management activity

• Stakeholder


  • Those groups without whose support the organization would cease to exist
  • Any group or individual who can affect or is affected by the achievement of the organization's objectives
  • Has an interest in a company and can either affect or be affected by the business
• Common groups considered stakeholders

  • Managers
  • Employees
  • Customers
  • Investors
  • Shareholders
  • Suppliers
• More generic groups often included as stakeholders

  • Government
  • Society at large
  • The local community
• Environment affected by organizational activity

  • Utilization of natural resources as a part of its production processes
  • Effects of competition between itself and other organizations in the same market
  • Enrichment of a local community through the creation of employment opportunities
  • Transformation of the landscape due to raw material extraction or waste product storage
  • Distribution of wealth created within the firm to the owners of that firm (via dividends) and the workers of that firm (through wages) and the effect of this upon the welfare of individuals
  • Pollution caused by increased volumes of traffic and increased journey times because of those increased volumes of traffic
• It is normal to consider all of these stakeholder groups separately. It should be noted however that each person will belong to several stakeholder groups at the same time
• Example of a single person belonging to multiple stakeholder groups


  • Customer of an organization
  • Employee
  • Member of the local community
  • Member of society at large
• Internal stakeholders


  Those included within the organization such as employees or managers
• External stakeholders


  Groups such as suppliers or customers who are not generally considered to be a part of the organization
• Example stakeholders in education

  • Internal: teachers, students and employees
  • External: parents, school authorities, local policy makers, and donors
• Voluntary stakeholders


  Can choose whether or not to be a stakeholder to an organization
• Involuntary stakeholders


  Cannot choose whether or not to be a stakeholder, such as society or the environment
• Example of a voluntary stakeholder


  • An employee can choose to leave the employment of the organization
• Stakeholder Theory


  • Based upon the assertion that maximizing wealth for shareholders fails to maximize wealth for society and all its members and that only a concern with managing all stakeholder interests achieves this
  • States that all stakeholders must be considered in the decision making process of the organization
  • There are 3 reasons why this should happen: it is the morally and ethically correct way to behave, doing so actually also benefits the shareholders, and it reflects what actually happens in an organization
• Fundamental aspect of stakeholder theory

  • Attempts to identify numerous different factions within a society to whom an organisation may have some responsibility
• Stakeholder theory has been criticised for failing to identify these factions although some attempts have been made
• Voluntary stakeholders (Clarkson 1995)


  • Shareholders, investors, employees, managers, customers and suppliers
  • They will require some value added otherwise they can withdraw their stake and choose not to invest in that organisation again
• Stakeholder management informational needs


  • It is extremely difficult to manage for a variety of stakeholders if there is no measurement of how the organisation has performed for those stakeholders
  • For each stakeholder identified it is necessary to have a performance measure by which the stakeholder performance can be considered
• Regulation and its implications


  • The regulatory regime which operates in any particular country means that certain actions must be taken by firms which affect their influence upon the external environment
  • Certain actions are prevented from being taken
  • These actions and prohibitions are controlled by means of regulation imposed by the government
• Environmental Impact Reporting


  • More forward looking and proactive organizations might be expected to have a tendency to extend their environmental impact reporting in anticipation of future regulation, rather than merely reacting to existing regulation
  • The increase in environmental accounting and reporting is not driven entirely by present and anticipated regulations
• Risk Reducing


  • A stakeholder approach to decision making and managing the organisation is likely to identify more risks and to manage them better
  • Risk is also much related to sustainability
• Benefits of stakeholder approach

  • Enhanced company or product image
  • Health and safety benefits
  • Ease of attracting investment and lowered cost of such investment
  • Better community relationships
  • Improved relationship with regulators
  • Improved morale among workers, leading to higher productivity, lower staff turnover and consequently lower recruitment and training costs
  • General improved image and relationship with stakeholders
• Stakeholder Theory is one approach to the managing of an organisation. It is particularly important for an understanding of CSR and its incorporation into organisational activity