![]() Instrumental power establishes a framework to observe the correlation between stakeholder management and the company's success. There are three components to stakeholder theory:ĭescriptive accuracy is used to outline the corporations' behavior. It also establishes a balance between the diverging interests between stakeholders. Stakeholder theory is a doctrine that holds companies accountable to their stakeholders. Therefore, why shouldn't their interest be considered? This is where stakeholder theory comes in. Just like shareholders, stakeholders are responsible for the success of a corporation. The Development and Implications of Stakeholder Theoryįrom a moral and ethical standpoint, the attitude taken towards stakeholders is not fair. As you can see, a stakeholder has a minimal impact on the corporation they serve, even though they will be directly impacted by any pitfalls of the corporation. ![]() Also, a non-shareholder does not have any voting rights. Typically, the law does not give a voice to stakeholders that are non-shareholders in a corporation.įor example, a non-shareholder would not have the right to set derivative actions against directors who have breached their duties. These include customers, employees, local community, shareholders, and suppliers. While the definition of a stakeholder varies, there are five main types. The advantages and disadvantages of stakeholder theory abound.
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