • Any organization, governmental entity, or individual that has a stake in or may be
impacted by a given approach to environmental regulation, pollution prevention,
energy conservation, etc.

• A participant in a community mobilization effort, representing a particular

segment of society. School board members, environmental organizations, elected
officials, chamber of commerce representatives, neighborhood advisory council
members, and religious leaders are all examples of local stakeholders.

Internal Stakeholders - Market (or Primary) Stakeholders are those that engage in
economic transactions with the business. (For example stockholders, customers,
suppliers, creditors, and employees)

External Stakeholders - NonMarket (or Secondary) Stakeholders are those who -

although they do not engage in direct economic exchange with the business - are affected
by or can affect its actions. (For example the general public, communities,activist groups,
business support groups, and the media)

[edit] Company stakeholder mapping

A narrow mapping of a company's stakeholders might identify the following

stakeholders:

• Employees
• Communities
• Shareholders
• Creditors
• Investors
• Government
• Customers

A broader mapping of a company's stakeholders may also include:

• Suppliers
• Labor unions
• Government regulatory agencies
• Government legislative bodies
• Government tax-collecting agencies
• Industry trade groups
• Professional associations
• NGOs and other advocacy groups
• Prospective employees
• Prospective customers
• Local communities
• National communities
• Public at Large (Global Community)
 • Competitors
• Schools
• Future generations
• Analysts and Media
• Alumni (Ex-employees)
• Research centers
• Each Person

[edit] In management

In the last decades of the 20th century, the word "stakeholder" has become 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 its 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, "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 in" 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).

Example

• For example, in the case of a professional landlord undertaking the refurbishment

of some rented housing that is occupied while the work is being carried out, key
stakeholders would be the residents, neighbors (for whom the work is a nuisance),
and the tenancy management team and housing maintenance team employed by
the landlord. Other stakeholders would be funders and the design and construction
team.

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."

[edit] In corporate responsibility

In the field of corporate governance and corporate responsibility, a major debate is

ongoing about whether the firm or company should be managed for stakeholders,
stockholders (shareholders), or customers. Proponents in favour of stakeholders may base
their arguments on the following four key assertions:

1) Value can best be created by trying to maximize joint outcomes. For example,
according to this thinking, programs that satisfy both employees' needs and stockholders'
wants are doubly valuable because they address two legitimate sets of stakeholders at the
same time. There is even evidence that the combined effects of such a policy are not only
additive but even multiplicative. For instance, by simultaneously addressing customer
wishes in addition to employee and stockholder interests, both of the latter two groups
also benefit from increased sales.

2) Supporters also take issue with the preeminent role given to stockholders by many
business thinkers, especially in the past. The argument is that debt holders, employees,
and suppliers also make contributions and take risks in creating a successful firm.

3) These normative arguments would matter little if stockholders (shareholders) had

complete control in guiding the firm. However, many believe that due to certain kinds of
board of directors structures, top managers like CEOs are mostly in control of the firm.

4) The greatest value of a company is its image and brand. By attempting to fulfill the
needs and wants of many different people ranging from the local population and
customers to their own employees and owners, companies can prevent damage to their
image and brand, prevent losing large amounts of sales and disgruntled customers, and
prevent costly legal expenses. While the stakeholder view has an increased cost, many
firms have decided that the concept improves their image, increases sales, reduces the
risks of liability for corporate negligence, and makes them less likely to be targeted by
pressure groups, campaigning groups and NGOs.

[edit] Stakeholder view theory

Post, Preston, Sachs (2002), in their theory called Stakeholder view, use the following
definition of the term "stakeholder": "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." This definition differs from the older definition of the term
stakeholder in Stakeholder theory (Freeman, 1984) that also includes competitors as
stakeholders of a corporation. Robert 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
normatively and derivatively legitimate stakeholders.

