Stakeholder theory in Corporate

Governance

Irish Singh – BM018133

Keertika – BM018143
Mahender – BM018153
Meghna – BM018163
Nishi Garg – BM018183
Stakeholder model of
Owners
Corporate Governance
Political
Government
Groups

Financial
Suppliers
Community

Competitors
The Customers
Firm

Trade Activist
Associations Groups

Customer
Unions Activist
Groups
Employees
( Freeman, (1984),
ed Crane, A et al, 2008 P114)

Stakeholders theory, is based upon the premise that organisations should be responsible to a
wider range of stakeholders, than the narrow interests of one group. (Cornforth, 2007)
Stakeholder consultation involves the development of constructive, productive
relationships over the long term.

Consultation usually takes on two forms:

Consultation on specific developments, projects, ventures.
Ongoing consultation to track and monitor stakeholder perceptions within the
broader operating environment.
STAKEHOLDER ANALYSIS
 Its origins in the theory of corporate governance can be traced to
Freeman (1994) who defines stakeholders as “any group or
individual who can affect, or is affected by, the achievement of a
corporation’ purpose”.

 The focus of the stakeholder theory is divided into two core

questions formulated by Freeman(1994).

 Firstly, what is the purpose of the firm?

 Secondly, what responsibility does management have to

stakeholders?
Stakeholders
 Internal
 External
1. Internal Stakeholders –
 Shareholders
 Employees
 Management
RESPONSIBILITY TOWARDS
SHAREHOLDERS

1. Proper use of capital

2. To manage business effectively
3. To provide accurate and timely information
4. Ensure growth and appreciation of owner’s capital
RESPONSIBILITY TOWARDS EMPLOYEES
 Fair compensation for service provided
 Timely and regular payments
 Provision of proper working and welfare condition
 Provision of security benefits and better living conditions
 Training and development opportunities
 Fair and unbiased treatment to all
RESPONSIBILITY TOWARDS MANAGEMENT

 Management decisions have impact

 Shareholder’s expects higher return
 Management has a fine balance
Responsibilties towards Investors/Creditors
1. To provide fair returns on capital invested.
2. To supply complete and accurate information.
3. To ensure that the value of investment doesn’t fall in the long
term.
4. To raise public image of the company.
5. To improve prestige of the company.
Responsibilities towards Investors/Creditors
 To undertake R&D activities for diversification.
 To build up financial stability and ensure safety of investment.
 To ensure timely payment of interests and principal
 To not participate in unethical practices and bring disrepute to the
company.
References

https://www.b2binternational.com/publications/stakeholder-research/

https://s21.q4cdn.com/589145389/files/doc_documents/EN/Stakeholder-
Engagement-Plan.pdf