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Inzinerine Ekonomika-Engineering Economics, 2015, 26(1), 75–83

The Importance of Stakeholders for Corporate Reputation Migle Matuleviciene, Jurgita Stravinskiene

Kaunas University of Technology

K. Donelaicio st. 73, LT-44029, Kaunas, Lithuania

e-mail: [email protected], [email protected]

http://dx.doi.org/10.5755/j01.ee.26.1.6921

Many scientists analysed the importance of stakeholders on the ground of the interrelationship between an

organization and stakeholders. Nevertheless, scientists do not define which stakeholders should be considered as the most

or the least important. For this reason, the stakeholder grouping in accordance with their importance to the organization

has been done. Stakeholders are divided into internal and external; primary and secondary; normative, functional,

diffused and customers; regulatory, organizational, community and media; groups in the order of power and interest. In

this paper, we also highlighted another stakeholder group, which we call a shadow group due to its illegal impact on the

organization or industry. The analysis of stakeholder grouping initiated that while grouping stakeholders in accordance

with their importance to the organization, it is worth to divide them into primary and secondary. Allocating the

stakeholders to the primary and secondary groups unconsciously leads to the conclusion that primary stakeholders take

the first, i.e. the most important place with regard to secondary stakeholders. It was observed that the scientists, acting on

business interests, propose that even these stakeholders who find themselves in the same stakeholder group have unequal

importance - the organizations give the priority to stakeholders, previously considered as the secondary. Consequently,

because of these two different mainstream approaches of the theorists and the scientists, acting on business interests, it

remains unclear what stakeholders should be attributed to which groups considering their importance to organization.

Keywords: stakeholders, stakeholder importance, corporate reputation.

Introduction

The importance of scientific stakeholder analysis is

unquestionable because of many scientists research in this

area - the stakeholders do not lose their importance for

many years. Proceedings of the first scientists are still

talking points nowadays. Although the importance of

stakeholders is sufficiently broad to analyze, there is a lack

of detailed stakeholder analysis for corporate reputation.

Many researchers provide a relatively narrow view to

corporate reputation as a result of interaction between

stakeholders and organization. However (Roberts & Dowling, 2002; Helm, 2007; Puncheva, 2008; Omar, 2009;

Siano et al., 2010; Peloza et al., 2012) treat corporate

reputation as a result of interaction between stakeholders

and organization. (Capriotti, 2009) states that corporate

reputation depends on how stakeholders value the

organization. Consequently, policy and decisions between the organization and stakeholders influence corporate

reputation (Jones, 1995). Although the scientists state that

the relationship between organization and stakeholders is

mutually important in the context of benefit and harm or

rights and obligations (Neville et al., 2005), it is also

observed that stakeholders make greater impact on the

organization than the organization can make on

stakeholders. Furthermore, it was revealed that the importance of different stakeholders in different

organizations is not equivalent. According to (Walker &

Dyck, 2014), it is supposed that the importance of

stakeholders is unequal because of the different

stakeholders that are differently defined for their

importance on the organization and its reputation.

Therefore, further analysis of the stakeholders, in

consideration of their importance to corporate reputation is

necessary.

With the reference to the aforementioned scientific

approaches, it is useful to recognize the stakeholder

concept and to substantiate the importance of stakeholders

for corporate reputation. Therefore, the research problem

is structured as a question, i.e. why and what stakeholders

are important to organization for corporate reputation? The research aims to substantiate the importance of

stakeholders for corporate reputation.

The object of this research is the substantiation of

stakeholder importance for corporate reputation.

The research methods involve systemic and

comparative analysis of scientific literature and

publications.

Stakeholder Concept

There have been found two terms in the scientific

literature – stakeholders and stakeholder groups, however

both concepts are used as synonyms. There will be used

the term „stakeholders“ in this paper. Scientists have made

a major contribution to the practical interpretation of this

concept, but most scientists to this day still certainly

support the first stakeholder definition of (Freeman, 1984) –

“any group or individual who can affect or is affected by the

achievement of the organization's objectives“ (Freeman,

1984, p. 46). (Bryson, 2004) argues that stakeholders are

usually defined by two opposite criterion: some scientists

argue that stakeholders must have the power to directly

affect the future of organization - if not, they could not be

Migle Matuleviciene, Jurgita Stravinskiene. The Importance of Stakeholders for Corporate Reputation

- 76 -

considered as stakeholders. Another group of scientists argue that the stakeholders are formally powerless to affect

the future of organization.

