Finally, stakeholder participation has been proposed in the context of decisions characterized by high risks, uncertainty, and complexity. For example, a company’s shareholders look to maximize profits, while the company’s employees want to maximize their compensation. and therefore has responsibilities towards it and an interest in its success SMART Vocabulary: related words and phrases Stakeholders can have a significant impact on decisions regarding the operations and finances of an organization. By signing up for this email, you are agreeing to news, offers, and information from Encyclopaedia Britannica. stakeholdermap.com Our definition is based on a broad meaning of the word Stakeholder, which is the most widely accepted and used definition. Senior Sustainability Scientist, Julie Ann Wrigley Global Institute of Sustainability, and Assistant Professor, School of Sustainability, Arizona State University. When customers purchase a product, they're of course going to expect it to be high quality and to represent good value for their money. In more practical terms, stakeholder theory seeks to describe and examine the connections between stakeholder legitimate interests, stakeholder management practices, and the achievement of the goals of an organization. Thus, stakeholder theory would provide tools for equipping managers to develop more effective relationships with the company’s environment (e.g., by reducing the firm’s vulnerability to stakeholder opposition). SRI’s work was focused on firms, and the stakeholder concept was focused on the firm’s most closely related actors. A stakeholder is any person, organization, social group, or society at large that has a stake in the business. | Examples, Definition, & Explanation. Stakeholder, any individual, social group, or actor who possesses an interest, a legal obligation, a moral right, or other concern in the decisions or outcomes of an organization, typically a business firm, corporation, or government. Public institutions can be interested in generating multistakeholder initiatives in order to avoid conflict, gain legitimacy, and deepen democracy. A stakeholder is any group, individual, or community that is impacted by the operations of the organization, and therefore must be granted a voice in how the organization functions. What is a Stakeholder? Different stakeholders have different motivations. On one hand, incorporating stakeholders’ participation enhances the organization’s management capabilities in a globalized context characterized by increasing socioeconomic interconnectivity. Customers: They benefit when a company reinvests profits to make a superior product or streamlines its operations to make a cheaper product. Primary stakeholders are fundamental for the firm’s operation and survival. Contractors and suppliers: They benefit when a company expands existing operations and hires more external people for the purpose. Please select which sections you would like to print: Corrections? For example, a company’s shareholders look to maximize profits, while the company’s employees want to maximize their compensation. The interest of the business and the stakeholders must be aligned to achieve results that are beneficial for the two parties. Internal and external stakeholders may have different interests and priorities, possibly leading to conflicts of interest. For instance, an employee is a stakeholder as their wages are dependent on how successful the company is. Findings: The refined definitions of stake and stakeholder are in terms of an interest and activity. From the mid-1980s, the meaning of the concept was stretched through the development of its social and political dimensions, making it a key concept for governance in general. See more. Employees can earn bonuses or higher salaries when a company is successful. In corporate governance, stakeholders are often classified into primary or secondary groups. A stakeholder is anyone with an interest in a business. Stakeholders are individuals or groups with an interest or incentive in a venture’s success or failure. The identification of these values can facilitate the weighting of the criteria for reaching more representative decisions. Stakeholders aren’t limited to those who work directly for or with a company, though. If a business folded tomorrow, these people would be affected in some way. What Are the Stakeholders of a Business? someone who has an interest in or who is affected by your project and its outcome This examination should lead to a better understanding of needs of stakeholders in order to set the bounds of operation and the formulation of recommendations for increasing governance efficiency. They can be internal or external and they can be at senior or junior levels. Stakeholder management and corporate governance, https://www.britannica.com/topic/stakeholder, Corporate Finance Institute - Stakeholder. stakeholder concept that threatened its survival as a useful business concept. On the other hand, promoting plurality and inclusivity and recognizing the intrinsic value of stakeholders’ interests makes it morally superior (e.g., in terms of democracy and social justice) to traditional managerial approaches based on the mere optimization of shareholders’ gains. Such stakeholders include owners, investors, employees, suppliers, customers, and competitors, as well as nature (physical resources and carrying capacity). | Definition, Examples, & Meaning, What is Defined-Benefit Plan? Stakeholders’ values can orient the type of scientific information (e.g., among several disciplines) that is more relevant for each decision. In a 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.The theory was later developed and championed by R. Edward Freeman in the 1980s. If the company does well, they may get a pay rise or a bonus. A stakeholder has an interest, or “stake,” in the success or failure of a business or its projects. 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