The Stakeholder Model Refined Yves Fassin

ABSTRACT. The popularity of the stakeholder modelhas been achieved thanks to its powerful visual schemeand its very simplicity. Stakeholder management hasbecome an important tool to transfer ethics to manage-ment practice and strategy. Nevertheless, legitimate crit-icism continues to insist on clarification and emphasiseson the perfectible nature of the model. Here, rather thanbuilding on the discussion from a philosophical or theo-retical point of view, a different and innovative approachhas been chosen: the analysis will return to the origin ofstakeholder theory and will keep the graphical frameworkfirmly in perspective. It will confront the stakeholdermodel’s graphical representation to the discussion onstakeholder definition, stakeholder identification andcategorisation, to re-centre the debate to the strategicorigin of the stakeholder model. The ambiguity and thevagueness of the stakeholder concept are discussed frommanagerial and legal approaches. The impacts of twomajor shortcomings of the popular stakeholder frame-work are examined: the boundaries and the level of thefirm’s environment, and the ambivalent position ofpressure groups and regulators. Working pragmatically,with a focus on the managerial and organisational per-spective, an attempt is made to clarify the categorisationsand classifications by introducing new terminology with adistinction between stakeholders, stakewatchers and stake-keepers. The analysis will finally lead to a proposedupgraded and refined version of the stakeholder model,with incremental ameliorations close to Freeman’s origi-nal model and a return of focus to its essence, the man-agerial implications in a strategic approach.

KEY WORDS: stakeholder, stakewatcher, stakekeeper,stakeholder model, stakeholder theory, strategy, graphicalframework, Freeman’s model, pressure groups, business ethics

Introduction

Few management topics have generated moredebate in recent decades than the underlying notion,the model and the theories surrounding stakehold-ers1 (Donaldson and Preston, 1995; Friedman and

Miles, 2006; Gibson, 2000; Wolfe and Putler, 2002).Stakeholder theory can be seen as ‘‘a genuine theorythough a perfectible one’’ (Lepineux, 2005). Thevisual power of the stakeholder model and its verysimplicity are seen as contributing to the success ofthe stakeholder concept (Fassin, 2008). Stakeholder‘management’ has become an important discourse inthe translation of business ethics to managementpractice and strategy (Waxenberger and Spence,2003, p. 242).

The impressive research on stakeholder theory hasproceeded along three, often confused, lines: thedescriptive, the normative and the instrumentalpoints of view (Donaldson and Dunfee, 1994;Donaldson and Preston, 1995; Friedman and Miles,2006; Hendry, 2001). To these three interpretations,Freeman has added ‘‘a fourth dimension, the meta-phorical use of ‘stakeholder’’’ (Freeman, 1994)which depicts the idea as ‘‘a figure in a broadernarrative about corporate life’’ (Freeman, in Cooperand Argyris, 1998, p. 612).

An increasing interrelation is noticed between theconcepts of stakeholder theory, corporate responsi-bility and business ethics (Valor, 2005, p. 193;Garriga and Mele, 2004, p. 61). Stakeholder man-agement has gradually been adopted as the leadingred thread in several recent handbooks on businessethics (e.g. Carroll & Buchholtz, 2006; Crane &Matten, 2004). The stakeholder concept has becomethe grille de lecture for the analysis of corporateresponsibility (Attarca & Jacquot, 2005).

Moreover, there have also been serious attempts tointegrate theory with research from disparateareas to further develop the stakeholder theory(Andriof et al., 2002; Jawahar and McLaughlin, 2001;Venkataraman, 2002). However, this widening rangeof application has also raised confusion and ambiguity.

The criticisms of stakeholder theory from philo-sophical and theoretical standpoints have alreadybeen thoroughly analysed and widely commented

Journal of Business Ethics (2009) 84:113–135 ! Springer 2008DOI 10.1007/s10551-008-9677-4

upon in the scientific literature (Donaldson andDunfee, 1994; Donaldson and Preston, 1995;Friedman & Miles, 2006; Gibson, 2000; Gond andMercier, 2004; Kaler, 2003; Key, 1999; Moore,1999; Sternberg, 1996; Weiss, 1995).

Methodology and structure

In this article, a different and innovative approach hasbeen chosen: rather than building the discussionpurely from a philosophical or theoretical point ofview, the analysis will return to the origin of stake-holder theory and will keep the graphical frameworkfirmly in perspective.

It will confront the stakeholder model’s graphicalrepresentation to the discussion on stakeholder defi-nition, stakeholder identification and categorisationto re-centre the debate to the strategic origin of thestakeholder model.

Departing from a description of Freeman’s stake-holder model, a brief review of the criticisms levelledat the model is followed by a succinct analysis of thedefinition of stakeholders and their categorisation.The ambiguity and the vagueness of the stakeholderconcept are explored from managerial and legalstandpoints. Next, the impact of two perceived majorshortcomings of the popular stakeholder frameworkare examined: i.e. the level of the firm’s environment,and the ambivalent position of pressure groups andregulators. Working pragmatically, with a focus onthe managerial and organisational possibilities, an at-tempt is made to clarify the categorisations and clas-sifications by introducing new terminology. Theanalysis finally leads to a proposition for an upgradedand refined version of the stakeholder model, withincremental ameliorations close to Freeman’s originalmodel, a refined scheme that offers an improvedconceptualisation of the firm and its environment, itsparts and the interrelations between the parts. Thebenefits of the new refined model are explained: thereturn of a focus to its essence, the managerial impli-cations in a strategic approach.

