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Stakeholders, Identity and Reputation 61

certain initiatives and communications towards stakeholder groups may have been
started for normative, even altruistic reasons – to be a ‘good corporate citizen’ as an
end in itself, so to speak – the gains that this delivers in terms of employee morale,
reputation, and so on, are often considerable and clearly of instrumental value to the
organization. Kotter and Heskett specifically observed that such highly successful
companies as Hewlett-Packard (HP) and Wal-Mart, although very diverse in other
ways, share a stakeholder perspective:‘almost all [their] managers care strongly about
people who have a stake in the business – customers, employees, stockholders, sup-
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pliers, etc.’ As HP’s former chairman and CEO Lewis Platt once noted, many com-
panies consider their shareholders to be far more important than their customers and
employees,but he suggested that by doing so they loose their employee’s support and
the quality of their customer service also declines. Kotter and Heskett also observed
that although HP and Wal-Mart had originally adopted a stakeholder philosophy for
both instrumental and normative reasons, this philosophy has turned out instrumen-
tal and successful overall.

The nature of stakes and stake-holding

Having sketched some of the background to stakeholder management, it is
helpful to devote a bit more space to discussing the concepts of ‘stake’ and ‘stake-
holding’.The standard definition of a stakeholder is the one provided by Freeman,
where a stakeholder is any group or individual who can affect or is affected by the achieve-
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ment of the organization’s purpose and objectives. A stake, which is central to this
definition and to the notion of stake-holding in general, can be described as ‘an
interest or a share in an undertaking, [that] can range from simply an interest in an
undertaking at one extreme to a legal claim of ownership at the other extreme’. 12
The content of stakes that are held by different persons and groups is varied, and
depends on the specific interests of these individuals or groups in the organization.
Special interest groups and NGOs which demand ever higher levels of ‘corporate
social responsibility’ from an organization, for example, in such instances exercise
their societal stake in the organization, which at any one time may coincide with
investors who for their part apply relentless pressure on that same organization to
maximize short-term profits. Stakes of different individuals and groups may thus
be at odds with one another, putting pressure on the organization and demanding
it to balance stakeholder interests.
Understanding the stakes of stakeholders and their priority thus offers strategic
advantages to organizations in the current business climate over conceiving of an organi-
zation’s environment as being composed of innumerable individuals and institutions,or
as consisting of markets alone. Freeman was among the first to offer a classification for
coming to terms with all those groups which hold a stake in the organization. In his
classic 1984 book Strategic Management: A Stakeholder Approach,Freeman considered three
groups of stakes:equity stakes,economic or market stakes,and influencer stakes.Equity
stakes, in Freeman’s terminology, are held by those who have some direct ‘ownership’
of the organization, such as stockholders, directors or minority interest owners.
Economic or market stakes are held by those who have an economic interest, but not
an ownership interest, in the organization, such as employees, customers, suppliers and