In business and finance, a stakeholder is a person or entity connected to a business that can be either affect or be affected by the firm in question. Originally the term had a narrower focus and concentrated on the influence of investors, employees, customers & suppliers. However, modern financial parlance has expanded the use of the term to include (but not limited to the following alphabetized terms
Primary
Secondary
As observed, stakeholders can be split into primary (internal), engaging in economic transactions with the business, or secondary (external), being affected by or able to affect its actions.
Stakeholder Awareness
Although it is not necessarily a legal requirement for either the acquirer or target to take into account the effect any deal may have on stakeholders, it will of course prove foolish if they did not do so. Employees or employee unions have a disproportionate effect in some industries and countries. Local communities may have strong ties to a well established local firm. Any disruption to the status quo may be seized upon by local officials or politicians in order to further their own political aims. Awareness and sensitivity to these points of view will help increase the chances of a friendly takeover thus avoiding the expense of a hostile battle.
Stakeholder Eptymology and Theory
The first alleged use of the term was in a 1963 internal memorandum at the Stanford Research Institute defining the term as “groups without whose support the organization would cease to exist”. A whole theory subsequently developed on the subject and was later popularized by R. Edward Freeman. The term entered mainstream vernacular in the 1980’s.
For more information on Stakeholder Theory, we direct the trader to the comprehensive and authoritative text Stakeholder Theory: Concepts and Strategies (Elements in Organization Theory) by R Freeman.