Freeman’s stakeholder model

Stakeholder theory has been complemented by agraphical framework: Freeman’s stakeholder model.

Many of the most popular management models areexpressed as, or supported by, a visual format;reputed examples being Porter’s Five Forces frame-work (Worren et al., 2002) and Mintzberg’s struc-turing of organisation. Research has demonstrated apreference for narrative and visual knowledgeamong practitioners over the prevailing prepositionalmode found in academia (Worren et al., 2002). Theconsiderable impact of Freeman’s stakeholder modelamongst practitioners may to a certain extent bebased on the cognitive power of visual representa-tions (Fassin, 2008).

The framework of the stakeholder model illus-trates visually the relationships among the variousgroups of actors in and around the firm. Based onthe expansive literature on organisation theory andcorporate strategy, and on a vast amount of researchand observation, Freeman conceptualised his view ofthe firm in a new and rather simple concept: thestakeholder model expressed through a powerfulvisual synthesis.

The model was possibly inspired by a methoddrawn from the sociological sciences, the sociogram,which visualises the frequency of interactionsbetween individuals or groups. The design of thestakeholder model was influenced by the traditionalinput–output model of managerial capitalism inwhich the company is related to only four groups:suppliers, employees and shareholders providing thebasic resources for the company; which are trans-formed into products or services for the fourthgroup, namely clients. Freeman added other con-stituencies that are affected by the firm’s activitiesand saw the corporation as the centre of a series ofinterdependent two-way relationships (Crane andMatten, 2004, pp. 50–52). Freeman originally pre-sented the stakeholder model as a map in which thefirm is the hub of a wheel and stakeholders are at theends of spokes around the rim (Frooman, 1999). Itconsisted of one central circle, or oval, representingthe firm, surrounded by a variable number of othercircles or ovals with bi-directional arrows towardsand from the central oval, each oval representing agroup of stakeholders. Freeman’s original frameworkincluded eleven stakeholders on a non-exhaustivebasis (Freeman, 1984, p. 25). The most commonversion of the model – as represented in Figure 1 –includes seven stakeholders. To the elements of themanagerial capitalism model – shareholders (or

114 Yves Fassin

financiers), customers, suppliers and employees –Freeman added competitors2 plus two importantexternal stakeholders: the government and thecommunities.

Later, Freeman and others added further groups ofstakeholders, most notably pressure groups. In a laterversion of the model, Freeman (2003) reduced thescheme to five internal stakeholders: financiers, cus-tomers, suppliers, employees and communities(dropping competitors), placed a box around thesefive stakeholders, and introduced six external stake-holders: governments, environmentalists, NGOs,critics, the media and others, without arrows linkingthese to the central hub. The adapted version is rep-resented in Figure 2.

However, one should be aware that all synthesisedrepresentations, models and schemes are social con-structions that inevitably simplify and reduce reality.This remark is naturally valid for the stakeholder

framework (Pesqueux and Damak-Ayadi, 2005).Recent literature on the subject proposes a range ofrefinements and improvements, or at least implicitexplanatory assumptions, to enable the correct inter-pretation of the framework to be made (Fassin, 2008).

Therefore, a more indepth review of the criti-cisms and confusion surrounding stakeholder theoryand definitions seems worthwhile.

A review of the criticisms: confusionsurrounding stakeholder theorisingand definitions

An overview of the literature on stakeholder theorycreates the impression that the concepts surroundingthe stakeholder are referred to in confusing ways(Egels, 2005; Lepineux, 2005; Stoney and Winstan-ley, 2001). Indeed, there are clear ambiguities in theliterature on the basic concepts of the stakeholdermodel, the stakeholder theory, the stakeholderapproach, stakeholder analysis and stakeholder man-agement. The stakeholder approach has even beenseen as ‘‘a powerful heuristic device, intended tobroaden management’s vision of its roles andresponsibilities beyond the profit maximisationfunction to include interests and claims from non-stockholding groups’’ (Mitchell et al., 1997).

‘‘A number of difficulties in identifying stakehold-ers and in defining the boundaries of the firm are afunction of the intrinsic flexibility of the theory itself ’’(Anonymous reviewer). There is even a lack of clarityand consistency in the definition of a stakeholder, andindeed of a stake (Waxenberger and Spence, 2003).Further, there are some fundamental inconsistenciesbetween some definitions and the graphical repre-sentation of the model. Finally, there is insufficientrigour in applying the framework to managerial,organisational and strategic issues: ‘‘much of stake-holder literature is prone to magnifying, blurring and/or neglecting’’ (Wolfe and Putler, 2002).

The stakeholder theory, as with any new theory,suffers from numerous shortcomings and imperfec-tions ‘‘owing in part to vagueness, ambiguity andbreadth of the stakeholder theory itself’’ and in partto its ‘‘wide-ranging intuitive appeal, critiques areoften implicit’’ (Phillips et al., 2003). Similar senti-ments were expressed by Orts and Strudler (2002),while Hall and Vredenburg (2005) note that

Government Competitors

FirmCustomersShareholders

Suppliers

Civil society

Employees

Figure 1. The original stakeholder model – Freeman(1984).

