Stakeholders are people who can affect or be affected by the actions taken by a business organisation. The concept of stakeholder can be traced to 1963 when the term was used in an internal memorandum at Stanford Research Institute. The memorandum defined stakeholders to mean people without whom the business would not continue in existence. Towards the end of the 20th century, the term started being used more broadly to refer to any person who has legitimate interests in an entity or a project. In other words, everybody who has an interest in what the entity in question does is a stakeholder. Stakeholders can therefore be categorized as internal or external.
- Other employees
- The government
Satisfying Stakeholder Objectives
Satisfying the objectives of stakeholders is a fundamental aim of all business organisations. Each group of stakeholders has its own expectations that need to be met. Some stakeholders may consider financial performance of the organization as being paramount, others will consider innovation as the most important aspect that the organisation should focus on. At the same time, there are those who will prefer good leadership and ethical standards.
Pluralistic approach to corporate governance is connected with instrumental stakeholder theory. Under the pluralistic perspectives, the organization should serve multiple stakeholders’ interests rather than serving interests of shareholders alone. Under this perspective, the value of stakeholders is not legitimized on the basis of its intrinsic worth. Instead, it is premised on being an effective means of improving efficiency, competitiveness, profitability and economic success. For this reason, proponents of this perspective argue that stakeholders who make firm-specific investments should be involved in corporate decision making to enhance the efficiency of the organization.
Pluralistic perspective is also closely related with the theory of corporate sustainability and corporate social responsibility. It provides a theoretical framework for analyzing the relationship between a business organization and the society. It has been argued that the best way of making corporate social responsibility a business objective is to change the intangible social and environmental issues into tangible stakeholder interests.
The Concept of Corporate Mission Objectives and Policies
Corporate mission objectives are essential to a business organization as they provide the direction to be taken by the organization. Strategic planning which involves the formulation of policies is guided by the objectives of the firm. Corporate strategic plan is always at the top of a firm’s set of plans. It is paramount and guides the business plans, human resource plans, budget and cash flow plans, and operational plans among others. A clear understanding of the purpose of the business is key to determining what will constitute strategic planning. Every stage of strategic planning is governed by reference to the corporate mission objectives that express the statement of purpose.