CHAPTER 3

STAKEHOLDERS
& SOCIAL
CONTRACT
STAKEHOLDER
 Those groups without
whose support the
organization would cease
to exist
Any group or individual
who can affect or affected
by the achievement of the
organization’s objectives
GROUP GENERIC GROUPS
CONSIDER WHO ARE OFTEN
TO BE INCLUDED
STAKEHOLDERS
Managers Government
Employees
Societyat large
Customers
The local
Investors
community
Shareholders
Suppliers
 EFFECTS OF
ORGANIZATION’S ACTIVITY
TO THE ENVIRONMENT
The utilization of natural resources
as a part of its production process
The effects of competition between
itself and other organizations in
the same market
The enrichment of a local
community through the creation of
employment opportunities
 Transformation of the landscape due to
raw material extraction or waste product
storage
 The 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 the individuals
 Pollution caused by increased volumes of
traffic and increase journey times
because of those increased volumes of
traffic
 ADDITIONAL
STAKEHOLDERS TO AN
ORGANIZATION

THE ENVIRONMENT
THE FUTURE
 MULTIPLE
STAKEHOLDING
It is normal to consider all of
these stakeholders groups
separately. It should be noted
how that each person will
belong to several stakeholder
groups at the same time
 CLASSIFICATION OF
STAKEHOLDERS
INTERNAL vs EXTERNAL

Internal stakeholders are those

included within the organization
such as employees or managers
whereas external stakeholders
are such groups as suppliers or
customers who are not generally
considered to be a part of the
organization
VOLUNTARY vs INVOLUNTARY

Voluntary stakeholders can

choose whether or not to be a
stakeholder to an organization
whereas involuntary
stakeholders cannot.
 STAKEHOLDERS
THEORY
Is based upon the assertion that maximizing
wealth for shareholders fails to maximize wealth
for society and all its member and that only a
concern with managing all stakeholder interests
achieve this

Three Reasons:
 It is morally and ethically correct way to behave

 Doing so actually also benefits the stakeholders

 It reflects that actually happens in an

organization
 REGULATION AND
ITS IMPLICATIONS
The disclosure of the actions of the firm
in terms of their impact upon the
external environment is essentially
voluntary in nature-but this does not
necessarily mean that the action
themselves are always voluntary. More
does it mean that all such disclosure is
necessarily voluntary
 ENVIRONMENTAL
IMPACT REPORTING
As the extent of regulation of such
activities can be expected to
increase in the future therefore the
more forward looking and
proactive organizations might be
expected to have a tendency to
extend their environmental impact
reporting in anticipation of future
regulation
 RISK REDUCING
One thing which is particular
importance for all corporation and is
becoming more important is the
matter of risks and the managing of
that risk. All stakeholders approach
for decision making and managing
the organization is likely to identify
more risks and to manage them better