In order to bring clarity and to systematize the number

of different stakeholder concepts (Mitchell et al., 1997)

offer to group stakeholder concepts according to certain

criteria:

1. Existing relationships between organization and stakeholders.

2. Power dependence - when organization is dependent on stakeholder and vice versa or mutual power

dependence relationship.

3. Basis for legitimacy of relationship. 4. Stakeholder interests - legitimacy not implied. According to these criteria, singled out by (Mitchell et

al,. 1997), there were proposed stakeholder definitions,

frequently presented in the scientific literature (see 1

table). 1 Table

Stakeholder concept interpretations (Freeman, 1984; Mitchell et al., 1997; Post et al., 2002; Leach, 2002; Bryson, 2004; Bailur,

2006; Dickinson – Delaporte et al., 2010; Florea & Florea, 2013)

Year Author Definition

EXISTING RELATIONSHIPS

1991 Thompson et al.* "Groups in relationship with an organization"

1993 Brenner* "Having some legitimate, non-trivial relationship with an organization [such as] exchange transactions, action impacts, and moral responsibilities"

1994 Freeman* "Participants in "the human process of joint value creation"

1994 Wicks et al. * "Interact with and give meaning and definition to the corporation"

2008 Kliatchko*** "All the relevant publics or multiple markets with which any firm interacts"

POWER DEPENDENCE

1984- 2013

Freeman (1984), Mitchell et al., (1997),

Bailur (2006), Florea &

Florea (2013)

"Those groups without whose support the organization would cease to exist"

1964 Rhenman* "Are depending on the firm in order to achieve their personal goals and on whom the firm is depending for its existence"

1971 Ahlstedt &

Jahnukainen*

"Driven by their own interests and goals are participants in a firm, and thus depending on it and whom for its sake the

firm is depending"

1983 Freeman & Reed* 1) "Individual or group who can affect the achievement of an organization's objectives or who is affected by the achievement of an organization's objectives"

2) "Groups on which the organization is dependent for its continued survival"

1984 Freeman "Any group or individual who can affect or is affected by the achievement of the organization's objectives"

1987 Freeman & Gilbert* "Can affect or is afiected by a business"

1988 Bowie* "Without whose support the organization would cease to exist"

1992 Nutt & Backhoff** "All parties who will be affected by or will affect [the organization’s] strategy"

1994 Langtry* "The firm is significantly responsible for their well-being, or they hold a moral or legal claim on the firm"

1994 Starik* "Are or might be influenced by, or are or potentially are influencers of, some organization"

1995 Nasi* "Interact with the firm and thus make its operation possible"

1995 Brenner* "Are or which could impact or be impacted by Ihe firm/organization"

1998 Eden & Ackermann** "People or small groups with the power to respond to, negotiate with, and change the strategic future of the organization"

2002 Johnson & Scholes** "Those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the

organization depends"

2002 Post et al. "The stakeholders in a firm are individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers"

2002 Leach "People whose personal or professional welfare depends substantially upon the outcomes of the partnership"

2008 Roloff*** "Any individual or group who can affect or be affected by the approach to the issue addressed by the network"

2013 Florea & Florea "Stakeholders are the persons, institutions, organizations, formal and non formal groups which are interested or can be

affected or which could influence the company decisions or actions"

BASIS FOR LEGITIMACY OF RELATIONSHIP

1987 Cornell & Shapiro* "Claimants" who have "contracts"

1988 Evan & Freeman* 1) "Have a stake in or claim on the firm"

2) "Benefit from or are harmed by, and whose rights are violated or respected by, corporate actions"

1989 Alkhafaji* "Groups to whom the corporation is responsible"

1990 Freeman & Evan* "Contract holders"

1992 Hill & Jones* "Constituents who have a legilimate cîaim on the firm ... established through the existence of an exchange relationship"

who supply "the firm with critical resources (contributions) and in exchange each expects its interests to be satisfied (by

inducements)"

1994 Clarkson* "Are placed at risk as a result of a firm's activities"

1995 Donaldson & Preston* "Persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity"

1995 Bryson** "Any person group or organization that can place a claim on the organization’s attention, resources, or output, or is

affected by that output"

