Reference no: EM132274942

Shareholder theory is based in the field of economics on the premise that businesses exist to create wealth for its owners – its shareholders. Stakeholder theory broadens that view to include a greater community of constituents. The two theories are not mutually exclusive. They overlap – shareholders are stakeholders too – and compete for a larger role in the purpose of the firm. Shareholder theorists believe in the concept of the “invisible hand of self-regulation”. Limited government and regulatory intervention in business will result in wealth maximization for the firm and a positive social impact overall. Stakeholder theorists, on the other hand, believe that wealth maximization results from competitive advantage gained by accounting for a broader range of constituents. Criticism of stakeholder theory centers around its broad view of who is a stakeholder. Mitchell et al. (1997) introduced the concept of stakeholder salience where stakeholders “who count” are those “possessing one or more of three relationship attributes: power, legitimacy, and urgency.”

Stakeholder management is an increasingly important aspect of managing projects. One of your responsibilities as a project manager is to identify project stakeholders and assess their potential to impact the success of the project. Understanding stakeholder theory and how it can be applied to managing project stakeholders will increase your effectiveness with this task.

Briefly describe shareholder theory, stakeholder theory, and stakeholder salience.

Compare the three concepts. In what ways are they similar? In what ways are they different?

Which of the three concepts do you think has the most potential to positively impact business strategy? How? Why?

Which of the three concepts do you think has the most potential to negatively impact business strategy? How? Why?