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In a
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
, a stakeholder is a member of "groups without whose support the organization would cease to exist", as defined in the first usage of the word in a 1963 internal memorandum at the
Stanford Research Institute SRI International (SRI) is an American nonprofit organization, nonprofit scientific research, scientific research institute and organization headquartered in Menlo Park, California. The trustees of Stanford University established SRI in 1946 as ...
. The theory was later developed and championed by
R. Edward Freeman Robert Edward Freeman (born December 18, 1951) 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 et ...
in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to
strategic management In the field of , strategic management involves the formulation and implementation of the major goals and initiatives taken by an 's managers on behalf of stakeholders, based on consideration of and an assessment of the internal and external ...
,
corporate governance Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation. Governance structures and principles identify the distribution of rights and responsibilities among diff ...
, business purpose and
corporate social responsibility Corporate social responsibility (CSR) 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 or supporting volunteering or ethically-o ...
(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 "stakeholders model" or a false analogy of the obligations towards shareholders and other interested parties.


Types

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: * Primary stakeholders are usually internal stakeholders, are those that engage in economic transactions with the business (for example stockholders, customers, suppliers, creditors, and employees). * Secondary stakeholders are usually external stakeholders, 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). * Excluded stakeholders are those such as children or the disinterested public, originally as they had no economic impact on business. Now as the concept takes an
anthropocentric Anthropocentrism (; from grc, ἄνθρωπος, ''ánthrōpos'', "human being"; and grc, κέντρον, ''kéntron'', "center") is the belief that human beings are the most important entity in the universe The universe ( la, universus) ...
perspective, while some groups like the general public may be recognized as stakeholders others remain excluded. Such a perspective does not give plants, animals or even geology a voice as stakeholders, but only an
instrumental value In moral philosophy Ethics or moral philosophy is a branch of philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about reason, Metaphysics, existence, Epistemology, knowledge, Ethics, valu ...
in relation to human groups or individuals. A narrow mapping of a company's stakeholders might identify the following stakeholders: *
Employees Employment is a relationship between two parties, usually based on contract A contract is a legally binding document between at least two parties that defines and governs the rights and duties of the parties to an agreement. A contract is le ...

Employees
*
Communities A community is a social unit (a group of living things) with commonality such as norms, religion Religion is a social system, social-cultural system of designated religious behaviour, behaviors and practices, morality, morals, beliefs, wor ...

Communities
*
Shareholders A shareholder (in the United States often referred to as stockholder) of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal en ...
*
Creditors A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of people who have been invited by a host A host is ...
*
Investors An investor is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...
*
Government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Departmen ...

Government
*
Customers In sales, commerce, and economics, a customer (sometimes known as a :wikt:client, client, buyer, or purchasing, purchaser) is the recipient of a Good (economics), good, service (economics), service, product (business), product or an Intellectua ...
*
Owners Ownership is the state or fact of exclusive rights and control over property, which may be any asset, including an object, land or real estate, intellectual property, or until the nineteenth century, slaves, human beings. Ownership involves multi ...
*
Financiers An investor is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Types ...

Financiers
*
Managers Management (or managing) is the administration of an organization An organization, or organisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, -ize (-isation, -iz ...
A broader mapping of a company's stakeholders may also include: *
Suppliers In commerce, a supply chain is a system of organizations, people, activities, information, and resources involved in supplying a product (business), product or service (business), service to a consumer. Supply chain activities involve the transfor ...
*
Distributors A distributor is an enclosed rotating Shaft (mechanical engineering), shaft used in Spark-ignition engine, spark-ignition internal combustion engines that have mechanically timed ignition system, ignition. The distributor's main function is to r ...
*
Labor union A trade union (or a labor union in American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the English language native to the United States. Cu ...
s *Government regulatory agencies *Government legislative bodies *Government tax-collecting agencies *
Industry trade group A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific Industry (economics), industry. An industry trad ...
s *
Professional association A professional association (also called a professional body, professional organization, or professional society) usually seeks to further Further or Furthur may refer to: *Furthur (bus), ''Furthur'' (bus), the Merry Pranksters' psychedelic bus ...
s *
NGO upright=1.3, alt=A roomful of people, Europe-Georgia Institute head George Melashvili addresses the audience at the launch of the "Europe in a suitcase" project by two NGOs (the EGI and the Friedrich Naumann Foundation), which aims to increase ...

NGO
s and other
advocacy group Advocacy groups, also known as special interest groups, use various forms of advocacy Advocacy is an activity by an individual or group that aims to influence decisions within political, economic, and social institutions. Advocacy include ...
s *Prospective employees *Prospective customers *
Local communitiesA local community has been defined as a group of interacting people living in a common location. The word is often used to refer to a group that is organized around common values and is attributed with social cohesion within a shared geographical loc ...
*National communities *Public at Large (Global Community) * Competitors *
School A school is an educational institution An educational institution is a place where people of different ages gain an education, including preschools, childcare, primary-elementary schools, secondary-high schools, and universities. They p ...

