Strategic Management of Stakeholder Relationships
0PURPOSE AND PERSPECTIVE
The purpose of this chapter is to fully examine the concept of stakeholders and explore why these
groups are important for today’s businesses. First, we define stakeholders, examine primary and
secondary stakeholders, and discuss the characteristics of stakeholders. In the stakeholder
interaction model, there are two-way relationships between the firm and a host of stakeholders.
Next, we consider the impact of corporate reputation and crisis situations on stakeholder
relationships, including the importance of understanding ethical misconduct disasters. Finally, we
examine the development of stakeholder relationships and the link between stakeholder
relationships and social responsibility.
Stakeholders are those people and groups to whom an organization is responsible.0
The historical view of business defined a relatively small group of stakeholders
known as market constituencies.0
Stockholders and other investors provide the financial foundation for
business and expect something in return; therefore, managers and
executives strive to maintain positive relationships with them.
Customers, who provide a revenue stream, are also viewed as primary
constituents by all types of organizations.
Employees are fundamental to the operations of any firm.
Suppliers and other business partners have a clear role in any business
enterprise because they provide goods and services that are necessary for
an organization to function effectively and efficiently.
In the latter half of the twentieth century, perceptions of business accountability
evolved toward an expanded model of the role and responsibilities of business in
society, resulting in a more broadly defined group of stakeholders that includes
When a business also cares about the well-being of nonmarket groups, it
earns trust and cooperation that ultimately reduce costs and increase
Nonmarket groups include the general community, the media, government,
special-interest groups, and others that are not always directly tied to issues
of profitability and performance.
Stakeholder Issues and Interaction0
Without primary stakeholder groups, a company would not be able to continue its
Groups that are
include shareholders and investors,
employees, customers, and suppliers, as well as public stakeholders, such
as government and the community.
There is a high degree of interdependence among these groups, so serious
dissatisfaction, withdrawal from the relationship, or other disruption may
threaten the existence of the firm.