Chapter 3 : The Stakeholders

STAKEHOLDERS

• People or an entity that contributes to the major influences of the operations of a business.

• as a person or group who has an interest in or can be affected by an organization’s activities

1. Managers

2. Employees

3. Customers

4. Inventors

5. Shareholders

6. Suppliers

7. Government

8. Society at large

9. The local community

GROUP CONSIDERED TO BE STAKEHOLDERS INCLUDES

Milton Friedman (2006)

American economist. He mentioned that "a group of writers comes to coalesce around particular social constructions of reality leading to writers referring to stockholders without being aware of relevant theoretical issues that have been raised in other literatures.

Edward Freeman (1984)

• American Philosopher and Professor for Business Administration

• Defines that stakeholder as "those group without whose support the organization would cease to exist".

• In 2004 he continued to use the definition in a modified form as “those who are vital to the survival and success of the organization.’

Ma. Elenita B. Cabrera ( 2019-2020 edition)

Stakeholders can be anyone who is influenced whether directly or indirectly by the actions of a company

ISO 26000

Stakeholder as an individual or group that has an interest in any decision or activity of an organization

CAMBRIDGE ENGLISH DICTIONARY

a person or group of people who own a share in a business

ACCOUNTING TOOLS

is any person or entity that has an interest in a business or project.

DICTIONARY.COM

a person or group owning a significant percentage of a company's shares.

WEBSTER DICTIONARY

a person entrusted with the stakes of bettors

THE GLOSSARY OF EDUCATION REFORMS

Stakeholders can be individuals, institutions, organizations, or groups.

1. Internal and external

2. Voluntary and involuntary

TWO MAIN WAYS TO CLASSIFY THE STAKEHOLDERS

INTERNAL STAKEHOLDERS

• the individual and parties that are part of the organization.

• Employees, managers, and all those included within the organization.

• They are also known as the primary stakeholders.

• They can influence and can be influenced by the business operations whether it is a success or a failure.

• The nature of impact is direct.

• They are the ones who serve the organization.

EXTERNAL STAKEHOLDERS

• the parties or groups that are not parts of the organization but are affected by its activities.

• The group outside the organization (suppliers, customers, and the government)

• They are referred to as secondary stakeholders.

• They do not participate in the day-to-day business activity of the organization, yet they provide an indirect impact on the business operations.

• They get influenced by the organization’s work.

VOLUNTARY STAKEHOLDERS

• can choose whether to be a stakeholder in an organization, whereas involuntary stakeholders cannot.

• Intend to place something at risk or a means to participate in the company's operation.

INVOLUNTARY STAKEHOLDERS

Benefit or are harmed by the company's action without their permission and sometimes without their knowledge

STAKEHOLDER THEORY

It is a business approach that emphasizes the interconnection or the relationship between the business identity and its stakeholders such as employees, managers, suppliers, investors, government, and more who have a stake in the organization. This theory argues that the organization should create value not only the shareholders but all stakeholders.

Mid 1980s

Shareholder approach strategy came up. Richard Edward Freeman popularized the Stakeholder concept. His work entitled “Strategic Management: A Stakeholder Approach” and came out in 1984. It was done from the perspectives of the company.

1960

Stanford Research Institute (SRI) was used its pioneering works. Wherein the concepts were further developed and influenced by the planning department of the Lockheed Company. And developed from the research done by Igor Ansoff and Robert Steward.

Dodd (1932)

states and identifies the 4 main groups of stakeholders namely: shareholders, employees, customers, and public.

Johnson and Johnson (1941)

identified stakeholders as customers, employees, managers, and the general public, which is mentioned by Preston and Sapieca. (1990)

Sears (1940)

named 4 parties in any business in order of their importance as customers, employees, community and stockholders.

Schilling (2000)

stated that the start of thinking about the stakeholder concept was the work of Follet in 1918.

Freeman (1984)

distinguishing his work between pre and post, it easier to understand why the stakeholder’s approach has become so popular during the last twenty years.

ADVANTAGES

1. It puts more ideas on the table

2. It includes varied perspectives from all sectors and elements of the community affected

3. It gains buy-in and support for effort from all stakeholders

4. It’s fair to everyone

5. It saves the company from being blindsided by concerns the organization didn’t know about

6. It creates bridging social capital for the community

7. It increases the credibility of the organization

8. It increases the chances for the success of the organization.

U - sers

P - roviders

I - fluencers

G - overnance

TYPES OF STAKEHOLDERS