School
s *
Future generations Future generations are the generations of people to come in the future, after the currently living generations of humans. The future generation is contrasted with current and past generations, and evoked in order to create thinking about interge ...
*Analysts and Media *Research centers


In corporate responsibility

In the field of
corporate governance Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation. Governance structures and principles identify the distribution of rights and responsibilities among diff ...
and
corporate responsibility Corporate responsibility is a term which has come to characterize a family of professional disciplines intended to help a corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act ...
, a debate is ongoing about whether the firm or company should be managed primarily for stakeholders, stockholders (
shareholders A shareholder (in the United States often referred to as stockholder) of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal en ...
),
customers In sales, commerce, and economics, a customer (sometimes known as a :wikt:client, client, buyer, or purchasing, purchaser) is the recipient of a Good (economics), good, service (economics), service, product (business), product or an Intellectua ...
, or others. Proponents in favor of stakeholders may base their arguments on the following four key assertions: #
Value Value or values may refer to: * Value (ethics) In ethics Ethics or moral philosophy is a branch of philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about Metaphysics, existence, reason, E ...
can best be created by trying to maximize joint outcomes. For example, according to this thinking, programs that satisfy both employees'
need A need is something that is necessary Necessary or necessity may refer to: * Need A need is something that is necessary Necessary or necessity may refer to: * Need ** An action somebody may feel they must do ** An important task or essentia ...

need
s and stockholders'
want The idea of want can be examined from many perspectives. In secular societies want might be considered similar to the emotion desire Desires are states of mind that are expressed by terms like "wanting", "wishing", "longing" or "craving". A gr ...
s are doubly valuable because they address two legitimate sets of stakeholders at the same time. There is 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. # 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 thus also take risks in creating a successful firm. # These
normative Normative generally means relating to an evaluative standard. Normativity is the phenomenon in human societies of designating some actions or outcomes as good or desirable or permissible and others as bad or undesirable or impermissible. A Norm (p ...
arguments would matter little if stockholders (
shareholders A shareholder (in the United States often referred to as stockholder) of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal en ...
) had complete control in guiding the firm. However, many believe that due to certain kinds of
board of directors A board of directors is a group of people who jointly supervise the activities of an organization An organization, or organisation (Commonwealth English The use of the English language English is a West Germanic languages, W ...
structures, top managers like
CEOs Kea ( el, Κέα), also known as Tzia ( el, Τζια) and in antiquity Antiquity or Antiquities may refer to Historical objects or periods Artifacts * Antiquities, objects or artifacts surviving from ancient cultures Eras Any period before t ...
are mostly in control of the firm. # 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. A corporate stakeholder can affect or be affected by the actions of a business as a whole. Whereas
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a Trust law, trust or partnership) that is registered by the corporation as the ...
s 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
customer In sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, comple ...

customer
s and
employees Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cropped away black border edge.jpg, 300px, ''Hip, Hip, Hurrah!'' ...
also have
stakes A stake is a strong wooden or metal post with a point at one end, driven into the ground to support a tree, form part of a fence, act as a boundary mark, etc. Stake may also refer to: Entertainment * ''Stake: Fortune Fighters'', a 2003 video gam ...

stakes
in the outcome. In the most developed sense of stakeholders in terms of real
corporate responsibility Corporate responsibility is a term which has come to characterize a family of professional disciplines intended to help a corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act ...
, the bearers of
externalities In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...

externalities
are included in stakeholdership.


In management

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
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
s,
government agencies A government or state agency, sometimes an appointed commission, is a permanent or semi-permanent organization in the machinery of government The machinery of government (sometimes abbreviated as MoG) is the interconnected structures and proce ...
, and
non-profit organization A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that o ...
s—the concept has been broadened to include everyone with an interest (or "stake") in what the entity does. This includes not only vendors,
employees Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cropped away black border edge.jpg, 300px, ''Hip, Hip, Hurrah!'' ...

employees
, and
customer In sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, comple ...

customer
s, 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 Game theory is the study of mathematical model A mathematical model is a description of a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. ...
, 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. Stakeholder management is particularly important in crisis contexts, where stakeholder demands are typically more salient and can conflict with an organisation's predetermined plans. 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
bank A bank is a financial institution Financial institutions, otherwise known as banking institutions, are corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), stat ...

bank
s the entity owes money to, and so on. In that usage, "constituent" is a synonym for "stakeholder".


Stakeholder theory

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."http://www.sup.org/books/title/?id=1967 This definition differs from the older definition of the term stakeholder in
Stakeholder theory The stakeholder theory is a theory of organizational management and business ethics Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical probl ...
(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 John Bordley Rawls (; February 21, 1921 – November 24, 2002) was an American moral A moral (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was ori ...
, 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.


Examples of a company's stakeholders


See also

*
Stakeholder engagement Stakeholder may refer to: *Stakeholder (corporate) In a corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and pub ...
*
Stakeholder theory The stakeholder theory is a theory of organizational management and business ethics Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical probl ...
*
Stakeholder (law) Stakeholder may refer to: *Stakeholder (corporate), a group, corporate, organization, member, or system that affects or can be affected by an organization's actions *Project stakeholder, a person, group, or organization with an interest in a projec ...
*
UK company law The United Kingdom company law regulates corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (p ...
*
Strategy Markup Language{{primary sources, date=April 2017 Strategy Markup Language (StratML) is an XML-based standard vocabulary A vocabulary, also known as a wordstock or word-stock, is a set of familiar words within a person's language. A vocabulary, usually develop ...
, whose core elements include *
Multistakeholder Governance Model Multistakeholder governance is a practice of governance that employs bringing multiple stakeholders together to participate in dialogue, decision making, and implementation of responses to jointly perceived problems. The principle behind such a st ...


Citations


References

* *Freeman, R.E. and Reed, D.L., 1983. Stockholders and stakeholders: A new perspective on corporate governance. California management review, 25(3), pp. 88–106.
Redefining the Corporation: An International Colloquy
* * 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), 200
CSM Lüneburg
(799 kBytes) {{Authority control Corporate finance Public relations