1995 Clarkson* "Stakeholders are persons or groups that have, or claim, ownership, rights, or interests in a corporation and its activities,

past, present, or future"

STAKEHOLDER INTERESTS – LEGITIMACY NOT IMPLIED

1989 Carroll* "Asserts to have one or more of these kinds of stakes" - "ranging from an interest to a right (legal or moral) to ownership or legal title to the company's assets or property"

1991 Savage et al. * "Have an interest in the actions of an organization and ... the ability to influence it"

1993 Carroll* "Asserts to have one or more of the kinds of stakes in business"

1995 Clarkson* "Have, or claim, ownership, rights, or interests in a corporation and its activities"

* cited in (Mitchell et al., 1997); ** cited in (Bryson, 2004); *** cited in Dickinson – (Delaporte et al., 2010)

Inzinerine Ekonomika-Engineering Economics, 2015, 26(1), 75–83

- 77 -

Despite the fact that there are many different

definitions with similar meanings, an overview of different

sources suggest that (Freeman’s, 1984) definition could be

considered as one of the best, which concisely and

accurately identifies the relationships between the

organization and stakeholders, based on the power

dependence. With reference to this scientist, the

stakeholders could be treated as groups or individuals, who

can influence or be influenced by the purposes of

organization. Despite the mutual influence between the

organization and stakeholders, it is proposed that

stakeholders may have a greater impact on the organization

because of a major power. According to this theoretical

background, it can be summarized that stakeholders are

very important to the organization and to corporate

reputation. Therefore, the importance of stakeholders to

the organization is presented in the next section.

The Importance of Stakeholders for Corporate

Reputation

An integrated view to stakeholder importance. The

analysis of the reasons for stakeholder importance to

organizations revealed that it is profitable for organization

to maintain relationships with stakeholders for one main

source - resources which are necessary for organization. A review of (Post et al., 2002; Neville et al., 2005; Huang & Gardner 2007; Wolf, 2014) and the resource dependency

theory enables to state that the relationship between

stakeholders and organization are based on the dependency

on certain resources, which are vital to organizations and

their loss “may place its survival in jeopardy" (Neville et al.,

2005, p. 1187). The influence of stakeholders on organization comes

through the use of power (Mitchell et al., 1997, Casciaro &

Piskorski, 2005, Neville et al., 2005) or under pressure

(Post et al., 2002). The power is treated as a privilege to

control stakeholder resources (Post et al., 2002). The

dependence on resources puts organization in a relatively

weaker position in regard to stakeholders (Neville et al.,

2005). In order to avoid this, the fundamental recource for

organization is to reduce the dependency on resources,

increasing the possibility to dispose of its own resources

(Wolf, 2014). Although many scientists analyze the techniques in which the organization can reduce its

dependence on the resources, it will not be widely discussed

in this paper.

The importance of stakeholders to corporate

reputation. Despite of the direct impact on the

organization, stakeholders also have an indirect impact on

the organization, i.e. on the ground of corporate reputation.

The interrelationship between stakeholders and the

organization is apparent – based on homogeneous

definitions of corporate reputation. The analysis of the

corporate reputation concept has revealed that corporate

reputation is generally treated as a result of the interaction

between stakeholders and the organization (Roberts &

Dowling, 2002; Helm, 2007; Puncheva, 2008; Omar, 2009;

Siano et al., 2010; Peloza et al., 2012). Many scientists

analysed the importance of stakeholders for corporate

reputation on the ground of this interrelationship (Neville

et al., 2005; Hillenbrand & Money, 2007; Gregory, 2007;

Capriotti, 2009; Dickinson - Delaporte et al., 2010; Krstic,

2014; Walker & Dyck, 2014).

The insights of the aforementioned scientists suggest

that the organization is able to secure not only a good

organizational performance but also a high corporate

reputation with respect to the relationships with

stakeholders. (Neville et al., 2005) made an assumption

that the stakeholders have an impact both on the financial

performance and on corporate reputation when the

organization is dependent on stakeholders. The

stakeholders possess the resources that are necessary for

the organization. (Krstic, 2014) argued that the

interrelationship between stakeholders and the

organization has not only a positive but also a negative

expression in terms of profit, persistence, relationship and

corporate reputation. There is a threat against corporate

reputation when the relationships between stakeholders

and the organization are one-sided, unsupported with

responsibility, transparency and accountability. A

collaboration between stakeholders and the organization

enables the organization to reduce the reputational risk, to

increase the availability of resources, to solve the arising

problems, to achieve the organizational goals, to facilitate

certain business processes and to improve the quality of

products and services (Krstic, 2014). In order to secure a

strong reputation, the organization must be able to engage

in subtle relationships and to manage a feedback between

the organization and stakeholders (Dickinson-Delaporte et

al., 2010) on the ground of a two-way communication

(Krstic, 2014). Long-term commitments between the organization and stakeholders can ensure the efficiency of

