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Encyclopedia > Stakeholder (corporate)

A corporate stakeholder is a party who affects, or can be affected by, the company's actions. The stakeholder concept was developed and championed by R. Edward Freeman in the 1980s. It has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, and business purpose (See Stakeholder theory). R. Edward Freeman (December 18, 1951 - ) is an American economist and professor of business administration at the Darden School of the University of Virginia; he has also taught at the University of Minnesota and the Wharton School. ... Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives[1]. It is the process of specifying the organizations objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies... Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way in which a corporation is directed, administered or controlled. ... To meet Wikipedias quality standards, this article or section may require cleanup. ...


A narrowly defined list of stakeholders might include:

Broader lists of stakeholders may also include: Employment is a contract between two parties, one being the employer and the other being the employee. ... For other uses, see Community (disambiguation). ... 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. ... Investment is a term with several closely related meanings in finance and economics. ...

Contents

Supplier may refer to: Manufacturer, uses tools and labor to make things for sale Processor (manufacturing), converts it from one form to another Packager (manufacturing), encloses products for distribution, storage, sale, and use Distributor (business), the middleman between the manufacturer and retailer Wholesaler, sells goods or merchandise to retailers Dealership... A union (labor union in American English; trade union, sometimes trades union, in British English; either labour union or trade union in Canadian English) is a legal entity consisting of employees or workers having a common interest, such as all the assembly workers for one employer, or all the workers... An industry trade group, also known as a trade association, is generally a public relations organization founded and funded by corporations that operate in a specific industry. ... This article or section should be merged with professional body In countries where the legal system entitles defendants to a jury by their peers, the general public may not be considered sufficiently knowledgeable in a field of practice to act as a peer in some legal cases. ... NGO is an abbreviation or code for: Non-governmental organization Nagoya Airport (IATA code) This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ... An advocacy group, interest group or lobbying group is a group, however loosely or tightly organized, doing advocacy: those determined to encourage or prevent changes in public policy without trying to be elected. ... Competition characterises a biochemical, ecologic, economic, political, or sporting activity whereby two or more individuals or groups strive antagonistically against one another for some reward. ... Students in Rome, Italy. ...

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 in the... For other uses, see Corporation (disambiguation). ... 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 non-profit organization (abbreviated NPO, or non-profit or not-for-profit) is an organization whose primary objective is to support an issue or matter of private interest or public concern for non-commercial purposes, without concern for monetary profit. ... This article is about work. ... Customers are waiting in front of a famous fashion shop for its grand opening in Hong Kong. ... Game theory is a branch of applied mathematics that is often used in the context of economics. ...


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. ... For other uses, see Bank (disambiguation). ...



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). ... A need is the psychological feature that arouses an organism to action toward a goal and the reason for the action, giving purpose and direction to behavior. ... ... 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. ... Chairman of the Board redirects here. ... Chief Executive redirects here. ...


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.


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, Shares

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. 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. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... John Rawls (February 21, 1921 – November 24, 2002) was an American philosopher, a professor of political philosophy at Harvard University and author of A Theory of Justice (1971), Political Liberalism, Justice as Fairness: A Restatement, and The Law of Peoples. ...


See also

See Stakeholders for other meanings. ... To meet Wikipedias quality standards, this article or section may require cleanup. ...

References

  • Redefining the Corporation: An International Colloquy
  • "Redefining the Corporation: Stakeholder Management and Organizational Wealth", by Post, Preston, and Sachs, Stanford University Press, 2002

 
 

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