What is Stakeholder Theory? video transcript

Stakeholder theory is an idea about how business really works. It says that for any business to be successful it has to create value for customers, suppliers, employees, communities and financiers, shareholders, banks and other people with the money. It says that you can’t look at any one of those stakes or stakeholders if you like, in isolation. Their interest has to go together and the job of a manager or an entrepreneur is to figure out how the interest of customers, suppliers, communities, employees and financiers go in the same direction. Now think about how important each of these groups is for a business to be successful. Think about a business that’s lost its edge with it’s customers. That has products and services that its customers don’t want as much or that they don’t want at all – that’s a business in decline. Think about a business who manages suppliers in a way that the suppliers don’t make them better, the suppliers just take orders and sell stuff but the suppliers aren’t trying to make a business or innovative, more creative. That’s a business that’s in a holding pattern and probably in decline. Think about a business who’s employees don’t want to be there every day, who aren’t using 100% of their effort and their energy and their creativity to make the business better, that’s a business in decline. Think about a business that’s not a good citizen in the community; that routinely ignores or violates local custom and law: that doesn’t pay attention to the quality of life in the community; that doesn’t pay attention to issues of corporate responsibility of sustainability; of it’s effects on civil society – that’s a business that’s soon to be regulated into decline. And think about a business that doesn’t create a value, doesn’t profits for its financiers, its shareholders, its banks and others – that’s a business in decline. So stakeholder theory is the idea that each one of these groups is important to the success of a business. In figuring out where their interests go in the same direction it’s what the managerial task and the entrepreneurial task is all about. Stakeholder theory says that if you just focus on financiers, you miss what makes capitalism tick. What makes capitalism tick is that shareholders, financiers, customers, suppliers, employees, communities can together create something that no one of them can create alone.

What is Stakeholder Theory? video

Back to The stakeholder perspective of CSR