PAMANTASAN NG LUNGSOD NG MAYNILA

(University of the City of Manila)

General Luna, Intramuros Manila

College of Business and Government Management

Graduate Programs

MASTER IN BUSINESS ADMINISTRATION

Stakeholders: Organizational, Economical and Societal

In partial fulfilment of the course requirement of

Social Responsibility and Good Governance
1st term, AY 2018-2019

Submitted to:

Prof. Danilo F. Marcelo Jr., DBA

Submitted by:

Generoso T. Calacday Jr
Abstract – This paper shall discuss what and who are the stakeholders of an organization,
what are their influence in the organization, the paper will discuss their different roles in the
business, the grouping of stakeholders, where do their vested interest arises in the
organization, what are the importance of stakeholders to the organization, how to balance
the tradeoff between different stakeholder and how to balance multiple interest of
stakeholders in the organization.

Keywords – Organizational stakeholders, economical stakeholders, societal stakeholder,

stakeholder theory, managing stakeholders.

I. INTRODUCTION

Stakeholders refers to persons, groups, or an organization that are affected by, or affect, the
business decision, policies and operations of a business, “stake” is define as having interest or
claim while “holder” means possession or ownership, which stakeholder would mean someone
who holds interest in organizational operations, according to William Werther Jr. and David
Chandler the stakeholders can be classified into three different main groups such as organizational
stakeholders, economical stakeholders, and societal stakeholders.

The main objective of any business is to maximize profit for the investors who provide
financial foundation of the company and this is regarded as the main objective of every company
because that’s the reason for anyone to start a business venture but in the latter half of twentieth
century, the perception of business accountability expands toward to a model of role and
responsibility and this sense of responsibility evolve to fulfilling the interest of all stakeholders
according to the research paper of Freeman and Dmytriyev in 1970 Friedman argued that CSR is
essentially an immoral idea, as it violate the rights of the owners business.

Furthermore, stakeholder theory is the management of corporate social responsibility in all of

its stakeholders by properly balancing individual interest. The stakeholder theory stresses the
importance of incorporating social responsibility to the business operation.

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II. ORGANIZATIONAL STAKEHOLDERS

Organizational stakeholders or also known as internal stakeholders are people and/or group of
people who exist within the organization. According to Strategic Corporate Social Responsibility:
Stakeholders in a global environment 2nd edition “These stakeholders are the one who operates,
controls and manages the organization.” The examples of these stakeholders are the following:

A. Shareholders are people, group, company or institutions that invest in the business in return
of profit through dividend or stock valuation, their primary goal is to enrich themselves
and benefit from the success of the business and according to Stakeholders and Corporate
Social Responsibility: An Ownership Perspective they have the rights to extract income
from an asset and to exclude others from accessing and transforming the business within
the legal limits.. They are responsible in the direction of the business by establishing the
purpose of the organization and the core values of the business as a guideline of its social
responsibility. Ultimately they have the power to appoint and reorganized the organizations
entire management if they feel that their interest is not being fulfilled by the directors.

B. Directors and managers are the people tasked by the shareholders to oversee the operation
of the organization, these people may also be a shareholder themselves or hired
professionals, with the primary purpose of implementing the company’s long term and
short term goal, and they are also responsible in implementing and improving the overall
corporate social responsibility of the company.

C. Employees are one of the most critically important stakeholder of an organization as the
business will not operate without them, they are primarily the one who provides the
services, make products, market to the customer and run the organization internally, their
primary interest includes salary, job security, respect, truthfulness, appreciation,
acknowledgement, recognition, training and development, occupational health and safety,
and communication with the management

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III. ECONOMICAL STAKEHOLDERS

The interactions that these stakeholders have with the firm are driven primarily by economic
concerns. As such, these stakeholders fulfill an important role as the interface between the
organization and its larger social environment. The issues in this stakeholders is not only limited
to their affection to financial/economic aspects of the organization but also create bond of
accountability between the firm and its operating context (Werther and Davison, 2011). This group
of stakeholders is composed by the following:

A. Consumers, customers and association of consumers are the stakeholders whose primary
concern is the product or service that they want or need. This group's interest lies within
the quality and safety of the product or services, according to research paper “Corporate
social responsibility: Stakeholders influence on MNEs’ activities by Byung II Park,
Agnieszka Chidlow, Jiyul Choi in 2014” consumers can pressure the company if they
believe that the firm does not behave in social responsible way, a good example of this is
the boycott of Coca cola product in Bacolod when the consumers group realized that the
company is not sourcing enough sugar products from Bacolod despite the fact that there is
a plant of coca cola in their province.

B. Creditors are stakeholders who extend credit to the company their primarily concern is to
be repaid by the amount they own in the company, usually this creditors charge interest for
profit to the company, the company must ensure that they maintain a good standing with
the creditor to maintain liquidity in times of need.

C. Suppliers or also known as vendor are the stakeholders who supplies goods or service to
the company. Their interest within the company is to sell their goods or services to the
company for their own profit, the company is responsible in ensuring that this group is not
being taken advantage in pricing, just like how farmers are being ripped by their hard work.
An equitable agreement between suppliers and the company is a good example of
responsible business.

