Stakeholder

What is a stakeholder?

Stakeholder theory had its roots in the work of Ed Freeman [see: Strategic Management: A Stakeholder Approach (Boston, Pitman,1984)] who argued that "...I can revitalize the concept of managerial capitalism by replacing the notion that managers have a duty to stockholders with the concept that managers bear a fiduciary relationship to stakeholders. Stakeholders are those groups who have a stake in or claim on the form. Specifically I include suppliers, customers, employees, stockholders, and the local community, as well as management in its role as agent for these groups. I argue that the legal, economic, political, and moral challenges to the currently received theory of the firm, as a nexus of contracts among the owners of the factors of production and customers, require us to revise this concept. That is each of these stakeholder groups has a right not to be treated as a means to some end, and therefore must participate in determining the future direction of the firm in which they have a stake."

Note that stakeholder theory has moved on.  I, for instance, include the environment as a stakeholder and, in that way, his social, economic and environmental model of the firm is complete. Some argue that the environment is not a ‘person' but that can be sidelined since there are representatives of the ‘environment' such as NGOs and/or the communities in which people live.

The choice of stakeholders, and how to consult them, is an art in itself and no one theory covers all aspects. A widely cited article on this is by Mitchell et. al. [Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts Author(s): Ronald K. Mitchell, Bradley R. Agle, Donna J. Wood Source: The Academy of Management Review, Vol. 22, No. 4 (Oct., 1997), pp. 853-886 Published by: Academy of Management].

These authors argue that stakeholder theory must account for power and urgency as well as legitimacy, no matter how...