Suppliers

Employees

Customers

Communities

Others MediaCritics

NGOS Environmentalists

Financiers

Governments

Firm

Figure 2. The adapted version of the stakeholder model –Freeman (2003).

The Stakeholder Model Refined 115

‘‘stakeholder ambiguity is difficult to managebecause it is idiosyncratic and context-specific’’.

In their discussions, some scholars have also widenedthe range of applications.3 Several authors have treatedthe stakeholder construct as the foundation for a theoryof the firm (Jones, 1995; Kochan and Rubinstein,2000), and as a framework for use in the field of businessand society4 (Rowley, 1997). Not only philosophersand jurists but also political scientists have entered thedebate,5 broadening the theory to cover issues forwhich it was never intended and in so doing providingammunition for its detractors (Argenti, 1997; Freeman,2003; Freeman and Evan, 1990; Kaler, 2003; Langtry,1994; Stoney and Winstanley, 2001; Weiss, 1995).Some scholars argue that the stakeholder theory, as it hasbeen presented, has no solid basis: neither in the eco-nomic theory of the firm (Key, 1999) nor in traditionalethical theories (Dunn, cited in Argandona, 1998).Others consider ‘‘it is lacking in its normative founda-tions’’ (Waxenberger and Spence, 2003), and thereforesee it as a weak theory (Lepineux, 2005), or merely as ‘‘ascience tradition’’ (Weaver and Trevino, 1994).

The debate has also introduced confusion con-cerning the implications for management and gov-ernance (Frooman, 1999). It is seen as important torecognise the limitations of the stakeholder theory soas ‘‘to prevent the theory [being] threatened withmeaninglessness’’ (Phillips, 1999). Notwithstandingthe academic debate, which will hopefully providefurther clarifications and delimitations, there hasbeen a fairly general consensus that the stakeholderconcept has the potential to deliver a theory of theorganisation with practical usefulness for manage-ment (Attas, 2004; Donaldson and Dunfee, 1994;Freeman, 1999; Harrison and Freeman, 1999; Jonesand Wicks, 1999; Key, 1999; Orts and Strudler,2002; Preston and Donaldson, 1999).

However, before taking up the critique on thestakeholder graphical representation, it is worthwhileto return to the various definitions of the notion ofstakeholder and to the different approaches to thestakeholder concept in academic literature.

The definitions of stakeholders andtheir categorisations

A stakeholder refers to any individual or group thatmaintains a stake in an organisation in the way that a

shareholder possesses shares.6 From the numerousdefinitions,7,8 two dichotomous views emerge (Kaler,2002) – the ‘claimant’ definition and the ‘influencer’definition of what it is to be a stakeholder – plus thecombinatory definition: any group or individual that‘‘can affect or is affected by the achievement of anorganisation’s objectives’’ (Freeman, 1984, p. 46).This, now classical, definition has become the mostaccepted of the definitions of a stakeholder, and hasgreater precision than the shorter version ‘‘those whocan affect or can be affected by the firm’’.

The literature includes many attempts at classifyingstakeholders using various criteria,9 (Frooman, 1999;Pesqueux et al., 2005; Phillips, 2003b; Winn, 2001):primary versus secondary, direct or indirect, genericversus specific, legitimate versus derivative, strategicand moral, core, strategic and environmental stake-holders, etc. Mitchell et al. (1997) offered a theory ofstakeholder identification and salience based on theattributes of power, legitimacy and urgency.

Phillips (2003b) distinguishes normative stakehold-ers, derivative stakeholders and dangerous or dormantstakeholders. Normative stakeholders are those stake-holders to whom the organisation has a moral obliga-tion: an obligation of stakeholder fairness (Phillips,2003b). Derivative stakeholders are those groups orindividuals who can either harm or benefit the orga-nisation but to whom the organisation has no directmoral obligation as stakeholders: these include com-petitors, activists, terrorists and the media (Phillipset al., 2003), and also ‘dangerous’ or ‘dormant’ stake-holders such as blackmailers or thieves (Jensen, 2002).These final categories can affect the corporation buthave no legitimate relationship with it (Mitchell et al.,1997; Phillips, 2003b; Savage et al., 1991).

An additional compelling basis for classificationconsiders the level of the environment: the resourcebase, the industry structure and the social politicalarena (Post et al., 2002a).

The ambiguity and vagueness in the scopeof the stakeholder concept

Legitimate criticism continues to insist on clarificationand emphasises the perfectible nature of the model (see,for example, Jones and Wicks, 1999). The stakeholdermodel is seen as suffering from vagueness in scope andambiguity due to the possible interpretations of the

116 Yves Fassin

basic stakeholder concept in either narrow or broadsenses (Hansen et al., 2004; Mitchell et al., 1997; Ortsand Strudler, 2002; Phillips, 2003a, p. 120). The dif-ferent understandings are founded in the differencesbetween managerial and legal interpretations of thestakeholder concept. They have imperceptibly beenintroduced through the various underlying definitionsof a stakeholder from a claimant definition ‘‘thosewithout whom the organisation could not survive’’ toan influence definition ‘‘those who can affect the firmor be affected by it’’. Even the latter, now classical,definition includes a certain ambiguity: those who canaffect a firm are not always the same as those who can beaffected by it.