D. Competitors are stakeholders who are in the same industry or produce the same product,
their interest is within the competition itself, an example of the competitor is when SM
mall acquire the naming rights for LRT-MRT-LRT7 common station but during
construction the winning bidder decided to build the common station in Trinoma mall
which is a competitor, this result to delays and requires a mutual agreement between the
two competitors.

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IV. SOCIETAL STAKEHOLDERS

Societal stakeholders constituted by the broader business and social environment in which the
firms operate, example of societal stakeholders are government agencies and regulator,
communities. According to Werther and Davison these societal stakeholders are essential for the
organization in terms of providing the legitimacy necessary for it to survive over the medium to
long term. Without the general consensus that it is valued by its broader society, no organization
can expect to survive indefinitely.

A. Government concerns lies with their mandate to protect the interest of the nation and its
people, this includes the tax, employment practices, truthful reporting, environmental
compliance, and legality of the business, the stake of the government is very vital in the
existence of the company as this stakeholder hold the power to close the business of the
firm due to noncompliance with the promulgated regulations of the government, a good
example is when President Rodrigo Duterte shutdown the operations of Philweb
Corporation a publicly listed company in 2016 over the accusation of oligarchy of its
owner.

B. Communities are the area where the company operates. Their primary concern is the
overall impact of the company in their community, the ethical standard in their operation
just like what happen with the closure of Boracay island due to the non-compliance of
numerous business establishment, donation to support local projects and livelihood another
example is the crackdown of open pit mining under the leadership of former DENR
secretary Gina Lopez.

C. Media is one of the most powerful stakeholders as they can build the reputation base on
what they see and report it to the general consumer of the company.

D. Specialized group are stakeholders of specialized cause examples are Bankers Association
of the Philippines, Trade Union Congress of the Philippines, and other group for specific
cause.

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V. MANAGEMENT OF STAKEHOLDER

The obligation to serve all stakeholders interest is often referred to as management. Since
corporations deal with several stakeholders overtime and simultaneously; it is unlikely that
organizations would fulfill all their responsibilities towards each primary stakeholder or
stakeholder groups. In the book Business and society stakeholders, ethics, public policy 13th
edition the management must facilitate consideration of each stakeholder’s interest in an outcome
that is beneficial for all.

Each stakeholder has interdependent interest that might be in tradeoff with the interest of
another. To fulfill one interest is at the expense of another interest because according to UKEssays
in 2015 “being a stakeholder is self-legitimizing” and everyone’s interest are not equal and
different from one another but are entitle with the same consideration. Sample of tradeoff is when
the company provide a better compensation or salary increase which is good for the employees,
but it will lower the net income of the business that is against the interest of the shareholders to
maximize profit in their investments for the benefit of the employee as stressed by the research
paper of Ventsislava Nikolova1 and Sanela Arsić in 2017. Another example is when the company
offer a good terms with the supplier, the cost of production will increase and that cost will be
passed to the end user which is the consumer, which is against the interest of the consumer to have
a quality product at a lower price.

In the book Social Responsibility and Business 4th edition we can manage the interest of every
stakeholders group the company may establish relevant department or process to address each
stakeholders concern to balance the interest of one another and to ensure that they are being
responsible with every stakeholders of the company. The lists below are some of the department
and program that are responsible in meeting the interest of specific stakeholder group.

A. Stockholders
1. Investors relations
2. External and internal audit
B. Customers
1. Customers relation
2. After sale program
3. Feed back
4. Total quality management
5. Recall management
C. Employees
1. Labor union
2. HR department
D. Supplier
1. Supply chain management

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 E. Government
1. Legal Department
2. Compliance
3. Safety
F. Media
1. Public relation
2. Press team
G. Environment
1. Environmental compliance
2. Pollution control
3. Waste management

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 VI. RESOURCES
Research Paper: Stakeholders and Corporate Social Responsibility: An Ownership Perspective
by Nicolai J. Foss and Peter G. Klein, 2018

Research Paper: Corporate social responsibility: Stakeholders influence on MNEs’ activities by

Byung II Park, Agnieszka Chidlow, Jiyul Choi, 2014

Research Paper: Corporate Social Responsibility and Stakeholder Theory: Learning From Each
Other by R. Edward Freeman, Sergiy Dmytriyev, 2017

Research Paper: The stakeholder approach in corporate social responsibility by Ventsislava

Nikolova1, Sanela Arsić 2017

Online: UKEssays. Corporate Social Responsibility: Stakeholders. In

https://www.ukessays.com/essays/management/corporate-social-responsibility-a-stakeholders-
perspective-management-essay.php, 2015

Book: Strategic Corporate Social Responsibility: Stakeholders in a global environment 2nd

edition by William B. Werther, Jr., David Chandler, 2011

Book: Social Responsibility and Business 4th edition by O. C. Ferrell, Debbie M. Thorne, Linda
Ferrell 2011

Book: Business and society stakeholders, ethics, public policy 13th edition by Anne T. Lawrence,
James Weber, 2011

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