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Chapter 4

MGMT 3020 Chapter Notes - Chapter 4: Stakeholder Theory


Department
Management
Course Code
MGMT 3020
Professor
Mark Juhasz
Chapter
4

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Unit 02: Chapter 4 Textbook Notes
Stakeholder Theory
constitutes an important way to understand the complex series of relationships that make up an
organization
two questions are fundamental to understanding what stakeholder theory mean for managers in
practice:
Who is a stakeholder?
(when interests conflict) Which stakeholders should be prioritized?
Who is a stakeholder?
A stakeholder in an organization is (by definition) and group or individual who can affect or is
affected by the achievement of the organization’s objectives
-Edward Freeman (1984)
because this definition is vastly wide and basically means everyone is a stakeholder, because
you self appoint yourself as a stakeholder, there is a new definition of stakeholder proposed in
the text:
A New Definition of Stakeholder
Any Entity who is affected by the organization (either voluntarily or involuntarily) and
possesses the capacity to affect the organization
in essence this definition is more towards the firms meaningful stakeholders
in this definition those who are not acting to defend their interests is considered,
thus the environment is not a stakeholder but anyone who represents them is, (greenpeace)
the environment and children are example of groups that are not seen as stakeholders, and are
often misused as a result. It is the job of agents that represent these groups (greenpeace, parents)
to be the stakeholders that represent their wants and needs
the firm will sort its stakeholder into 3 groups:
organizational stakeholders: internal to the firm
includes employees, managers, directors
should be the firms primary concern, because they make up the firm and work towards
accomplishing the firms goals
economic stakeholders
includes consumers, shareholders, and competitors
fulfill the role as the interface between the firm and society
societal stakeholders: external to the firm
includes media, government, local communities
essential for the organization in terms of providing the legitimacy necessary for it to
survive
the 3 layers of stakeholders sit within the business context that is shaped by the 5 driving forces
of CSR
affluence, sustainability, globalization, communication, and brands
The firms substance is derived from those who constitute it. This substance comes from the
actions initiated by stakeholders pursuing their specific interests (sometimes conflicting,
sometimes not) that intersect in the firm’s day-to-day operations. This is why stakeholder
theory is central to any CSR perspective
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