The legal interpretation – reinforcing the philo-sophical analysis – rests upon rights and contracts:stakeholders have claims, firms have obligations andduties. Conversely, the managerial approach, origi-nating from organisation theory and sociology, ismore pragmatic and emphasises the relational aspectsbetween stakeholders and the firm (Pesqueux et al.,2005). These two opposing visions of the stake-holder concept reflect totally different issues. Thecontinuously evolving mix, juxtaposition and com-binatory use of both definitions (Kaler, 2002) hasincreased the perception of vagueness in the model –with considerable consequences.

The definition of a stakeholder using the broadview, as any individual or group that can ‘‘affect or beaffected’’, leads to the need to pay attention, care andrespect to all such stakeholders who then have to betaken into account. The legal interpretation – with amore abstract focus – leads to a narrower view of thestakeholder concept, with a selected number oflegitimate stakeholders linked through a contractualrelationship, and all such relationships having a com-parable degree of intensity. Moreover, the claimantand influencer definitions are not mutually exclusive:a stakeholder that affects, or that can be affected by,can also have a claim; while a stakeholder that has noclaim can still affect or be affected. There is noimplication of, or necessity for, reciprocal impact(Mitchell et al., 1997). Using the claimant definition,competitors, for instance, would have to be excludedas stakeholders whereas, on the basis of the influencedefinition, they should be integrated since they canharm or benefit the firm (Phillips, 2003a, p. 133;Spence et al., 2001). From a strategic perspective, it isessential to include them in a strategic analysis.

The managerial interpretation implies multiplerelationships with a much greater degree of variation inthe intensity of their influence or power. It is a broadview of the stakeholder concept, with a pragmatic focuson strategic analysis and management implications.However, as some opponents like to point out, theevolution in the definition of stakeholders represents adramatic increase in the number of stakeholders(Sternberg, 1996). Due to globalisation and techno-logical evolution, with improved communications andinformation systems, virtually everyone and every-thing, everywhere, can ‘‘affect or be affected’’ by thedecisions and actions of a business enterprise (Metcalfe,1998; Orts and Strudler, 2002; Sternberg, 1996).Consequently, virtually everyone and everythingshould be considered as a stakeholder. This view addslittle value to the theory (Phillips, 2003a, p. 121); and,in any case, managerial time constraints and limitedcognitive capacity force a simplification and reductionthat counterbalances the comprehensiveness and use-fulness of the theory (ibid., p. 129).

The ambiguity and vagueness in identifyingstakeholders has largely resulted from the intrinsicflexibility of stakeholder theory and from the mixingof two interpretations. This ambiguity, and also acertain ambivalence, has been amplified by a com-binatory use of stakeholder definitions (Kaler, 2002)taking elements of the broad view with character-istics of the narrow view, and vice versa. Whathappened was that, in the academic discussion, manytheorists argued with the claimant definition in orderto reduce the number of stakeholders on a theoret-ical basis, but used the influence definition to extendthe list on pragmatic arguments from a strategicperspective. The narrow view attempts ‘‘to definerelevant groups based on their direct relevance to thefirm’s core economic interests’’, while the broadmanagerial view’s purpose is to collect ‘‘knowledgeof actual and potential claimants in the firm’s envi-ronment’’ (Mitchell et al., 1997). The major out-come of this somewhat artificial debate has been toincrease ambiguity and confusion and so underminethe whole stakeholder concept. With the introduc-tion of a distinction between normative and deriv-ative legitimacy, Phillips was able to reconcile ‘‘thetwo often opposing streams of stakeholder research’’and to ‘‘bring together both moral philosophicaland strategic conceptions of stakeholder theory’’(Phillips, 2003a, p. 123).

The Stakeholder Model Refined 117

Table I summarises the differences as describedabove, and at the same time the complementarities,between the managerial and legal approaches to thestakeholder concept.

These two views are not opposite, but are twodimensions of the same reality, with differentobjectives, applied and theoretical. In addition tothese views that can be seen as a continuum, a thirddimension which will not be further discussed here,has been developed in the literature, the ethicalapproach, somewhat more related to the philo-sophical approach.10

Numerous academic articles have concentrated onstakeholder identification and categorisation elaboratedfrom one of these complementary approaches. How-ever, very few scholars go on to link their analysis to thegraphical scheme, and thus avoid analysing the incon-sistencies that may exist between their definitions andthe graphical model. The following analysis focuses onthis overlooked aspect of stakeholder theory.

The analysis of the graphical stakeholdermodel scheme

Confronting Freeman’s graphical scheme with thetwo definitions – narrow versus broad, or rights versusrelationships – leads to interesting developments. Thenumber of stakeholders in the original scheme is notrestricted, although it is generally kept low for reasons

of clarity. The outlaying ovals are linked to the firmwith bi-directional arrows symbolising a relationship,or by a unidirectional arrow representing a claim.Only Phillips (2003a, p. 127) has introduced a dis-tinction between the legitimate and derivative stake-holder relationships in the graphical representation.

Much of the vagueness and ambiguity vanisheswhen one combines the definitions of a stakeholderwith the graphical representation since they weredesigned to go hand in hand. Freeman had deliberatelychosen a broad view, one based on relationships withmany stakeholders, in full concordance with his def-inition as those who ‘‘can affect or can be affected bythe firm’’. His approach was essentially managerial(Freeman, 1984, p. 43), whereas, much of the sub-sequent discussion originates from an opposing legalapproach and its narrow view. Seemingly, manyphilosophical theorists have neglected the link be-tween definition and scheme. They seem also to haveneglected the origins of the theory and the fact thatstakeholder identification was never proposed as anymore than the first step in a strategic analysis.

