It is not legitimate for firms to not consider stakeholders and focus on profits.

It is not a

form of legitimacy because of how stakeholders are classified, and how not considering

stakeholders for profits does not follow stakeholder legitimacy.

According to R. Edward Freeman in his text, Strategic Management: A Stakeholder

Approach, a stakeholder is someone or a group that can affect a firm or be affected by the firm

(Freeman, 1984). Stakeholders can be classified in different ways; primary, secondary, and so

on, or in three dimensions which are power, legitimacy, and urgency. Primary stakeholders are

individuals or groups such as customers, employees, suppliers, etc… Secondary stakeholders

can be the government, media, environment, competitors, and so on. Both of which can be

seen as essential to a firm as the former is crucial to a firm’s success and the latter also requires

important attention due to how it affects society, simply they cannot be ignored. The power,

legitimacy, and urgency refers to the relationship a firm and stakeholder will have. When

addressing the power aspect of the relationship, it refers to which of the two parties are

dependent on the other, or who has more power/authority over the other. This can go both

ways as the firm can be dependent on the stakeholder and in this situation would always have

to consider the stakeholders over profit, or the stakeholder is dependent on the firm and the

firm can do whatever they want. Legitimacy will be discussed in the following paragraph.

Urgency refers to the time constraint a relationship a firm and stakeholder may have (Mitchell,

1997, 867). The three identifications for stakeholders can be sorted to form a venn diagram

which can show stakeholders that may have two or more of the three attributes mentioned

however that is somewhat irrelevant. This is a simple explanation of what a stakeholder is and

the next paragraph addresses stakeholder legitimacy.

 What the term stakeholder legitimacy means in this scenario is “A generalized

perception or assumption that the actions of an entity are desirable, proper or appropriate

within some socially constructed system of norms, values, beliefs, or definitions” (Mitchell,

1997, 868). Since stakeholders are affected by the firm’s actions and vice versa, it would be

unfair if the firm chooses to pursue profits over considering the stakeholders. Not only do

stakeholders consist of a firm’s workforce, producers and consumers, and population around

them, they actively contribute towards the firm’s success. Without the stakeholders, the firm

would not thrive which would not fall in line with the definition of stakeholder legitimacy as

one would assume that the firm’s success is desirable within the constructed system of norms.

By discussing what stakeholders are and what stakeholder legitimacy is, firm’s

neglecting stakeholders for the pursuit of profit is not legitimate as it does not agree with the

definition.