Stakeholder (corporate) facts for kids

A stakeholder is anyone who has an interest in a business or project, or who can be affected by what it does. Think of it as someone who has a "stake" or a part in something. This idea was first talked about in 1963 at the Stanford Research Institute. Later, a person named R. Edward Freeman helped make the idea more popular in the 1980s. Since then, it has become very important in how businesses are run and how they think about their responsibilities to the world.

What Are the Different Types of Stakeholders?

Any action a business or group takes can affect many people. For example, parents, children, customers, owners, employees, and even people living nearby can all be affected. There are generally three main types of stakeholders:

Primary Stakeholders

These are usually people or groups directly involved with the business. They have economic dealings with the company.

• Examples: Stockholders (people who own parts of the company), customers, suppliers (who provide materials), creditors (who lend money), and employees.

Secondary Stakeholders

These are usually outside groups. They don't have direct money dealings with the business, but they can still be affected by its actions or can affect the business.

• Examples: The general public, local communities, activist groups, business support groups, and the media.

Excluded Stakeholders

Originally, this group included people like children or those who didn't seem to have a direct money impact on a business. While some groups like the general public are now seen as stakeholders, others are still left out. For example, plants, animals, or even the environment itself are often not given a "voice" as stakeholders, but are only seen for their value to humans.

Who Are a Company's Main Stakeholders?

When we look closely, a company's main stakeholders often include:

• Employees
• Communities
• Shareholders
• Creditors
• Investors
• Government
• Customers
• Owners
• Financiers
• Managers

Broader View of Stakeholders

If we look at an even wider group, a company's stakeholders can also include:

• Suppliers
• Distributors
• Labor unions
• Government agencies (like those that make rules or collect taxes)
• Industry trade groups
• Professional associations
• NGOs (non-profit organizations) and other groups that speak up for causes
• People who might work for the company in the future
• People who might become customers in the future
• Local communities and national communities
• The general public around the world
• Competitors
• Schools
• Future generations
• Analysts and Media
• Research centers

Why Are Stakeholders Important in Business?

When companies make decisions, there's a big discussion about who they should focus on most. Should it be just the stockholders (owners), or should it be all stakeholders, including customers, employees, and others? People who support focusing on all stakeholders have good reasons:

• Creating More Value: They believe a company can be most successful by trying to make everyone happy. For example, if a company helps its employees and its owners, it's a win-win! When customers are also happy, sales go up, which helps employees and owners even more.
• Everyone Contributes: It's not just stockholders who take risks. People who lend money, employees, and suppliers all help make a company successful. They all contribute and take risks too.
• Company Leaders Have Power: Sometimes, the top managers, like the CEO, have a lot of control over the company. This means they can choose to consider many different groups when making decisions.
• Protecting Image and Brand: A company's good name and brand are super important. By trying to meet the needs of many different people – from local communities and customers to employees and owners – companies can avoid problems. This can stop them from losing sales, having unhappy customers, or facing expensive legal issues. Even if it costs a bit more, many companies find that caring for all stakeholders improves their image, boosts sales, and makes them less likely to be targeted by groups that might criticize them.

A company's actions can affect or be affected by any corporate stakeholder. While stockholders often have the most obvious interest in business decisions, customers and employees also have a lot at stake.

Stakeholders in Management Decisions

In recent years, the word "stakeholder" has become common in talking about how big businesses, government groups, and non-profit organizations make decisions. It now includes everyone who has an interest in what the organization does. This means not just suppliers, employees, and customers, but also people in the community where a factory or office might affect the local economy or environment.

To work well with all these groups, a company's leaders need to:

• Know who their stakeholders are.
• Understand what these groups want and expect.
• Know if they are supportive, neutral, or against the company's actions.
• Decide which stakeholders are most important to focus on, especially when resources are limited.

Example of Stakeholders in Action

Imagine a landlord who is fixing up apartments while people are still living in them. The key stakeholders would be:

• The residents living there.
• The neighbors (who might be bothered by the noise).
• The teams who manage the apartments and do the repairs.

Other important stakeholders would be the people who provide money for the repairs and the team designing and building the changes.

Each different group with an interest in the company's business is sometimes called a constituency. So, there might be a group of stockholders, a group of neighbors, or a group of banks that the company owes money to. In this way, "constituent" can mean the same thing as "stakeholder."

What is Stakeholder Theory?

Stakeholder theory is an idea that says a business should consider everyone who has an interest or concern in its actions. These people or groups can affect the business or be affected by it.

Some examples of key stakeholders are:

• Creditors (people who lend money)
• Directors (people on the company's board)
• Employees
• Government (and its agencies)
• Owners (shareholders)
• Suppliers
• Unions
• The community where the business gets its resources

Not all stakeholders are equally important. For example, a company's customers should be treated fairly, but they don't have the same rights as the company's employees. Stakeholders are the people and groups who help a company create wealth and who can benefit from it or take risks with it.

Examples of a Company's Stakeholders and Their Concerns

Here's a table showing different stakeholders and what they care about:

See also

In Spanish: Participante (empresa) para niños

• Stakeholder engagement
• Stakeholder theory
• Stakeholder (law)
• UK company law
• Strategy Markup Language
• Multistakeholder Governance Model