The strategic and management origins of the stakeholdermodel

The stakeholder model was originally conceived as astrategic instrument for organisations to broadentheir vision of management and to turn their

TABLE I

The managerial versus the legal approach to the stakeholder concept

Interpretations Managerial Legal

Analysis Sociological PhilosophicalBasis of definition Relation RightDefinition Influencer ClaimantCharacteristics Attention Claim

Care ContractInfluence DutiesRespect Obligations

Focus Pragmatic AbstractNumber Many stakeholders Select numberLegitimacy Derivative NormativeRelevance Knowledge of firm’s environment Firm’s core economic interestsScope Broad view Narrow viewPerspective Strategy Theory

118 Yves Fassin

attention to the participants in the organisationbeyond the shareholders and to take into accountthe interests of the surrounding business communityand the socio-economic region11 (Freeman, 1984;Mitchell et al., 1997). Stakeholder theory is seen as ‘‘atheory of organisational strategy and ethics’’ (Phillipset al., 2003). A few articles (Gond and Mercier, 2004;Heene and Dentchev, 2006; Waxenberger andSpence, 2003) have recently recalled attention to theinstrumental rationale for stakeholder managementfrom a strategic perspective, regardless of the moral orethical considerations.

Shortcomings and imperfections in the stakeholdermodel’s graphical scheme

Besides the discussions on the identification andselection of specific stakeholders, the model has beenattacked for other flaws. Indeed, some of the originalhypotheses are not fully justified: reality is far morecomplex than the simplified graphical presentationprovided by the model. A systematic analysis of someof the model’s major shortcomings has been illus-trated using the graphical model (Fassin, 2008).Some of the major objections found in the literatureinclude the variability in the dependence amongstakeholders, the variability in salience and the im-pact of the various stakeholders, the central placewithin the model, the multiple linkages and thenetwork relationships. Stakeholders have a series ofmultilateral contacts and direct influences on otherstakeholders of the firm (Phillips, 2003b, p. 127),while stakeholders themselves possess their ownsubset of stakeholders (Rowley, 1997). There is alsoheterogeneity within stakeholder groups and ‘doubleappartenance’: the members within every stake-holder group can be far from homogeneous, whileone stakeholder may occupy simultaneously severalroles (Freeman, 1984, p. 58; Fassin, 2008).

The survey concluded that, with the implicitacceptance of simplification along the aforementionedexplanatory elements, Freeman’s model could still beaccepted as a valuable approximation of reality. Theanalysis suggested only one change: the central ovalshould represent the management, including the CEOand the board of directors, rather than the firm.12

Although a minor change in form, it represents a majorchange in content, as it reaches to the fundamentals of

the model. If the central oval contains the managementat the nexus of contracts, the firm encompasses allstakeholders. In this approach, the firm encircles thewhole framework. This view corresponds more closelywith definitions of the corporation as a system of pri-mary stakeholder groups (Clarkson, 1995) or as acomplex network of constituencies.

Additional imperfectionsof the stakeholder model

Further, the stakeholder model can be seen as pre-senting a few additional shortcomings. The differentlevels of the environment are not addressed as theyare in other models. The ambivalent position ofpressure groups and regulators raises other concerns(Fassin, 2008). Finally, the model, if it is to be auseful tool, needs to offer greater help in identifyingand selecting stakeholder groups.

The levels of analysis of a firm’s environment

Stakeholder theory is seen as inadequately addressingthe environment surrounding a firm (Key, 1999).The model suffers a problem of delimitation of theboundaries of the firm, with the various levels notclearly defined. Stakeholders around the firm,especially those in the immediate business environ-ment and those in the broader environment aresomewhat confused. Post et al. (2002b, p. 55, Figure2.1) have responded to this objection by proposing anew graphical model, the new stakeholder view of thefirm, referred to here as the PPS view, with threeconcentric rings around the corporation, represent-ing successively the resource base, the industrystructure and the social political arena. This PPSview is an extension of the graphical display of theinterface between a business and selected stake-holders with which it has social relationships (Carrolland Buchholtz, 2006, p. 9, Figures 1 and 2).

The ambivalent position of pressure groupsand regulators

Pressure groups belong to the set of derivativestakeholders. The legitimacy of the derivative

The Stakeholder Model Refined 119

stakeholders is derived from their ability to affect theorganisation and is based on obligations owed toothers (Phillips, 2003a, pp. 125–126). Sometimes,pressure groups have been collectively represented asa separate, fully-fledged stakeholder, in an additionalcircle, or sometimes even in individual additionalcircles. In reality, pressure groups vary in nature, sizeand importance. They represent a number of distinctcategories of stakeholders. Some have evolved into‘‘institutional structures that serve the function ofmonitoring and enforcing the terms of the implicitor tacit contracts’’ (Hill and Jones, 1992). Althoughmost pressure groups do not have a real stake, theycan negatively influence the company through theiractions. They do not enjoy a real relationship withthe firm, and in most cases are independent ofbusiness. Their pressure is exerted in one direction,whereas the essence of the original stakeholdermodel was interdependence. This is the main reasonwhy they have been, over time, presented differ-ently: in a separate circle, on a second layer, withunidirectional arrows, or outside the box as inFreeman’s latest adaptation. A detailed analysisclearly shows that pressure groups operate in variousfunctional areas of the firm. Their impact is generallychannelled through one of the more obviousstakeholders to the firm. Investor funds representshareholders, auditors monitor and control the ac-counts on behalf of the shareholders, and unionsrepresent the employees. They can all assume therole of proxy or intermediary for pressure groups.

