Abstract
AbstractNonprofit leaders face the challenge of making decisions within a complex environment of heterogeneous and often competing stakeholder claims. In such a setting, leaders not only make judgments about the power of their organization's stakeholders but they also make conscious choices about which stakeholders they personally represent while making organizational decisions. This study uses insights from stakeholder theory and agency theory to investigate (1) how nonprofit leaders' perceptions of stakeholder power and stakeholder representation are interrelated across a wide range of stakeholder groups and organizations, and (2) how perceptions of power and representation differ between board members and executive managers. Drawing on data from 491 nonprofit leaders, we find evidence of stakeholder representation surpluses and deficits for several stakeholders, although perceptions of these deficits and surpluses differ considerably between board members and managers. Our study holds important implications for nonprofit governance, the practice of stakeholder analysis, and the use of stakeholder constructs in future empirical research.
Highlights
Nonprofit organizations typically operate in an environment populated by many different and diverse stakeholder groups (Ebrahim, 2010)
Similar to the first difference, beneficiaries emerge as a distinct dimension when it comes to stakeholder representation (Factor 4), which is not the case for stakeholder power (Factor 1)
Our study has offered a new approach to stakeholder analysis in nonprofit organizations, where leaders operate in a complex environment of competing stakeholder claims
Summary
Nonprofit organizations typically operate in an environment populated by many different and diverse stakeholder groups (Ebrahim, 2010). Powerful donors or institutional funders can pressure organizations to underinvest in infrastructure (Charles, Sloan, & Schubert, 2020; Lecy & Searing, 2015; Schubert & Boenigk, 2019), misreport financial data (Krishnan & Yetman, 2011; Parsons, Pryor, & Roberts, 2017), or incite mission drift (Bennett & Savani, 2011; Hersberger-Langloh, Stühlinger, & Schnurbein, 2020), resulting in the potential impairment of organizations' effectiveness and reputation All such cases reflect situations in which priority is given to the power of resource providers while less powerful stakeholders, such as beneficiaries or the community at large, remain underrepresented in organizational decisions. While a mismatch between power and representation can at times create dysfunctional practices, at other times it might even be desirable to ensure that powerful stakeholder interests are effectively reflected in organizational decisions
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