a performance, even when a crisis strikes (Dickinson-

Delaporte et al., 2010). (Hillenbrand & Money, 2007)

agreed with (Jones, 1995) that the mutual trust between the

organization and stakeholders is the ground for a long-term

success. (Hillenbrand & Money, 2007) substantiated that a

long-term business success depends on the responsible

relationships beween the organization and stakeholders.

Responsibility in the relationships determines the future

financial success, a sustainability and a high corporate

reputation. These results are well compared to Capriotti

(2009), who revealed that responsibility and transparency

in the media have a positive impact on a stakeholder

assessment of the organization. The author also argued that

organizations that are appreciable by stakeholders, achieve

a higher corporate reputation. (Dickinson-Delaporte et al.,

2010) analyzed the impact of a brand communication on

corporate reputation and found that stakeholders bracket

together different product characteristics. Consequently,

the organization must ensure the stakeholder solidarity to

the brand. This can help to reduce the disjuncture between

different stakeholders. A greater stakeholder identity with

the brand and an estimation of the organization lead to a

higher corporate reputation. (Gregory, 2007) performed a

similar analysis. He analysed the development of the

corporate brand and emphasized that in this process, either

directly or indirectly, all stakeholders must be involved.

(Gregory, 2007) argued that the corporate brand can not be

chaotic or inconsistent with the stakeholder visions. The

same principle can be applied to form the corporate

Migle Matuleviciene, Jurgita Stravinskiene. The Importance of Stakeholders for Corporate Reputation

- 78 -

reputation. Many scientists agree that it is necessary to

involve all stakeholders in the development of the

corporate reputation. It is important because stakeholders

can influence the corporate image, reputation and revenue -

directly through decisions, boycotting, gentle revenge,

income - taxes, and restriction of resources.

In consideration of the various scientists, it can be

concluded that stakeholders have an indirect impact on

corporate reputation – through the stakeholder relationship

with the organization. In part, stakeholders unconsciously

form corporate reputation. On the other hand, the

organization must try to maintain the relationships, to satisfy

the stakeholder expectations, to coordinate the performance

and to consider the stakeholder interests. Organization also

should be able to fulfil stakeholder requirements primarily

due to the fact that the stakeholders, realizing that they do

not receive a sufficient benefit from organization, can

easily choose cooperation with another organization.

Stakeholders can always find an alternative when there is a

clash of interests (Neville et al., 2005).

A brief overview of the importance of different

stakeholders for corporate reputation. The importance of

interrelationship between the organization and stakeholders

could not be treated unambiguously with regard to all

stakeholders. According to Krstic (2014), some stakeholders

often arise a higher reputational risk than the remaining.

They are shareholders, customers, employees and non-

governmental organizations. Furthermore, one of the

stakeholders, which unconsciously involves in disruption

(Krstic, 2014) or development of corporate reputation, is

media (Capriotti, 2009) - the media contributes to forming

public opinion about organization, from which the corporate

reputation arises. The media can be considered as the riskiest and the most uncontrollable stakeholder group,

which has the impact on corporate reputation. However, it

can not be regarded as the most dangerous stakeholder.

The scientists do not distinguish another dangerous

stakeholder group – the lobbyists. According to (Walker & Dyck, 2014), who claimed that corporate reputation is

perceived unequaly by different stakeholders, it is

supposed that the organization needs to take notice of

those stakeholders who negatively perceive corporate

reputation. It is presupposed that a negative perception

have a negative impact both on a stakeholder behavior and

corporate reputation. It was observed that the recent scientists treat the

stakeholders differently, according to the stakeholder

importance to the organization. Nevertheless, scientists do

not define which stakeholders should be considered as the

most or the least important. However, it is neccesary to

review the stakeholder groups found in the scientific

literature and to prioritize the stakeholders by their

importance to the organization. The stakeholder grouping

can help to reveal which stakeholders are the most

important to the organization. Stakeholder groups are

discussed in the next section.