A category closely linked to pressure groups is theregulators. Although these are mostly situated out-side the company, they exert a significant influence.Regulators are often independent, and their impacttends to be seen as a constraint as is the case with apressure group. Many observers prefer to considerthem as non-stakeholders and suggest placing themin a separate group. The regulator par excellence is thestate and the law, with its agencies, commissions andother authorities (Fassin, 2008).

The identification and selection of stakeholder groups

Stakeholder theory is ‘‘mainly utilised to opera-tionalise the question of to whom businesses have aresponsibility’’ rather than for what (Egels, 2005).Strategic stakeholder management involves much

more than the identification of groups and decidingwhether they should be integrated in the model asseparate stakeholders.

Curiously, it is precisely the identification ofindividual stakeholders that has become one of thecentral themes of the discussions in academic andmanagement literature on stakeholding (Cappelen,2004; Clarkson, 1998, p. 7; Mitchell et al., 1997;Phillips, 2003b; Post et al., 2002a). In an analysis ofthe literature referring to stakeholder selection, Ifound about one hundred stakeholder groups andsubgroups. I have attempted to logically regroupcommon and related subgroups, and identify anycommon elements in the various selections. A de-tailed list of the subgroups so identified is included asAppendix A.

The literature is unanimous on the three majorstakeholder groups: financiers, employees and cus-tomers. As competitors have been eliminated invarious versions of the model (Post et al., 2002b,p. 53; Spence et al., 2001), it may be reasonable togroup them with suppliers in one larger group called‘business’. There is also a general recognition of twofurther groups, namely ‘communities’ and ‘civilsociety’, and to include a number of external con-stituencies and influencers as surrounding externalstakeholder groups: in particular the government andstate, pressure groups, regulators and the media. Asargued by Clarkson, ‘‘the public is a stakeholder inall corporations’’ (1994). Along with the generalpublic, some more abstract groups such as the envi-ronment (Phillips and Reichart, 2000), technology,and future generations can be included within thecommunities (seen as somewhat local), or in civilsociety and the wider world. Notably, this selectionrespects the logic and the history of stakeholder theory.

In following sections I will explore how stake-holders can be better identified and categorised andhow the discussed imperfections and shortcomingsof the graphical model can be reduced to arrive at arefinement of the stakeholder model itself.

Stakeholders, stakewatchersand stakekeepers

The range of definitions of the stakeholder, and thewidening of the term to include all kinds of externalbodies, has created confusion and diluted the

120 Yves Fassin

concept. For this reason, in the current analysis, thepotential list of stakeholders has been divided intothree distinct categories: the internal constituentsand stakeholders who have a real stake in the com-pany, the pressure groups that influence the firm,and the regulators who impose external control andregulations on the firm. Real stakeholders have aclaim on the firm, pressure groups as indirectstakeholders only an indirect claim, while regulatorshave no claim. In Table II, the three categories areconfronted with different elements of the typologyof Mitchell et al. (1997): legitimacy and power, andto the responsibility.

The three categories above have substantiallydifferent profiles. For the real stakeholders, whopossess a legitimate claim, power and influence arereciprocal; the firm has responsibility for them. Thefirm has little power on and no responsibility forindirect stakeholders, whose legitimacy is derivative(Phillips, 2003a, p. 120). The legitimacy of the claimof pressure groups is of mixed origin. They haveconsiderable power over the firm, while the firm canhardly influence them. The firm has no responsi-bility for pressure groups and regulators. They aretotally independent of the firm but, indirectly, reg-ulators can externally impose responsibilities.

In an attempt to disentangle the confusion in theexisting terminology, I have introduced a new ter-minology, that clearly distinguishes these categoriesand which – I hope – will overcome many of themisinterpretations found in the stakeholder litera-ture. First of all, there are the real stakeholders,essentially the classic stakeholders in the originalnarrow approach – those who have a concrete stake:the dedicated stakeholders with a real positive and(or at least expected) loyal interest in the firm.

Next, there are those stakeholders, such as pressuregroups, who do not really have a stake themselves but

who protect the interests of real stakeholders, often asproxies or intermediaries. I label these stakewatchers.The group encompasses those stakeholders who lookafter a stake with care, attention and scrutiny, just aswatchdogs do. Good examples are unions guardingthe stake of employees and workers; consumerassociations defending the stake of consumers;investor associations protecting the shareholders; andactivists watching the stake of the community and theenvironment.

