The answer to the question 'what are Stakeholders?' has important consequences for organisations. There are many definitions of 'Stakeholder' some with a narrow focus on those that have the 'power' to impact a business or project and others with a wider definition that includes stakeholders who are impacted by a business's actions e.g. local communities. stakeholdermap.comA selection of the key definitions are shown in this mind map - what is a stakeholder?.
R. Edward Freeman, in the now classic text Strategic Management: A Stakeholder Approach (1984), defines a stakeholder as:
any group or individual who can affect or is affected by the achievement of the organization's objectives Freeman, E. 1984: 46.His definition has been seen as problematic as it allows almost anyone to be identified as a Stakeholder. In this video Professor Freeman explains the thinking behind his definition.
What are Stakeholders? Video
What are Stakeholders? Video transcript
Emphasis (text in bold) added by stakeholdermap.com
"I have defined Stakeholders as any group or individual that can affect or be affected by a companies purposeProfessor E. Freeman
Now that defnition can sometimes be controversial, some people say it lets everybody in, because after all can't activist groups, uh web-based NGOs, uh.. a small group on the other side of the world, can't they affect a company?
And the answer to that is 'yes' there is some truth in this criticism, its a very wide definition of stakeholders. It comes from the idea that stakeholder theory is about a business, its about strategy and it says if a group can affect you then you need to deal with it.
Well another way to think about stakeholders is just to define them as those groups that can almost always affect or be affected by. So you start from idea, that if you look at practice, if you look at a lot of business over time, in lots of settings, really its customers suppliers, employees communities and the people with the money - financiers, that those are the the primary or definitional stakeholders.
And other stakeholders government, media, NGOs, interest groups, environmentalists, critics, however, you want to put those groups, those groups are important because they can affect how you create value for customers, suppliers, communities and the people with the money.
I don't think definitions are very important. I think what's important is understanding how the value creation process works in a business. And in business A in the automobile industry in India, the value creation process may be different than in business B a web-based start-up in Silicon Valley.
So the point of stakeholder theory is to say lets try and understand who those groups are that are important to the value creation process."
What are stakeholders? ReferencesFreeman, R. E. 1984. Strategic Management: A Stakeholder Approach. Boston: Pitman. Latest edition Strategic Management: A Stakeholder Approach
R. Edward Freeman, Stakeholder Management [online] Available at: https://redwardfreeman.com/ [Accessed 24 July 2013]
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