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Encyclopedia > Stakeholder

The term stakeholder has two distinct uses in the English language:

  • The traditional usage, in law and notably gambling, a third party who temporarily holds money or property while its owner is still being determined.
  • More recently a very different meaning of the term has become widely used in management. This sees a stakeholder as a person or organization that has a legitimate interest in a project or entity.

The new use of the term arose together with and due to the spread of corporate social responsibility ideas, but there are also utilitarian and traditional business goals that are served by the new meaning of the term (see stakeholder concept and below). The stela of King Hammurabi depicts the god Shamash revealing a code of laws to the king. ... Gambling has had many different meanings depending on the cultural and historical context in which it is used. ... An example of Money. ... // Use of the term The concept of property or ownership has no single or universally accepted definition. ... The term management characterizes the process of and/or the personnel leading and directing all or part of an organization (often a business) through the deployment and manipulation of resources (human, financial, material, intellectual or intangible). ... Corporate social responsibility (CSR) is an expression used to describe what some see as a company’s obligation to be sensitive to the needs of all of the stakeholders in its business operations. ... The stakeholder concept states that a companys responsibilites are to all of its stakeholders. Stakeholders are people who affect, and are affected by, the company. ...

Contents

In law

The role of stakeholder is a very old concept in law. A stakeholder was originally a person who temporarily holds money or other property while its owner is being determined. This is, for example, the situation when two persons bet on the outcome of a future event and ask a third, disinterested, neutral person to hold the money (or "stake[s]") that they have wagered (or "staked"). After the event occurs, the stakeholder distributes the stakes to one or both of the original (or other) parties according to the outcome of the event and according to the previously decided conditions. Courts sometimes act as stakeholders, holding property while litigation between the possible owners resolves the issue of which one is entitled to the property. Trustees also often act as stakeholders, holding property until beneficiaries come of age, for example. An "escrow agent" is one kind of trustee who is a stakeholder, usually in a situation where part of the purchase price of property is being held until some condition is satisfied. In legal documents, the escrow agent is often referred to as a "mere stakeholder." The stela of King Hammurabi depicts the god Shamash revealing a code of laws to the king. ... An example of Money. ... // Use of the term The concept of property or ownership has no single or universally accepted definition. ... Gambling has had many different meanings depending on the cultural and historical context in which it is used. ... Escrow is a legal arrangement whereby an asset (often money, but sometimes other property such as art, a deed of title, website, or software source code) is delivered to a third party (called an escrow agent) to be held in trust pending a contingency or the fulfillment of a condition... The word trustee is a legal term that refers to a holder of property on behalf of some other beneficiary. ...


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). (19th century - 20th century - 21st century - more centuries) Decades: 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s As a means of recording the passage of time, the 20th century was that century which lasted from 1901–2000 in the sense of the Gregorian calendar (1900–1999... A corporation is a legal person which, while being composed of natural persons, exists completely separately from them. ... An agency is a department of a local or national government responsible for the oversight and administration of a specific function, such as a customs agency or a space agency. ... A nonprofit organization (abbreviated NPO, or non-profit or not-for-profit) is an organization whose primary objective is to support some issue or matter of private interest or public concern for non-commercial purposes. ... Employment is a contract between two parties, one being the employer and the other being the employee. ... A customer is someone who makes use or receives of the products or services of an individual or organization. ... Game theory is a branch of applied mathematics and economics that studies situations where players choose different actions in an attempt to maximize their returns. ...


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, neighbours (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." A shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. ... The First Provincial Bank of Taiwan in Taipei, Republic of China was formerly the central bank of the Republic of China and issued the New Taiwan dollar. ...


In the field of corporate governance and corporate responsibility, a major debate is ongoing about whether the firm should be managed for stakeholders, stockholders, or customers. Those who support the stakeholder view usually 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. In general, the economic value of something is how much a product or service is worth to someone relative to other things (often measured in money). ... The concept of Needs is often used to refer to things that people must have. ... ... Legitimacy is the popular acceptance of a governing regime or law. ...


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 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. In philosophy, normative is usually contrasted with positive, descriptive or explanatory when describing types of theories, beliefs, or statements. ... In relation to a company, a director is an officer of the company charged with the conduct and management of the affairs of the company. ... A chief executive officer (CEO), or chief executive, is the highest-ranking corporate officer or executive officer of a corporation, or agency. ...


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 neglicence, and makes them less likely to be targeted by pressure groups.


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, examples include managers who are affected by a project, process owners, people who work with the process under study, internal departments that support the process, the financial department, suppliers, and even customers.
  • 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.

Examples of common stakeholders

Stakeholder Examples of interests
Owners private/shareholders Profit, Performance, Direction
Government Taxation, VAT, Legislation
Senior Management staff Performance, Targets
Non-Managerial staff Rates of pay, Job security
Trade Unions Working conditions, Minimum wage
Customers Value, Quality, Customer Care
Creditors Credit score, new contracts, Liquidity
Local Community Jobs, Involvement, Environmental issues

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." The Stakeholder View of Strategy is an instrumental theory of the firm, integrating both, the resource-based view as well as the market-based view, and adding a socio-political level. ...


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. To meet Wikipedias quality standards, this article or section may require cleanup. ...


See also


  Results from FactBites:
 
Stakeholder Comments In San Francisco, CA., June 30, 1999 - 8:30-12:30 (3587 words)
A stakeholder from the brick, marble and masonry industry stated that silica exposures occur during dry cutting of materials and that a trend is developing toward the use of dry saws (quickie saw cuts) because it takes more time to set up a water supply.
This stakeholder noted that a little "haze" in the air is a common problem, and that this factor is a key element in worker training.
A stakeholder noted that job specifications for construction of prisons and schools do not allow the wet cutting of bricks due to concern that the bonding of the mortar may be affected.
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Stakeholder pensions are a new type of pension scheme that started in April 2001.
Stakeholder pensions are mainly for people who cannot join a pension scheme where they work.
Stakeholder scheme members have the right to vary the amount they pay into the scheme through their wages at least every six months.
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