[edit] As jargon in local government

The word "stakeholder" has been listed as one of the top ten classic jargon terms used by
English councils, and as such alarms or confuses ordinary people and is best avoided.[2] It
is recognised as jargon by the UK government, and defined as such by the Learning and
Skills Council.[3] It is argued by the Plain English Campaign that words such as
"stakeholder" prevent people from getting involved in local government by making it
difficult to understand what is meant, and councillor Tony Greaves actively objects to the
word "stakeholder" considering it to be an example of management speak adopted by the
Labour Party under its New Labour guise to avoid sounding like socialists.[4]
[edit] See also
• Stakeholder engagement
• Stakeholder (law)
• Stakeholder theory

[edit] References
1. ^ Stockholders and Stakeholders: A new perspective on Corporate Governance.
By: Freeman, R. Edward; Reed, David L.. California Management Review,
Spring83, Vol. 25 Issue 3, p88-106
2. ^ "Why do councils love jargon?". BBC.co.uk. 2008-02-08.
http://news.bbc.co.uk/1/hi/magazine/7234435.stm. Retrieved 2009-11-04.
3. ^ "Jargon buster - Stakeholder". Learning and Skills Council.
http://www.lsc.gov.uk/Jargonbuster/Stakeholder.htm. Retrieved 2009-11-04.
4. ^ White, Roland (2009-06-14). "One nation under jargon". London: Times
Online. http://www.timesonline.co.uk/tol/news/politics/article6493420.ece.
Retrieved 2009-11-04.

• Stockholders and Stakeholders: A new perspective on Corporate Governance. By:

Freeman, R. Edward; Reed, David L.. California Management Review, Spring83,
Vol. 25 Issue 3, p88-106
• Redefining the Corporation: An International Colloquy
• Post, James (2002). Redefining the Corporation: Stakeholder Management and
Organizational Wealth. Stanford University Press. http://www.sup.org/book.cgi?
id=1967. Retrieved 2009-01-29
• Figge, F.; Schaltegger, S.: What is Stakeholder Value? Developing a Catchphrase
into a Benchmarking Tool. Lüneburg/Geneva/Paris: University of
Lüneburg/Pictet/ in association with United Nations Environment Program
(UNEP), 2000 CSM Lüneburg (799 kBytes)

Retrieved from "http://en.wikipedia.org/wiki/Stakeholder_(corporate)"

Categories: Corporate finance | Public relations

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Stakeholders analysis

Stakeholder analysis in conflict resolution, project management, and business

administration, is the process of identifying the individuals or groups that are likely to
affect or be affected by a proposed action, and sorting them according to their impact on
the action and the impact the action will have on them. This information is used to assess
how the interests of those stakeholders should be addressed in a project plan, policy,
program, or other action. Stakeholder analysis is a key part of stakeholder management.

Stakeholder analysis is a term that refers to the action of analyzing the attitudes of
stakeholders towards something (most frequently a project). It is frequently used during
the preparation phase of a project to assess the attitudes of the stakeholders regarding the
potential changes. Stakeholder analysis can be done once or on a regular basis to track
changes in stakeholder attitudes over time.

A stakeholder is any person or organization, who can be positively or negatively

impacted by, or cause an impact on the actions of a company, government, or
organization. Types of stakeholders are:

• Primary stakeholders : are those ultimately affected, either positively or

negatively by an organization's actions.
• Secondary stakeholders : are the ‘intermediaries’, that is, persons or organizations
who are indirectly affected by an organization's actions.
• Key stakeholders : (who can also belong to the first two groups) have significant
influence upon or importance within an organization.

Therefore, stakeholder analysis has the goal of developing cooperation between the
stakeholder and the project team and, ultimately, assuring successful outcomes for the
project. Stakeholder analysis is performed when there is a need to clarify the
consequences of envisaged changes, or at the start of new projects and in connection with
organizational changes generally. It is important to identify all stakeholders for the
purpose of identifying their success criteria and turning these into quality goals.