Stakeholders

Dr. Sami Ullah

 Stakeholders
• Groups or individuals whose interests are directly affected by the activities of
a firm or organisation.

• The greater the power of a stakeholder group, the greater its influence will
be.
 Stakeholders' Objectives
• Employees and managers
⁻ Job security (over and above legal protection)
⁻ Good conditions of work (above minimum safety standards)
⁻ Job satisfaction
⁻ Career development and relevant training
• Customers
⁻ Products of a certain quality at a reasonable price
⁻ Products that should last a certain number of years
⁻ A product or service that meets customer needs.
 Stakeholders' Objectives
• Suppliers: regular orders in return for reliable delivery and good
service
• Shareholders: long-term wealth
• Providers of loan capital (stock holders): reliable payment of interest
due and maintenance of the value of any security.
• Society as a whole
⁻ Control pollution
⁻ Financial assistance to charities, sports and community activities
⁻ Co-operate with government in identifying and preventing health hazards
 Competitors as Stakeholders
• Competitors can be stakeholders.
• Competitors in a given industry act as stakeholders in that industry's
overall status and the public's perception.
 Managing stakeholders
• An organization’s stakeholder relationships must be managed in
accordance with their bargaining strength, influence, power and
degree of interest.
• Stakeholders have three options:
₋ Loyalty
₋ Exit
₋ Voice
 Managing Stakeholders
• Relationship between company and stakeholders is conducted is a
function of the parties' relative bargaining strength and the
philosophy underlying each party's objectives
 Stakeholder Mapping
• It identifies stakeholder expectations and power to determine
political priorities.
⁻ How interested the stakeholder is to impress their expectations 
on the organization’s choice of strategies
⁻ To what extent the stakeholder has power to impose its wants?
 Stakeholder Mapping
• It identifies stakeholder expectations and power to determine political
priorities.
⁻ How interested the stakeholder is to impress their expectations on the
organization’s choice of strategies
⁻ To what extent the stakeholder has power to impose its wants?
• How Interested they are depends on:
⁻ high personal financial or career dependence on what business does
⁻ absence of alternative 
⁻ potential to be called to account for failing to monitor
⁻ high social impact of firm 
 Stakeholder Mapping
• Power 
• Resignation, withdrawing labor, cancelling orders, refusing to sell,
calling in an overdraft, dismissing directors, legal action, granting
contracts, setting remuneration.
⁻ Employee protection legislation (dismissal, redundancy, health and
safety) moves power to employees and away from management
and shareholders.
⁻ Environmental protection legislation moves power to the local
community and other interested parties.
⁻ Consumer legislation moves power to customers.
Stakeholder Mapping
 Stakeholder Mapping
(a) Key players are found in segment D: strategy must be acceptable to them,
at least. An example would be a major customer.
(b) Stakeholders in segment C must be treated with care. While often passive,
they are capable of moving to segment D. They should, therefore be kept
satisfied. Large institutional shareholders might fall into segment C.
(c) Stakeholders in segment B do not have great ability to influence strategy,
but their views can be important in influencing more powerful stakeholders,
perhaps by lobbying. They should therefore be kept informed. Community
representatives and charities might fall into segment B.
(d) Minimal effort is expended on segment A.
 Implications for Organizations
• The framework of corporate governance should recognize
stakeholders' levels of interest and power.
• It may be appropriate to seek to reposition certain stakeholders and
discourage others from repositioning themselves, depending on their
attitudes.
• Key blockers and facilitators of change must be identified.
The internal and external
coalitions