Theories of Stakeholder Management

Abstract

A Business entity cannot exist in vacuum. The following are always present.  People in the form of shareholders, employees, suppliers, customers, investors, collaborators, competitors, public agents etc  The business entity develops its economic activity in a geographical area within an economic, social and political context. Stakeholder management is the most visible face of Corporate Social Responsibility and hence many mistake one for the other even thought there are differences between them. Though the ideas of both can be seen from time immemorial, both are evolving topics and hence defy exact definition. The stakeholders approach has become so popular during the last forty years. Yet there is no clarity for the term “Stakeholder” as it is used by different researchers to mean many different concepts. There are some who believe that stakeholder management cannot be even theorized! Stakeholder theory is required to manage organizations in a highly complex and turbulent environment as it give a practical, efficient, effective, and ethical way. Stakeholder theory is about creating more value at its core. But who should share the value that is created varies from manager’s view. There are narrow models that focus on a small set of stakeholders like shareholders or customers, while much larger group of relevant stakeholders are covered in the broader models. . Good stakeholder management is fundamental for any business to deliver enduring change. Stakeholder concept is basically a redefinition of the purpose of the Organization. . In a stakeholder management plan different groups needs to be accommodated. Stakeholder theory first found expression in Ansoff who defined the firm’s objectives to include, amongst others, reconciliation of conflicting interests of various stakeholders. Over the years a number of theories have been put forward in the academic literature to explain social reporting practices. Of these, the most notables are stakeholder theory, legitimacy theory and political economy theory. Stakeholder theory describes an interrelationship among the various actors involved in the firm and offers an alternative purpose of the firm. Stakeholder management is intended to create methods to manage the different groups and relationships. Organizations need to better understand their stakeholders and how to strategically manage them. This paper traces the evolution of stakeholder management and attempt to give an overview of the various theories and approaches that are associated with stakeholder management.