The term “stakeholder” has been in the English vocabulary since 1963. It originates from an internal Stanford Research Institute memo about a workforce that examines teamwork, problem analysis and decision-making structures. In the memo, the word stakeholder is used to describe the parties who have natural interests in a company.
Even though used since 1963, the definition of stakeholder only entered the management realm in 1983, marked by the emergence of R. Edward Freeman’s book “Strategic Management: A Stakeholder Approach”. Since then, the term stakeholder has been introduced into everyday language and Freeman is recognized as “Mr. Stakeholder Theory”.
Freeman is not the only academic who believes that a company should not be “owned” by shareholders alone. This assumption is a reaction to the attention of the business world and its supporting sciences to the interests of shareholders in the 1970s.
Thus, in the early 1980s there was an opinion from academics and business practitioners that there were actually many parties outside the shareholders who had a legitimate interest in the company’s operations, including employees, suppliers, consumers, and creditors. Their rights cannot be ignored, because shareholders are not the only parties who have a legitimate interest in the company. Moreover, the company is in the form of a corporation and has a public status (Tbk). Freeman has carefully brought together all the interested parties in the shorthand coined at the Stanford Research Institute two decades earlier, namely stakeholders.
The definition of stakeholder in Freeman’s theory is: “Parties that have an impact on or are affected by the achievement of an organization’s goals”. Companies that are run based on the understanding that the shareholders’ will is not the only determinant in the determination and implementation of its business policies will identify and map those who have an impact and are affected. The next process is to determine priorities because the degree of interest among the various stakeholders cannot be equalized, then how to interact with each of them effectively. This whole process is Stakeholder Management.
In Indonesia, stakeholders are translated into “pemangku kepentingan” and often those who are considered included are those who have an impact on the company or problem, more specifically only government agencies, regardless of the interests of those who are affected. This is implied in the following news excerpt: “Commission IV of the DPR proposes holding a Joint Meeting with national salt stakeholders to discuss policies regarding the import of industrial salt. The stakeholders in question are the House of Representatives Commission VI, the Coordinating Ministry for Maritime Affairs, the Ministry of Maritime Affairs and Fisheries, the Ministry of Industry, the Central Bureau of Statistics, and PT Garam in order to discuss the salt import policy.” (Bisnis Indonesia, January 23, 2018).
The above statement suggests that importers, wholesalers and industrial users and related business associations are only considered as affected parties. This group does not include stakeholders. This means that companies are not obliged to take into account the views of these groups.
We often encounter this kind of understanding, where stakeholders are defined as merely those who have the power to suppress, thus impacting the company or certain issues. In fact, based on the Stakeholder Theory, those who have the power to suppress only include some of the stakeholders.
Henceforth, in my writings what is meant by stakeholders is in accordance with Edward Freeman’s concept which is the mainstream in the international world. In the January 2018 edition of PR INDONESIA, I have presented two main approaches in Public Affairs according to Grunig: Issues Management and Stakeholder Management. Each of these topics I will discuss in the next two papers, complemented by more recent thoughts that have developed over the years.
Chairman & Chief Consultant, Kiroyan Partners
This article has been published in PR Indonesia magazine 35th edition, issued on February 2018, page 43.
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