Stakeholder Groups, Found in the Scientific

Literature

Many scientists speak up for the necessity to identify

and analyze the stakeholders for organizations. They argue

that the effective relationship management between

organization and stakeholders ensure the success to

organization and the satisfaction to stakeholders (Bryson,

2004). However, the review of the scientific literature confirms that there is no single construct that allows the

identification of stakeholders in general - the stakeholders

vary, depending on the industry, organization, geographic

situation and specific problem (Mitchell et al., 1997; Bailur,

2006; Gil-Lafuente & Paula, 2013). There is a widely usable

stakeholder model of Donaldson & Preston (1995) in the

scientific literature. It reflects that all stakeholders are

equally important in the relationship with organization -

neither of stakeholders is preeminent. Although this model includes the all key stakeholders - the investors, political

groups, customers, the public, employees, trade associations,

suppliers and the government, however, scientists propose

more different stakeholders, which may be interested in the

organization - there are critics, non-governmental

organizations (Dickinson – Delaporte et al., 2010, Sontaite,

2011, Gil-Lafuente & Paula, 2013), the media (Neville et

al., 2005, Fiedler & Kirchgeorg, 2007, Dickinson-Delaporte

et al., 2010, Sontaite, 2011) business partners (Neville et al.,

2005, Sontaite, 2011, Florea & Florea, 2013), local

community (Neville et al., 2005, Sontaite, 2011, Gil-

Lafuente & Paula, 2013, Florea & Florea, 2013) natural

environment (Neville et al., 2005), the board of directors

(Florea & Florea, 2013), owners, competitors, retailers, trade

associations, government regulatory agencies, financial

institutions, analysts / experts, interest groups (Sontaite,

2011) and even terrorists (Freeman, 1984).

There are many stakeholder groups, but the most

popular ones will be discussed, usually found in the

scientific literature.

Internal and external groups. Internal stakeholders are

more interested in financial activities of organization, they

feel concern about profit, efficiency and financial return. External stakeholders are dependent on decisions and

actions of organization or may influence them themselves. They are interested in value, quality, satisfaction, long-term

relationships, ethical and moral actions of organization,

financial support and so on (Florea & Florea, 2013). Despite

the fact that the internal stakeholders are considered to be

the leading, in some cases the external stakeholders can be

the prior, therefore they can not be demoted (Bailur, 2006). Shareholders/owners, employees, managers, the board of

directors are considered to be the internal, whereas

customers, suppliers, business partners, community, the

public, competitors, the government, special interest groups,

retailers, trade associations, government regulatory agencies,

financial institutions, analysts/experts, terrorists - the

external (Freeman, 1984; Sontaite, 2011; Florea & Florea,

2013).

Primary and secondary groups. (Freeman, 1984;

Clarkson, 1995; Mitchell et al., 1997; Bailur, 2006;

Sontaite, 2011; Florea & Florea, 2013; Mishra & Mishra,

2013; Wolf, 2014) divide stakeholders into primary and

secondary. The primary stakeholders are vital to the persistence of organization - their withdrawal can lead the

organization to performance cessation (Clarkson, 1995;

Bailur, 2006; Sontaite, 2011; Mishra & Mishra, 2013). (Clarkson, 1995) argues that the secondary stakeholders

are also important to organization in the context of their

Inzinerine Ekonomika-Engineering Economics, 2015, 26(1), 75–83

- 79 -

relationship, but the persistence of organization does not

depend on the secondary stakeholders. (Sontaite, 2011) identifies these primary stakeholders - consumers,

suppliers, employees, owners, community, whereas the

media, competitors, financial institutions, the government,

public interest groups are the secondary stakeholders. (Florea & Florea, 2013) single out the third group - key

stakeholders. They are defined as "people or organizations who might belong to either or neither of the first two

groups“ (Florea & Florea, 2013, p. 132). These stakeholders

are important because of participation in the organization

management and financing, during decision-making

process and implementation. The key stakeholders are

policy makers, officials, important professionals or

community personalities who have a strong position or

influence (Florea & Florea, 2013). Normative, functional, diffused and customer groups.

