Grad Strat Stakeholder

Stakeholder Theory

Overview

Stakeholder theory (Freeman, 1984) argues that firms must manage relationships with all groups who can affect or are affected by the organization — not just shareholders. Mitchell, Agle, and Wood (1997) introduced the salience model to solve the practical problem: which stakeholders deserve managerial attention?

When to Use

• Mapping stakeholders for strategic decisions, projects, or crises
• Prioritizing stakeholder demands when they conflict
• Designing stakeholder engagement strategies
• Evaluating CSR or ESG initiatives through a stakeholder lens

Assumptions

IRON LAW: Not all stakeholders are equal — salience determines
prioritization. A stakeholder's claim on managerial attention
depends on the combination of power, legitimacy, and urgency
they possess. Treating all stakeholders equally is strategically
incoherent.

Key assumptions:

• Firms have obligations beyond shareholders
• Stakeholder attributes (power, legitimacy, urgency) are variable, not fixed
• Managers perceive and weigh stakeholder attributes — perception matters

Methodology

Stakeholder Identification

A stakeholder is any group or individual who can affect or is affected by the achievement of the organization's objectives.

Mitchell et al. Salience Model

| Attribute | Definition | Indicators |

|-----------|-----------|------------|

| Power | Ability to impose will on the relationship | Coercive (force), utilitarian (resources), normative (social) |

| Legitimacy | Perceived appropriateness of the stakeholder's claim | Legal, moral, or presumed right |

| Urgency | Degree to which the claim demands immediate attention | Time sensitivity + criticality |

Salience Classification

| Attributes Possessed | Class | Type | Priority |

|---------------------|-------|------|----------|

| P + L + U | Definitive | Highest salience | Immediate |

| P + L | Dominant | High salience | High |

| P + U | Dangerous | Coercive, may act without legitimacy | High (risk) |

| L + U | Dependent | Relies on others for power | Moderate |

| P only | Dormant | Unused power | Monitor |

| L only | Discretionary | No power or urgency | Low |

| U only | Demanding | Urgent but no power or legitimacy | Low |

Analysis Steps

• Identify all stakeholders — Brainstorm broadly, then categorize
• Assess each stakeholder on P, L, U — Use evidence, not assumption
• Classify salience — Map to the 7-type taxonomy above
• Design engagement strategy — Proportional to salience class
• Monitor dynamics — Attributes shift over time; re-assess periodically

Output Format

## Stakeholder Analysis: [Context]

### Stakeholder Map
| Stakeholder | Power | Legitimacy | Urgency | Class | Priority |
|-------------|-------|-----------|---------|-------|----------|
| [name]      | H/M/L | H/M/L    | H/M/L   | [type] | [level] |

### Engagement Strategy
| Class | Stakeholders | Strategy |
|-------|-------------|----------|
| Definitive | ... | Active engagement, co-creation |
| Dominant | ... | Keep satisfied, regular dialogue |
| Dangerous | ... | Risk mitigation, containment |
| Dependent | ... | Support, coalition building |

### Dynamic Risks
- Stakeholders likely to gain attributes: ...
- Coalitions that could shift power: ...

Examples

Good Example

Hospital expansion project: Definitive stakeholders (regulators: P+L+U), Dominant (medical staff: P+L), Dependent (patients: L+U), Dormant (media: P). Strategy tailored per class with specific engagement tactics.

Bad Example

Listing "community" as a stakeholder without assessing whether they have power, legitimacy, or urgency in this specific context. Salience requires context-specific assessment of each attribute.

Gotchas

• Stakeholder attributes are dynamic — a dormant stakeholder can become definitive overnight (e.g., media exposing a scandal)
• Managerial perception mediates salience — biases affect which stakeholders get attention
• Dangerous stakeholders (P+U, no L) are often overlooked but pose real risk (activist hackers, hostile regulators)
• Do not confuse stakeholder analysis with shareholder primacy — the framework explicitly broadens beyond shareholders
• Coalitions between stakeholders can aggregate attributes (e.g., dependent stakeholders gaining power through alliance)

References

• Freeman, R.E. (1984). *Strategic Management: A Stakeholder Approach*. Pitman.
• Mitchell, R., Agle, B., & Wood, D. (1997). Toward a theory of stakeholder identification and salience. *Academy of Management Review*, 22(4), 853-886.
• Phillips, R. (2003). *Stakeholder Theory and Organizational Ethics*. Berrett-Koehler.