Then there is another group containing thosewho are even further removed from the active, realstakeholders: the independent regulators, who haveno stake in the firm but have influence and control.They impose regulations and constraints, while thefirm has little reciprocal direct impact on them. I callthese the stakekeepers, in an analogy with the term ofgatekeeper in innovation literature, and more re-cently introduced in social sciences and in finance.The term of gatekeeper connotes some form ofoutside or independent monitor with some power toscreen out or at least to grade or to rate the personsor entities he scrutinises. Examples in finance are theauditors, the security analysts, the Security and Ex-change Commission. They are typically ‘‘repeatplayers who provide certification or verificationservices to investors’’ and ‘‘act by pledging theirreputational capital to the corporation’’ to assureinvestors as to the quality of the information (Coffee,2006, pp. 2, 10). A stakekeeper controls and signals,as a gatekeeper does. He keeps a stake for thestakeholders. Governments tend to be the majorgeneric stakekeeper. Specific stakekeepers includecourts, regulatory agencies, certification organisa-tions, independent evaluation bodies and laborato-ries. The press and the media form anotherimportant grouping of stakekeepers. The actions ofstakekeepers find their expression in laws, norms,

TABLE II

Differences between the three categories of stakeholders

Stakeholder Pressure group Regulator

Legitimacy of the claim Normative Derivative MixedPower/influence dominance Of the firm On the firm On the firmResponsibility Of the firm No Externally imposed

Stakeholder Stakewatcher Stakekeeper

The Stakeholder Model Refined 121

codes, analyses etc., and in publications. Public butalso private accreditation institutions have expandedin different fields such as security and quality (ISO-norms). In parallel, rating agencies cover anincreasing number of sectors and possibly publicisethe results and rankings: from the classical exampleof the Michelin guide for restaurants to the KLDindex for corporate social responsibility and to theEconomist or FT rankings of business schools.

The proposed categorisation thus includes threedistinct groups: stakeholders who hold stakes, thestakewatchers who watch over a stake and thestakekeepers who keep the stake.

For completeness, one should add the false anduncontrolled influencers, the activist groups and ter-rorists who do not want the good of the firm, and whocan harm it through unjustified and unfair actions orby spreading false information. They may pursue ahidden agenda and often act without warning.Although these groups are sometimes referred to asstakeholders, a more appropriate term might be ‘stakeimpostors’.

The triangular relationship

By so classifying the list of stakeholders, triangularrelationships appear. For almost each major constit-uency there is a corresponding main pressure group.For most stakeholder there is a correspondingstakewatcher, and these are labelled associated stake-holders. Finally, for each group of associated stake-holders there is also at least one correspondingspecific stakekeeper,13 while the generic stakekeepershave impact on many stakeholders. Figure 3a and brepresent the triangular relationship among the vari-ous groups of stakeholders.

For shareholders (stakeholders), the correspond-ing pressure groups (stakewatchers) are the institu-tional investment funds and analysts, and the

regulators (specific stakekeepers) comprise the reg-ulator’s office of the stock exchange, the SEC, otherregulatory agencies and rating agencies, accreditationoffices, professional associations of directors and asophisticated financial press (Van den Berghe, 2002,p. 158). The corresponding regulatory framework islaid down in specific laws, corporate governancecodes, etc.

Employees have their unions as their stakewatchers,while the government through the law and the courtsare the stakekeepers. The stakeholder group of clientsor customers includes wholesalers, retailers and finalcustomers (Ferrell, 2004). Pressure groups, such asconsumer associations, act as stakewatchers, whereasregulators such as the Food and Drug Administration(FDA) in the USA, control laboratories and otheragencies play roles as stakekeepers.

Organisational boundaries are becoming fuzzythrough new forms of cooperation in research andinnovation, involving co-development, customerinvolvement in design and product testing, and newalliances established to enter new or foreign markets(Harrison and St. John, 1996). Therefore, suppliershave been increasingly integrated into a largerstakeholder group called ‘business’. This groupcomprises the suppliers and competitors from theoriginal model. The business group also includesjoint venture and strategic alliance partners, consul-tants, advertisers, trade associations and professionalassociations. Competitors represent a special case,originally seen as a stakeholder but later rejected(Attas, 2004; Freeman, 1994) as they do not strivefor the wellbeing of the firm. However, there areincreasing numbers of cases involving co-operationwith competitors, as for instance in joint-researchprogrammes with the support and funding of theEuropean Union. Generally, however, the maineffects of competitors are influential in nature and,therefore, they should have their place in any stra-tegic analysis (Spence et al., 2001). Competitors andnew entrants with substitute products (from Porter’smodel) are thus stakewatchers and fit within thebusiness group. In this business group, competitorsform the associate stakeholder, corresponding to thesuppliers as the classic stakeholder.

In addition to the four economic stakeholders,communities and civil society are identified as aseparate group of associated stakeholders, predomi-nantly of the stakewatcher type. Civil society is

Constituency Pressure Group STAKEHOLDER STAKEWATCHER

or

Regulator STAKEKEEPER

(a) (b)

Figure 3(a, b). The triangular relationship among stake-holder groups.

122 Yves Fassin

represented by actors from the general public outsidethe immediate economic realm of the corporationand outside the public sector. Civil society organi-sations include a plethora of pressure groups, non-governmental organisations, charities and religiousgroups (Crane and Matten, 2004, p. 345). Thecommunities provide the infrastructure, impose localregulations and levy taxes. In reality they representthe local component of the state, with a predomi-nantly stakewatcher role, while the regulatory part oftheir function is classified within the stakekeepergroup of government.

Some stakekeepers have specific influence overone stakeholder, but most of them have commonelements and can be grouped in a few commongeneric groups: the government for the public sec-tor, and the ‘wider world’ as another sector. Theserepresent the citizens’ interests, the general public,society as a whole, the interests of the wider worldand the environment. They operate through officialcontrol and regulation. Contrary to the stakewat-chers, stakekeepers have generally less direct contactwith their associated stakeholder. However, theyhave more than influence since they exert a coercivepower through laws, norms and codes, and controlmechanisms. The government, for instance, as ageneric stakekeeper, has general laws applicable to allcompanies, but also has specific laws for each sector,such as the control institutes and the FDA in thefood sector.

