The analysis finds that the stakeholder approach is a legitimate management strategy and helps companies building trust and maintaining a sustainable competitive advantage, even giving better financial return in the long term.
Why is stakeholder theory important?
Stakeholder theory holds that company leaders must understand and account for all of their company's stakeholders — the constituencies that impact its operations and are impacted by its operations. Stakeholders include employees, shareholders, customers, suppliers, creditors, the government, and society at large.
It is the social responsibility of the stakeholder to ensure that the employees of the company work under the best possible conditions . A company could potentially increase its profits by working employees harder for less pay, but the effects on the employees would be negative.
What is stakeholder based approach?
In management, a stakeholder approach is the practice that managers formulate and implement processes that satisfy stakeholders' needs to ensure long-term success . ... It emphasizes active management of the business environment, relationships and the promotion of shared interests.
What is an example of stakeholder approach?
As an example of how stakeholder theory works, imagine an automobile company that has recently gone public . Naturally, the shareholders want to see their stock values rise, and the company is eager to please those shareholders because they have invested money into the firm.
What are the advantages and disadvantages of stakeholder?
- Advantage: Business Experience. Internal stakeholders with a large vested interest in a business often sit on the board of directors. ...
- Disadvantage: Representing Own Interests. ...
- Advantage: Anticipate Potential Problems. ...
- Disadvantage: Block Progress.
What is the responsibility of a stakeholder?
Stakeholders are individuals or companies with a vested interest in the outcome of their specific projects . ... Most project stakeholders have responsibilities to businesses that include educating developers, financing projects, creating scheduling parameters and setting milestone dates.
What is the main characteristics of stakeholder approach?
Unlike the shareholder approach, “the stakeholder approach” emphasizes responsibility over profitability and sees that company's success should be measured by the satisfaction among all stakeholders around itself , not by one stakeholder- shareholders.
What ways are the stakeholders responsible to the community?
Stakeholders are individuals or groups to whom business has a responsibility . Businesses are responsible to employees. They should provide a clean, safe working environment. Organizations can build employees' self-worth through empowerment programs.
What are the three stakeholder approaches?
According to Donaldson and Preston, 5 there are three theoretical approaches to considering stakeholder claims: a descriptive approach, an instrumental approach, and a normative approach . The descriptive approach sees the company as composed of various stakeholder groups, each with its own interests.
How is a stakeholder analysis performed?
Stakeholder Analysis is the first stage of this, where you identify and start to understand your most important stakeholders. The first stage of this is to brainstorm who your stakeholders are . The next step is to prioritize them by power and interest, and to plot this on a Power/Interest grid.
Who are the primary stakeholders?
The primary stakeholders in a typical corporation are its investors, employees, customers, and suppliers . However, with the increasing attention on corporate social responsibility, the concept has been extended to include communities, governments, and trade associations.
Why according to stakeholder theory is it in companies best interest?
1. Why, according to stakeholder theory, is it in companies' best interests to pay attention to their stakeholders? a) If firms only act in their own self-interest employees may feel exploited. ... d) If firms only act in their own self-interest and inflict harm on stakeholders then society might withdraw its support .
What are the stages of stakeholder management?
- Identify Your Stakeholders. ...
- Map Your Stakeholders. ...
- Learn About Your Stakeholders. ...
- Plan with Your Team on How to Strategically Proceed. ...
- Engage more Effectively with Your Stakeholders. ...
- Monitor Your Stakeholders. ...
- Report on Your Stakeholder Information.
Which companies use the stakeholder theory?
Other successful companies that use stakeholder methods include Johnson & Johnson, Merck, Google and eBay .
What is wrong with stakeholder theory?
Most critics, like Teppo, feel that stakeholder theory is vacuous and offers an unrealistic view of how organizations operate . ... In this view, the organization is a shell that can be written upon freely by the various groups that lay claim to the corporation. The firm has very few innate interests.
