Chapter TWO:

Management of
Stakeholders

By: Mahteb W.
Chapter contents 1.
Definition of Stakeholders
2. Stakeholder Management
3. Implications for CSR
What is a Stakeholder?
A stakeholder :- is any
individual, group or
organization that can
affect, be affected by, or
perceive itself to be
affected by a program.
Types of Stakeholders

Internal Stakeholders

Internal stakeholders are groups or

people who work directly within the
business, such as managers, employees,
and owners.
 1. Managers and employees
want to earn high wages
and keep their jobs, so they
1. Employees have a vested interest in the
financial health and success
Stake: Employment income and safety
of the business.
Employees have a direct stake in the
company in that they earn an income to
support themselves, along with other
benefits (both monetary and non-
monetary).
Depending on the nature of the business,
employees may also have a health and
safety interest (for example, in the
industries of transportation, mining, oil
and gas, construction, etc.).
 1. Employees
Employees have a direct stake in the
company.
They interact directly with customers,
earn money to support themselves, and
give support to the business operations
as well.
Employees can carry out
managerial, supervisory or
other functions.
They typically expect benefits
like incentives, career growth
and job satisfaction.
 2. Owners
2. Owners want
Owner stakeholders are the
to maximize the
owners of an organization.
They supply capital or equity to
profit the
the business and have a say in business makes
how everything runs. as compensation
There can be multiple owners at for the risks
a business, and each owner they take in
would have equity in the owning or
business. running a
business.
 External Stakeholders
External stakeholders are groups outside a
business or people who don’t work
inside the business but are affected
in some way by the decisions and
actions of the business.
Examples of external stakeholders are customers,
suppliers, creditors, the local community,
society, and the government.
 #1 Customers
Stake: Product/service quality and value
Many would argue that businesses exist to
serve their customers.
Customers are actually stakeholders of a
business, in that they are impacted by the
quality of service/products and their value.
For example, passengers traveling on an
airplane literally have their lives in the
company’s hands when flying with the
Customers want the airline.
business to produce
quality products at
reasonable prices.
 . Government
2. Shareholders have an interest
agencies in business operations since they
Government agencies are counting on the business to
can also be thought of as remain profitable and provide a
return on their investment in the
a major stakeholder in a business.
business.
They collect taxes from 3. Federal, state, and local
the company, its governments need businesses to
employees, and from thrive in order to pay taxes that
other spending the support government services
company does. such as education, police, and
fire protection.
 4. Suppliers
Suppliers are people or
businesses who sell goods to
your business and rely on you
for revenue from the sale of
those goods.
Suppliers need the business
to continue to buy their
products in order to maintain
their own profitability and
long-term financial health.
In addition to looking out for
their own revenue-
generation, suppliers are
also often concerned with
safety, since their products
can directly impact your
business’ operations.
 5.Investors
Stake: Financial returns
Investors include both shareholders
5. Investors and debt holders.
Investor’s can include owners but Shareholders invest capital in the
business and expect to earn a certain
they can also be outside vendors rate of return on that invested capital
who typically have a right to Investors are commonly concerned
Investors may also have the accurate and timely information with the concept of shareholder value
right to approve or reject major such as regular financial statements. Lumped in with this group are all
other providers of capital, such as
decisions like mergers and
lenders and potential acquirers.
acquisitions. All shareholders are inherently
An investor does more than stakeholders, but stakeholders are no
just bring you funding to pursue inherently shareholders.
projects that help your business
grow.
 6. Creditors
Creditors lend money to businesses, and
they couls also have a secured interest in
the company’s worth. Creditors get paid
back from the sale of products or services
at your business. In the event of a
business shutdown, creditors get paid
before stockholders.
6. Creditors that supply Creditors can include banks, suppliers,
financial capital, raw and bondholders.
materials, and services to the
business want to be paid on
time and in full.
 Communities are major
7. The local community has a stake
• 7. Communities stakeholders in businesses
in the business because it provides The community in which a because each party (your
jobs, which generate economic
activity within the community. business functions can be business and the community
Society as a whole (as well as the considered as another set of are mutually beneficial in
local community) is concerned
stakeholders. different ways than, say, a
about the impact that business
operations have on the environment Good businesses are considered supplier and your business
in terms of noise, air, and water 1. Communities are impacted by
an asset to any community.
pollution. Society also has an things like
interest in the business with regard
to the safety of the goods and 2. Job creation
services produced by the business. Safety
3. Economic development
4. Health (from environmenta
development)
 Every business
generally has a
relationship with a
8. Trade unions trade union to keep
A trade union (also called labor union) is the interests of other
an organization of workers in a particular stakeholders, like
industry that exists to secure good employees, in mind.
improvements in pay, benefits, safe
Trade unions may be
working conditions, or social and
political status through collective
informed and
bargaining. consulted about
things like worker
safety.
 9. Media
Every business needs media
publication relationships to
spread the word about their
brand. Businesses often need to
interact with press to make an
important announcement or
advertise their product.
importance of stakeholder

Stakeholders can help a business or

organization:
Work toward achieving goals
Meet strategic objectives
Get necessary materials and resources
Make smart business decisions
Increase sales
Find new areas for market penetration
 Stakeholders vs shareholders
: is there a difference?
You might have heard these
terms used interchangeably
in the past.
Yes. and here’s the difference:

A stakeholder has a vested interest in your business or a

project. This type of stakeholder does not typically have a
financial stake in your business.

A shareholder has a financial interest in a business or

project. Often a shareholder is a partial owner.
Put simply, shareholders are also
stakeholders, but stakeholders are
not always shareholders.
That’s because a shareholder owns
part of a public company through
the purchase of stocks. A
stakeholder has an interest in the
corporation’s overall performance,
not stock performance.
 Stakeholder Management
• Stakeholder Management is a process
and control that must be planned and
guided by underlying Principles.

• Stakeholder Management, within

business or projects, prepares a strategy
utilizing information (or intelligence)
gathered during the following common
processes:
importance of stakeholder management

The importance of stakeholder

management is to support an
organization in achieving its strategic
objectives by interpreting and
influencing both the external and
internal environments and by creating
positive relationships with stakeholders
through the appropriate management of
their expectations and agreed
objectives.
 Stakeholder Management process…

Stakeholder Identification – Interested parties either internal or

external to organization/project.

Stakeholder Analysis – Recognize and acknowledge stakeholder’s

needs, concerns, wants, authority, common relationships, interfaces
and align this information within the Stakeholder Matrix.

Stakeholder Matrix – Positioning stakeholders according to the level of

influence, impact or enhancement they may provide to the business or
it’s projects.
Stakeholder Engagement – Different to Stakeholder Management in that the engagement does not
seek to develop the project/business requirements, solution or problem creation, or establishing roles
and responsibilities. It is primarily focused at getting to know and understand each other, at the
Executive level. Engagement is the opportunity to discuss and agree expectations of communication
and, primarily, agree a set of Values and Principles that all stakeholders will abide by.

Communicating Information – Expectations are established and agreed for the manner in which
communications are managed between stakeholders – who receives communications, when, how
and to what level of detail. Protocols may be established including security and confidentiality
classifications.

Stakeholder Agreements: A collection of agreed decisions between stakeholders. This may be the
lexicon of an organization or project, or the Values of an initiative, the objectives, or the model of the
organization, etc. These should be signed by key stakeholder representatives. Contemporary or
modern business and project practice favors transparent, honest and open stakeholder management
processes.