The Stakeholder Theory: Corporate Responsibility

As defined above, external stakeholders are ‘secondary’ stakeholders, with an indirect connection with a business. Such outside actors can involve policy and regulatory agencies, advocacy and activist organisations, or the wider population and society as a whole. External stakeholders ‘goals may involve complying with regulatory legislation and conformity to tax rules, supporting a social cause or concern for interest groups, as well as exposure to quality goods and services for the broader community. In spite of increasing involvement in corporate social responsibility, the value of external stakeholders in terms of their willingness to affect a company’s behavior continues to grow. External stakeholders ‘leverage may include the ability to enact laws, warn and control the organisation’s public sentiment, and affect policies by lobbying. Get more informations of stakeholder theory of corporate governance.

Understanding the priorities and interests of such stakeholder communities is important for companies. For this cause, corporations often participate in Stakeholder Mapping. In this phase, companies try to understand who are their main customers, where they come from and what they are searching for in relation to their company. This can be accomplished through a four-stage method in which the organization defines related communities, analyzes the views and desires of these classes, visualizes partnerships and then prioritizes members of those groups.

One such method for Identifying Actors is Mendelow’s Matrix. The Matrix tests stakeholders on two main components; how involved the stakeholder is in impressing their preferences on the option of policies of the company (how willing the stakeholder is to exert control) and how much the stakeholder has the ability to enforce their desires. The Matrix offers a common 2×2 grid structure for calculating these elements, which allows businesses to determine how best to address stakeholder needs. For example, a stakeholder with a large degree of involvement and influence to enforce his desires may have a substantial effect on a company’s activities and policies, and so it should be prudent for the organization to consult regularly with them on plans and objectives so as not to interfere with their interests.