This website uses cookies to ensure you have the best experience. Learn more

What Is The Stakeholder Theory? Essay

1170 words - 5 pages

Stakeholder can be defined as “any group or individual who can affect or is affected by the achievement of the organization’s objectives”. This theory focuses on wider aspect rather than only focusing on just the shareholder. Stakeholder theory is a fundamental theory about how business works at its best and how it could work. It is concerning on the value creation and trade on how to manage a business effectively.
A consequences of focusing on organization or company’s stakeholder is that the shareholder value itself can be enhanced and improved when a wider stakeholder group-such as employees, provider or credit, customers, suppliers government and the local community is taken into ...view middle of the document...

Second, addressing the stakeholder interest is perceived and proved to directly improve company’s profitability because of the good reputation.
Unlike agency theory in which the agents are working and serving solely for the stakeholders, this theory suggest that managers or agents in organizations have a network of relationships to serve and this include the suppliers, employees and business partners. It was argued that this group of network is important other than owner-manager employee relationship as in agency theory (Freeman, 1999).
Stakeholder theory also argues that managers should make decisions and take into consideration all the interests of the company’s stakeholders. Since there are no specific one interest of the stakeholder groups (such as the profit maximization of the shareholder theory), it is difficult for managements to determine which one of the stakeholder interest that will meet the firm’s objectives and it is hard for them to fulfill all of the interest together in a time.
On the other hand, there still exist conflicting interests of individual groups with each other and this “leaving managers with a theory that makes it impossible for them to make purposeful decisions” (Jensen, 2001). This is because the manager had to meet the needs of different stakeholders’ interests and thus it is hard for them to decide which the best to be taken into considerations. Organization and companies cannot afford to ignore the issues of its stakeholder interests if they want to maximize its shareholder wealth because all stakeholder groups will contribute to the success of the corporation.
The stakeholders of an organization change can changed from time to time due to the decisions taken by management or as a result of external events which are outside its control. It is up to management to find out who their company stakeholders are and what their needs involve. For instances, the directors of global corporations had to consider making ethical decisions which will meet the interest of global stakeholders. Simply moving operations from one part of the globe to another in the interest of shareholder value will not eventually solve the problems of increasing global-stakeholders problems. A board that pays less attention to the interests of its stakeholders cannot maximize its shareholder value.
However in relation to company performance, this theory has made a number of key contributions. For example, by emphasizing on maintaining goodwill with stakeholders, the organization will have a much better business ethics. Stakeholder ideas will develop the corporate value statements as well as the board's role in creating corporate ethics codes, social and environmental reporting...

Find Another Essay On What is the Stakeholder Theory?

What is Kanatianism Theory? Essay

1897 words - 8 pages healthcare provider to save his nephew – Jean would technically fall under the “rights and duties” of LM Pharmacy’s social construct with the governance of Virginia as a state employee. Therefore, Jean’s actions are not justified under the social contract theory. Works Cited “What is financial fraud.” Quinn, J. Michael. Ethics for the information age: Seattle: Seattle University, 2013. Print. Page 84 Quinn, J. Michael. Ethics for the information age: Seattle: Seattle University, 2013. Print. Page 71 Quinn, J. Michael. Ethics for the information age: Seattle: Seattle University, 2013. Print. Page 75

What Is Meant By The Term Structuralism? What Is Saussure's Structuralist Theory Of The Sign?

1903 words - 8 pages What is meant by the term 'structuralism'?What is Saussure's Structuralist theory of the sign?It must at first be stated that the term 'structuralism' is not only applicable to literature, but also philosophy and psychology, and many of the social sciences. It is important to acknowledge this since thorough out the essay references will be made to as many of these disciplines as possible where appropriate. 'Structuralists' will look at 'surface

Feminist Sociological Theory: What is Intersectionality?

750 words - 3 pages 1. Intersectionality is a feminist sociological theory. According to Tomlinson (17, March, 2014). It is the study of the interactions of multiple systems of oppression or discrimination affecting marginalized groups. In 1989, the term “intersectionality” was coined by a person named Kimberlé Crenshaw. The term is particularly prevalent in black feminism, which argues that the experience of being a black female cannot simply be understood in

Rostow's theory of the stages of economic development: what it is? how was it developed?

