Stakeholders

“A stakeholder in an organisation is any group or individual who can affect or is affected by the achievement of the organisation’s objectives” (Freeman, 1984). Stakeholders are individuals who either care about or have a vested interest in a project, organisation, or any government programme. They are actively involved with the work of the projects or programmes or have something to gain or lose as a result of its implementation.

• For example, when the government or local bodies take up a project to add lanes to a highway, motorists, local residents, and highway users are stakeholders who are affected positively or negatively by the implementation of the project. Residents near the highway may face construction-related issues, noise, dust pollution, and increased traffic during the project’s implementation, while motorists and highway users benefit after the project’s completion.

Public governance issues are likely to involve the following stakeholders (amongst others):

• Citizens (as individuals)
• Community organisations that are loosely organised
• Non-profit organisations (including charities and major non-governmental organisations), which are often quite tightly organised
• Business
• Media
• Public agencies (different levels of government/parliament, including international levels)
• Elected politicians
• Trade unions

A stakeholder can be a person, group, or organisation who/which has an interest or stake in any activity and has the ability to influence the outcome positively or negatively.

Stakeholder Theory

• Stakeholder theory is a conceptual framework of business ethics and organisational management that addresses moral and ethical values in the management of an organisation. It was originally detailed by Ian Mitroff in his book ‘Stakeholders of the Organisational Mind’ published in 1983. The theory points out that it is not just the people who own the stock in a business who gain from decisions made in the organisation. Each business decision potentially affects the well-being of many more people than just stakeholders. Every business has an obligation to all those involved directly or indirectly, including stockholders, employees, suppliers, customers, and the local community.
• Stakeholder theory emphasizes addressing the needs of stakeholders in any organisation, referred to as instrumental stakeholder theory. It also talks about the need to pay attention to those stakeholders who get affected by the value of the firm. It discusses giving attention to stakeholder governance and securing their interest to get maximum benefit from their contribution to the organisation.
• There are two other perspectives on stakeholder theory: descriptive and normative views. The descriptive stakeholder approach identifies and classifies different constituents in an organisation without assigning values to their claims or power. The normative view, on the other hand, provides intrinsic value to the stakeholders’ claims by justifying the moral rights of those affected by corporate decisions. From a normative point of view, stakeholders need to be included in corporate governance to respect their moral rights. The stakeholder view integrates a resource-based view, a market-based view, and a socio-political view, suggesting that corporations should be managed in the interests of a whole range of stakeholders.

Stakeholders in Governance Process

• The governance perspective is changing in the 21st century with the issues of neoliberal economic policy and globalisation combined with challenges such as environmental degradation, migration, sustainable development, and grassroots development. These socio-economic challenges and governance issues need to be addressed with the participation of all stakeholders.
• In traditional governance models, decision-making prerogatives were given to organisational leaders, with pressure groups predominantly acting as representatives attempting to gain political mileage for certain population sections. In contrast, a stakeholder model of governance provides benefits to large population sections by ensuring their active participation in the governance process.
• Active participation of stakeholders ensures justice for everyone. Organisations are social arrangements that pursue collective goals, control their performance, and have a boundary separating them from their environment. Various types of organisations include government, corporate organisations, NGOs, media, international organisations such as the United Nations, World Bank, and IMF. Community-based organisations (CBOs) play a significant role at the local level, solving problems where they exist.

Forms of Stakeholder Involvement in Governance

Stakeholder involvement takes various forms, including:

1. Communication: Sharing information with all those involved/affected.
2. Consultation: Gathering information and experiences from stakeholders for the final outcome.
3. Participation: Involving stakeholders in policy/project development.
4. Representation: Including stakeholders to help determine choices.
5. Collaboration and Partnerships: Working together with stakeholders.
6. Co-decision and Co-production: Balanced sharing of power among stakeholders involved.

Participatory forms of democracy are part of stakeholder governance. Active citizen participation strengthens democracy, resulting in better policies. Strong democracy, as proposed by scholars, considers the welfare of the entire society or community and fosters participation of citizens in the governance process through discussion, multi-stakeholder participation, public meetings, referendum, interactive polling, and other forms of deliberation and dialogue among stakeholders and citizens.

Significance of Stakeholders in the Governance Process

• Stakeholder governance ensures flexibility, diversity, and informal exchange of ideas. Networking of various actors in society benefits all. Decentralised governance and public policy-making engage people directly, finding solutions to complex social problems and ensuring institutional interdependence and interconnectivity.
• Direct stakeholder involvement and inter-organisational collaboration bring positive impacts in the governance process, benefiting all stakeholders for sustainable resource use, successful implementation of public policies, knowledge creation, development of social capital, sharing of benefits by the entire community, and addressing the needs of women and marginalised groups.

Examples of Stakeholder Involvement in Governance

1. People’s Plan Campaign in Kerala: Introduced to bring bottom-up planning, involving all stakeholders in the gram panchayat, resulting in welfare improvements and increased public participation.
2. Right to Information (RTI): RTI movement in Rajasthan empowered citizens to become part of the democratic process, ensuring transparency and accountability.
3. Joint Forest Management in India: Implemented with local community participation to reduce deforestation and promote sustainable forest use.
4. Delhi Metro Rail Corporation (DMRC): Collaborative venture involving central and Delhi governments, external funding agencies, and other stakeholders, ensuring stakeholder satisfaction.
5. International Examples:
   • In Quebec, Canada, public, private, and not-for-profit actors jointly design river basin management plans.
   • In Grenoble, France, consumer associations engage with the water and sanitation service provider to decide on water prices.
   • In Arizona, USA, stakeholder engagement tackles extreme heat conditions, demonstrating the effectiveness of water harvesting strategies.

Challenges in Stakeholder Governance

1. Lack of clarity on ensuring inclusivity and equity in governance: Identifying stakeholders directly and indirectly affected.
2. Inadequate institutional arrangements: Establishing effective structures for stakeholder participation.
3. Absence of political will and leadership: Ensuring commitment to stakeholder involvement.
4. Lack of clarity on roles and responsibilities: Defining stakeholder roles and expected outcomes.
5. Resistance to change: Overcoming opposition to new governance models.
6. Inadequate monitoring and evaluation mechanisms: Assessing the efficacy of stakeholder governance.