Dowling (1995) highlights the fact that organization does

not have one corporate reputation. He offers to divide

stakeholders into four groups, according to how

homogenous is corporate reputation within groups. According to his suggestion, the stakeholders are divided

into the following groups - normative, functional, diffused

and customer‘s. Stakeholders, which belong to a normative group, secure functioning of organization and establish the

certain rules and norms - they involve the government,

regulatory agencies, trade associations, professional

societies, shareholders, the board of directors. Functional stakeholders are like mediators, which facilitate

organization's daily operations – they are employees,

suppliers, unions, distributors, service providers. Diffuse stakeholders generally take an interest in the activity of

organization only during the crisis of organization – they

are journalists, community members, the special interest

groups. The fourth group of stakeholders is customers -

they secure welfare of organization and can be segmented

according to the needs, involvement and experience. These four groups of stakeholders have a different approach to

organization, so corporate reputation in a context of

different groups can not be equivalent - each stakeholder

group has an unequal perception of a corporate reputation.

Therefore corporate reputation must be managed

differently according to the interests of each stakeholder

group. Regulatory, organizational, community and media

groups. Henriques & Sadorsky (1999) propose stakeholder

groups, similar to previously discussed groups of

(Dowling, 1995). The regulatory group includes those stakeholders such as trade associations (limiting actions of

the organization under the certain legislations), informal

networks (important sources of information technology),

competitors (who can become leaders in a certain

technologies, which will eventually become the standard in

the industry). This group may be equated as a normative group, singled out by (Dowling, 1995). The organizational

group includes those stakeholders which may have a direct

impact on organization - it is consumers, suppliers,

employees and shareholders. The organization in a way is dependent on organizational stakeholder group. This group

is similar to a functional group, distinguished by (Dowling,

1995), except that (Dowling, 1995) distinguishes consumers

as a separate group. The community, with help of certain

organizations, can unite against organizations' activities

and have a significant impact on the results of

organization's performance. This stakeholder group may be closely associated with a group of media, because the

media forms public opinion about organization, especially during the crisis of organization. Henriques & Sadorsky (1999) claim that public opinion about organization is

formed through the influence of media.

Groups in order of power and interest. (Freeman,

1984) developed a strategic stakeholder matrix, based on a

stakeholder distribution in the four groups under the

influence of power and interest levels. The importance of each stakeholder to organization depends on where the

stakeholders find themselves in the matrix field (Gregory,

2007) (see Figure 1). As stated by (Polonsky & Scott,

2005), the position of stakeholder in the matrix enables the

organization to choose the most appropriate strategies for

the relationship development with stakeholders (Gregory,

2007). INTEREST

Low High

Low

POWER

High

Figure1. Stakeholder grouping, according to the strategic

stakeholder matrix (adapted by Bryson, 2004; Gregory, 2007)

Bryson, 2004) argues that the key players have a

significant power and interest, subjects do not have the

power but have a high interest. Context setters do not care about the organization, but these stakeholders have the

high power on organization, while the crowd is the

stakeholders, which have neither the interest nor the

power. According to (Mitchell et al., 1997), the scientists often prove that in the reality almost every stakeholder

may have the influence on the performance of

organization, whereas it is possible to distinguish

accurately the interested stakeholders from disinterested by

grouping them under the power and interest.

A shadow stakeholder group. The review of the

scientific literature showed that the discussed stakeholder

groups do not describe all stakeholders of the organization.

There were found some stakeholders that act indirectly and

can not be considered as partners of the organization.

(Hine & Preuss, 2009) attributed them to the secondary

stakeholder group, but in our oppinion, this group can not

be equated or identified with the secondary stakeholder

group that was proposed by (Freeman 1984; Clarkson,

1995; Mitchell et al., 1997; Bailur, 2006; Sontaite, 2011;

Florea & Florea, 2013; Mishra & Mishra, 2013; Wolf,

2014). Stoney & Winstanley (2001) argued that it is the tertiary stakeholder group. (Campos & Giovannoni, 2007)

compare this stakeholder group with lobbyists, who have

the access to political structures (de Figueiredo & Richter,

2014) and the performance of this group is equivalent to

corruption. We suggest to entitle this group as a „shadow“

A

Crowd (minimal effort)

B

Subjects (keep informed)

C

Context setters (keep

satisfied)

D

Players

Migle Matuleviciene, Jurgita Stravinskiene. The Importance of Stakeholders for Corporate Reputation

- 80 -

stakeholder group. In principle, this stakeholder group

functions as a normative regulator and is associated with

political impact on the organization. On the other hand, it

functions illegally and is not directly related to the

organization or its survival (Hine & Preuss, 2009).

