stakeholder definition

A stakeholder is someone whose support is required in order for an enterprise to be successful.

A stakeholder is someone whose support is required in order for an enterprise to be successful.

The term stakeholder has its roots in horse racing. A stake race is one in which the prize money is derived from the entry fees that horse owners pay to enter the race. The entry fee is called a stake, a synonym for risk. The person or entity who takes care of the entry fees until the prize money is awarded is called the stakeholder. Traditionally, the stakeholder has no financial interest in the outcome of the race.
Stake races are still popular today and over the years, the terms stake and stakeholder have been applied to many other types of speculation — including the stock market. In their 1983 article, “Stockholders and Stakeholders: A New Perspective on Corporate Governance,” R. Edward Freeman and David L. Reed proposed that in order for a business to succeed, it must create value for the owners (the stockholders) as well as for those people who do not have a direct financial interest in the company’s success but without those help, the business could not exist (the stakeholders). The job of the entrepreneur is to find out who the stakeholders are and determine where their interests intersect with those of the stockholders. In this context, stakeholders include employees, suppliers, business partners, unions and government agencies.

Freeman expanded on this idea in his book Strategic Management: A Stakeholder Approach. Freeman emphasized the idea that a business is asystem that’s built on relationships and no one part of the system can be viewed as an isolated entity. Freeman’s stakeholder theory is often credited with helping to raise social consciousness in business about the value of treating stakeholders ethically.

Source: TechTarget-stakeholder definition by Margaret Rouse


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