Stakeholder Influence

ACCA P1考試：Stakeholder Influence

1. Risk

A key underlying concept of corporate governance is managing risk.

Business risk is "the risk that the business will not achieve its objectives".

Stakeholder risk (as a subset of business risk) can be considered as the risk that the business will not maximise its wealth because of the lack of understanding of the impact of stakeholders on the business by the directors—a failure by the directors to make the appropriate business case.

Under stakeholder theory, it is essential for directors to identify all stakeholders, assess their level of interest and their level of power when developing the company's strategy.

2. Mendelow

Mendelow (1991) suggested that the influence of each stakeholder on key strategic decisions could be "mapped" by looking at two aspects of their relationship with the firm:

Power—the ability to influence strategic objectives (how much they can).

Interest—the stakeholder's willingness (how much they care) to influence.

Influence—the combined impact of power and interest.

2.1. High Interest, High Power = Key Players

Most of the firm's efforts need to be placed on the key players. The firm cannot manage without them. They have the ability (interest and power) to prevent the firm from achieving its strategy (e.g. upsetting customers will drive them to competitors). A specific difficulty may be that there are a number of conflicts between stakeholders in this category which have to be managed.

Alternatively, an interested stakeholder may be in a position of power to actively lobby for the benefit of the organisation.

2.2. Low Interest, Low Power = Minimal Effort

Diametrically opposite are the stakeholders with low interest and low power. Mendelow indicates that these stakeholders can be largely ignored when considering strategic objectives.*

2.3. High Interest, Low Power = Keep Informed

High-interest, low-power stakeholders need to be kept informed and not underestimated. Because of their high interest, they care a lot and can be useful in forming positive lobby groups. Alternatively, they may join forces to form a stronger grouping and so move toward the high-power sector and become lobbyists against the firm.

2.4. Low Interest, High Power = Keep Satisfied

Lastly, the low-interest, high-power stakeholders (often referred to as "sleeping giants") need to be kept satisfied and stay dormant. If, for whatever reason, they become more interested (woken up), they can easily become key players and, for example, frustrate the adoption of a new strategy.

Alternatively, their interest could be deliberately enhanced by the organisation so that their power can be effectively used.

2.5. Use of Mendelow's Framework

Using the Mendelow framework and approach, firms can:

understand whether their current strategy is still in line with stakeholders' interests and power;

identify who will support a strategic project and who can and aim to stop it;

try to reposition stakeholders to increase support/reduce threats to a strategic objective;

encourage stakeholders to stay in a category or prevent them moving to another; and

identify change within stakeholders that may imply that the current strategy needs to be re-thought with the possibility of a new strategy being developed.