Therefore, we put a proposal that the shadow stakeholder

group is related more to the industry, than to a particular

organization. As (Hine & Preuss, 2009) stated, it is the

group that may keep down the organization. (Campos &

Giovannoni, 2007) submitted that the shadow stakeholders

generally act in transit, politically unstable and corrupt

countries. Whereas de (Figueiredo & Richter, 2014) stated,

that the government and social groups can be attributed to

the shadow stakeholder group. They are interested in the

enactment of particular laws that affect particular

industries. Organizations can suspend the performance and

suffer losses in the case of a new lobbying organizations,

which get the opportunity to line their own pockets. The

experience of many countries has shown that the

establishment of new organizations is the secondary

(shadow) activity of persons who are interested in

lobbying.

It can be stated that there are predominantly four

leading stakeholder groups – shareholders, employees,

suppliers and customers. The analysis of their importance

to the organization has revealed that shareholders and

employees usually belong to the same group of

stakeholders. Whereas suppliers and customers rarely

belong together to the particular group of stakeholders.

The analysis of stakeholder grouping initiated that while

grouping stakeholders in accordance with their importance

to the organization, it is worth to divide them into primary

and secondary. Allocating the stakeholders to the primary

and secondary groups unconsciously leads to the conclusion

that primary stakeholders take the first, i.e. the most

important place with regard to secondary stakeholders.

Discussion

The stakeholder distribution has raised some doubts.

Scientists often attribute shareholders, employees,

suppliers and customers to the primary stakeholder group.

However, it was observed that the scientists do not

subsume shareholders and employees to the same

stakeholder group with suppliers and customers.

The analysis of a stakeholder grouping revealed the

other important question – it was observed that the

scientists, acting on business interests, criticize the

aforementioned stakeholder grouping. They argue that

even these stakeholders who find themselves in the same

stakeholder group have unequal importance to the

organization. (Vilanova 2007; Kaler, 2009; de Bussy &

Suprawan, 2012) stated that employees and shareholders

were attributed to the same stakeholder group for a long

time. However, the shareholders take up a higher position

than the employees. (Stieb, 2009) noticed that the interests

of the shareholders should not often be the leading. He

queries whether it is possible to rely on the theory in a real

business. Therefore, the following assumption is made that

the stakeholder grouping is ambiguous – based on the

stakeholder theory, which is difficult to adapt in a real

business.

(Kaler, 2009; Tullberg, 2013) criticized stakeholder

grouping. They argued that the scientists often distinguish

only a few key stakeholders and group them into two

categories – the primary and the secondary stakeholders.

(Kaler, 2009) provided a broader view on stakeholders and

on their grouping. He argued that the interests of the

secondary stakeholders must be equated with the interests

of the primary stakeholders. From the business prospect,

stakeholders are often grouped depending on the financial

value to the organization (Tullberg, 2013). For this reason,

the scientists treat shareholders and employees as key

stakeholders of the organization. The insights in this area

enable to state that the scientists do not consider a context

in which the organization acts. It is important to consider

the sector in which the organization operates, what the

product is and who the final consumer is. For instance, the

shareholders may actually be considered as the most

important stakeholders in the financial sector, while the

consumers take up a leading position in the service sector.

Paradoxically, in the scientific literature the consumers are

treated as less important to the organization.

(Parent & Deephouse, 2007) conducted a research in

France, and (Boesso & Kumar, 2009) conducted a research

in Italy and America to identify the criteria of a

stakeholder priority in public organizations. These

researchers have found that the main criterion is power.

The second criterion is the legitimacy of stakeholders who

have a privilege to regulate the performance of the

organization. Meanwhile, the urgency of stakeholders was

not very important. However (Vazques-Brust et al., 2010)

research in Argentina and (Siriwardhane & Taylor, 2014)

research in Australia revealed that the urgency and the

legitimacy of stakeholders are more important criteria than

the stakeholder power. If we eliminate the influence of the

cross-cultural differences, it can be concluded that in

business the stakeholders are often divided into the

primary and the secondary according to their importance to

the organization. However, the scientists acting on

business interests got different results, comparing with the

situation 5–7 years ago. Nowadays the organizations give

the priority to stakeholders, previously considered as the

secondary. Generally and particularly, the organizations

reduce the gap between different stakeholders according to

their importance to the organization.

