Stakeholder Theory

Defining Who Is and Is Not a Stakeholder

Stakeholders are groups and individuals who have an interest in the activities and outcomes of an organization and on whom the organization relies to achieve its own objectives. For instance, customers are a stakeholder because they acquire goods and services from the firm in exchange for money that is then used to continue the firm’s operations. This is an example of an economic stake. Suppliers and employees are other examples of stakeholders with an economic stake in the organization. Stakeholders might also have an equity stake in the firm, such as shareholders. In addition, stakeholders may simply have an interest in what the firm does because it influences them in some way, even if it is not a direct market effect. In the early stakeholder literature, these stakeholders were sometimes referred to as kibbutzers. Special interest groups, for instance, try to influence firm decisions in conformance with their own agendas. Of course, stakeholder interests also tend to be interconnected, which means that stakeholder coalitions often form around particular issues and any particular organizational action could be received either favorably or unfavorably across a variety of stakeholder groups.

The third type of stake, the influencer or kibbutzer stake, highlights an important point: Just because a stakeholder has an interest in the organization does not necessarily mean that the organization is particularly interested in that stakeholder. Although there is no universally accepted definition of who merits classification as a legitimate stakeholder from the organization’s perspective, in general, stakeholders are considered salient to the managers of an organization if they have power and legitimacy. Stakeholders have power if they possess critical resources that the firm needs or if they have the ability to influence outcomes through political, coercive, or other means. Legitimacy pertains to cultural and societal norms. For instance, a stakeholder may be considered salient to a manager because doing so is considered desirable, proper, or appropriate given the circumstances. In addition to power and legitimacy, a stakeholder that might not normally be considered very important could become important in urgent situations, where urgency means that a particular stakeholder’s claim is time sensitive or critical to the stakeholder.

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