835 words - 3 pages In the eighteenth century the theory of the stages of economic development began to evolve. Adam Smith believed that underdeveloped countries went through four stages in order to achieve a high level of economic growth. These stages were titled hunting, pastoral, agricultural and manufacturing. Karl Marx also believed that there were four stages, he titled them capitalism, socialism, feudalism and communism. It is believed that Rostow's theory

What International Relations theory best explains humanitarian intervention. What is your critical view on the effectiveness of humanitarian inter

1257 words - 6 pages Humanitarian intervention can be defined as an ‘activity taken up by a state, a group within a state, a group of states, or an international organisation which interferes coercively in the domestic affairs of another state’. (Vincent, 1974, p.3) Now, depending of the school of thought, this can be seen in either a positive or negative light. For those who subscribe to the solidarity theory, the idea of humanitarian intervention is perfectly

Describe one process theory of motivation- why is it a process theory? What are the features and how does it apply to the workplace?

806 words - 3 pages Process theories stress the differences in people's needs and focus on the cognitive processes that create these differences. What all process theories have in common is an emphasis on the role of an individual's cognitive processes in determining his or her level of motivation.One major process theory, equity theory, assumes that one important cognitive process involves people looking around and observing what effect other people are putting

Content theory of motivation- why is it a content theory? What are the features and how does it apply to the workplace?

664 words - 3 pages needs are. Maslow (1954) outlined what is perhaps the most influential of the content theories. According to A. H. Maslow, human needs become reasonably well satisfied, a person places more emphasis on the secondary needs. He suggested there is a hierarchy of needs up which people progress. Maslow separated the five needs into higher and lower orders. Physiological and safety needs were described as lower-order needs. The two orders were

What is useful in Freud's theory of dreams?

1705 words - 7 pages Strachey, (Penguin Books : 1991) p 132 ** * Freud's theory of dreams appears to be very useful in understanding when and why dreams occur, what is their meaning, why they are beneficial to psychoanalysis but also to explain what are dreams and how they are created. Identifying the processes of dream creation, wish fulfilment, repression and recognizing the meaning of dreams through interpretation allows a better awareness of the patient's

What is wrong about Donald Black's theory of law?

1242 words - 5 pages What is wrong about Donald Black's theory of law?      In his book on ?The Behavior of Law? Donald Black attempts to describe and explain the conduct of law as a social phenomenon. His theory of law does not consider the purpose, value, impact of law, neither proposes any kind of solutions, guidance or judgment; it plainly ponders on the behavior of law. The author grounds his theory purely on sociology and excludes the psychology of the

What is the Internet?

559 words - 2 pages . The Internet itself does not contain information. It is a slight misstatement to say a "document was found on the Internet." It would be more correct to say it was found through or using the Internet. What it was found in (or on) is one of the computers linked to the Internet.Computers on the Internet may use one or all of the following Internet services:* Electronic mail (e-mail). Permits you to send and receive mail. Provides access to

What is the Truth?

1764 words - 8 pages Before I begin to pen ink on paper I want to ask you a question. “What is the truth?” I like any prolific author am trying to be concise about my whole contexts. Before long it suffices me to say you will know enough and be equipped well enough to understand the discontinuity of these passages. I want to make it clear that before your journey reaches its end you will come across many liars. Many books, characters, its plot holes and all its

Similar Essays

Stakeholder Theory Of The Modern Corporation

840 words - 4 pages corporation, the manager is the person who has the right to use company’s resources in order to meet not only stockholder wished but also to cover the needs of all employees, suppliers and society. In case something goes wrong, the stockholders can sue the manager for not doing what he/she is supposed to. The figure below explains how the stakeholder theory works in the modern corporations. It describes how the corporation is organized and who are the

What Is The Role Of A Stakeholder In A Company?

986 words - 4 pages A stakeholder is “a person, group or organization that has interest or concern in an organization.” Stakeholders are affected by the operations of the business and if the business is successful or unsuccessful. Internal Stakeholders Internal stakeholders are stakeholders who “benefit directly from their contributions to the growth of the company.” The internal stakeholders in

What Is The Instiutional Theory Of Art?

1987 words - 8 pages essay will unfold in the following manner: an examination of the views of the Institutional Theory of art (looking in particular at Dickie and Danto), a study of Wollheim’s criticisms and finally, an attempt to reconcile Wollheim’s problems. What is the Institutional theory of Art? There is a distinguished tradition of trying to define the term ‘art’- to create a definition that is able to encompass what exactly makes something ‘art’ rather

What Is A Theory? Essay

530 words - 2 pages contain evidence and results that can be reproduced.A theory is more than an educated guess, or hypothesis, that people can make in a matter of a few moments. It is a tested and confirmed idea that is backed by reproducible data. A guess is something people can make without knowing anything or very little about a subject. A theory is not simply a hypothesis, it is an explanation made at the end of experimentation that will attempt to explain the