To summarize the stakeholder grouping and its

importance, it should be first emphasized that the

stakeholder grouping is one of the most important and

decisive factors, which determines not only the performance

of organization, but also its reputation. Although scientists propose the different methods of stakeholder grouping, it is

true to say that all of them are in some sense based on a

stakeholder grouping according to stakeholder importance to

organization. The stakeholders are mostly divided into the

primary and the secondary groups. However, the scientists

acting on business interests observed that the stakeholders

that are attributed to a particular group by the practicians

differ from those stakeholders that are attributed to the same

group by the theorists. The situation in business shows that

the primary stakeholders begin to take the secondary

position according to their importance to the organization.

This regrouping demonstrates a decreasing gap between the

Inzinerine Ekonomika-Engineering Economics, 2015, 26(1), 75–83

- 81 -

importance of the primary and the secondary stakeholders to

the organization.

Conclusions

The stakeholder concept is widely discussed in the

scientific literature, however, many scientists support the

definition of (Freeman, 1984). This definition expresses

the relation between the organization and stakeholders,

which is based on the addiction of power. Despite the mutual influence between the organization and

stakeholders, it is proposed that stakeholders may have a

greater impact on the organization because of a major

power. With regard to this scientific viewpoint, it is stated

that stakeholders are important for the organization

because of the necessary resources and the impact on

corporate reputation. The stakeholders are important to the organization for

one main source - resources which are necessary for

organization. Despite involving themselves in the activities of the organization, stakeholders can not only control the

stability of organization, but also to form corporate

reputation - directly through decisions, boycotting, gentle revenge, income - taxes, restriction of the resource. The

insights in this area enable to state that the stakeholders

have the impact on corporate reputation on the ground of the

interrelationship between the organization and stakeholders.

However, the importance of interrelationship between the

organization and stakeholders could not be treated

unambiguously with regard to all stakeholders. In summary,

it could be stated that some stakeholders, such as

shareholders, customers, employees, non-governmental

organizations, the media, lobbyists, arise a higher

reputational risk than remaining. Nevertheless, scientists do

not define which stakeholders should be considered as the

most or the least important. Stakeholder grouping is

considered to be a way to reveal their importance to the

organization.

There is no unified construct, defining stakeholders,

common to all organizations. It could be stated that there are predominantly four leading stakeholder groups – the

shareholders, employees, suppliers and customers. It was

found that stakeholders can be divided into internal and

external; primary and secondary; normative, functional,

diffused and customers; regulatory, organizational,

community and media; groups in order of power and

interest. The analysis of the scientific literature enabled us to highlight a new stakeholder group, which we call a

shadow group due to its illegal impact on the organization

or industry. The analysis of stakeholder grouping initiated

that while grouping stakeholders in accordance with their

importance to the organization, it is worth to divide them

into primary and secondary. Allocating the stakeholders to

the primary and secondary groups unconsciously leads to

the conclusion that primary stakeholders take the first, i.e.

the most important place with regard to secondary

stakeholders.

The analysis of stakeholder grouping has revealed

another important question – it was observed that the

scientists, acting on business interests, criticize the

aforementioned stakeholder grouping. They propose that

even these stakeholders who find themselves in the same

stakeholder group have unequal importance. The results of

many studies have raised some doubts in attributing the

stakeholders to the particular groups. The scientists acting

on business interests got different results comparing with

the situation 5–7 years ago. Nowadays the organizations

give the priority to stakeholders, previously considered as

the secondary. Consequently, because of these two

different mainstream approaches of the theorists and the

scientists, acting on business interests, it remains unclear

what stakeholders should be attributed to which groups

considering their importance to organization.

Future Research

There are two different mainstream approaches of the

theorists and the scientists, acting on business interests

found in this study. The theorists offer to divide

stakeholders into primary and secondary considering their

importance to organization. The scientists acting on

business interests prove that the priority of the primary and

the secondary stakeholders to the organization changes

recognizably. The main issue is to find out which approach

to the stakeholder grouping is fundamental. Future

research could shed further light on the issues discussed in

this paper, using not only a method of a quantitative

empirical research, but also a qualitative research to detect

why the stakeholder grouping in business differs from that

in theory.

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The article has been reviewed.

Received in April, 2014; accepted in January, 2015.

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