Stakekeepers impose responsibilities upon thefirm and can signal it to the external world. Themedia, therefore, – including the press – have beenclassified as a distinct stakekeeper, and not as astakewatcher. The choice was made for three mainreasons: their general character that embraces allactivities, their independence of the corporation,and their power. The press can counterbalance thepower of business and relay the demands of thevarious pressure groups. The media can call firms toaccount in their publications just as the governmentdoes this through their courts. With their role ofcontrolling and signalling the firm towards itsresponsibility, government and media act as gate-keepers. The press is considered to be a fourthpower, and one of which the business communityshould be constantly aware. The press has a genericappeal but can also address specific subgroupsthrough the specialised press. It is not unusual for

serious and justified requests from consumers,employees and other pressure groups of stakeholdersto be conveyed by the press and then graduallyadopted by the authorities and eventually enshrinedin the law (Dentchev, 2008).

To complete the picture, one should also notethat the government does not have a monopoly onregulation. There is also self-regulation, where thebusiness community itself creates a code on a vol-untary basis. Examples are the codes of corporategovernance, launched by industrial associations, orindividual company codes of conduct. Another in-stance of successful voluntary regulation is adoptionof ISO certification in the field of quality control.

The refined stakeholder model: the ‘stakemodel’

The proposed systematic categorisation of stake-holders should lead to a new graphical representationthat integrates the concepts of stakewatchers andstakekeepers. A first model has been built on theearlier concept of the stakeholder view of the cor-poration by Post, Preston and Sachs.14 The superi-ority of the PPS view over Freeman’s model is that itclearly indicates the three levels of operation – theresource base, the industry structure and the socialpolitical arena – in four concentric ovals. Con-versely, an advantage of Freeman’s model is itscognitive power: the way it visually represents therelationships between stakeholders, something that isless apparent in the PPS view. Further, and moreimportantly, the major advantage of Freeman’smodel over the PPS view is the widespread andgeneral acceptance of the framework, both in aca-demic literature and, essential from a pragmatic pointof view, in business circles. ‘‘Freeman’s conceptu-alisation has become the convention from which thestakeholder theory has developed’’ (Frooman, 1999).Further reflection, in an attempt to move the modelcloser to the original concept of Freeman’s stake-holder model, has led, after a number of redesigns, toa new graphical representation that integrates thenotions of stakewatchers and stakekeepers. It keepsclose to Freeman’s adapted model without losing thecompleteness offered by the PPS view. I have calledthis enhanced and refined version the stake model ofthe corporation.

The Stakeholder Model Refined 123

The hub-spoke concept of the original model isretained, as well as the later addition in the adaptedversion, of a box encompassing all its internal con-stituencies. The management of the firm is placed inthe central oval core; the box is replaced by a singlelarge circle or oval, referred to as the ring. The ringpartly encompasses the ovals representing thestakeholders, and splits them into two unequal parts.The larger of these parts is in the inner circle for thefour major stakeholder groups (i.e. the economicstakeholders: financiers, employees, customers,business) and outside the inner circle for the com-munity and civil society groups. In this scheme, theovals do not simply represent the stakeholders:the stakeholders are represented by the part withinthe ring with their associated stakewatchers in thepart beyond the ring. The hub-spoke model is thusgradually transformed into a kind of solar systemwith a central oval sun and surrounding planets. Theovals fully outside the ring represent the stakekeepersin much the same way as the external ovals inFreeman’s adapted version. In this new stake model,the firm (or corporation) encompasses the core andall stakeholders within the ring. The hub is themanagement rather than the firm.

Since most of the stakekeepers exert influence onthe firm through multiple stakeholders, their rela-tions can be represented by multiple arrows from thespecific stakekeepers to their associated stakeholders,and from the generic stakeholders to various stake-holders of the firm. Figure 4 shows the conceptualview of the new outline framework, highlighting thefirm with its stakeholders around the management atthe core, and surrounded by stakewatchers andstakekeepers.

For reasons of simplification and clarity, the tri-angular relation will not be explicitly drawn (as inthe right upper corner), but replaced by the dottedunidirectional lines pointing towards the ring of thefirm (as at the foot in the right). This view buildsfurther on one idea of Phillips’s stakeholder map(2003a, p. 127), but retained only for the stake-keepers (the media in Phillips’s example), not for thestakewatchers (activists in the example). The dis-similarity is that in the present view, activists are notconsidered as a generic group, but as clearly identi-fied specific groups with generally a one single issuefocus and mainly concerned with a single primary setof stakeholders; the specific activist is then posi-

tioned adjacent to its associated stakeholder: con-sumer defence organisation close to the consumers,shareholder activist next to the financiers, unionsbesides the employees, competitors next to business,NGOs for the civil society, special interest groupsnext to the communities.

Figure 5 illustrates this new graphical representa-tion of the refined stake model of the firm and detailsthe major stakeholders, stakewatchers and stake-keepers.

Through these adaptations, an attempt has beenmade to achieve the best of both worlds: the supe-riority of synthesised value, visual power and thegeneral acceptance of Freeman’s model; plus thevaluable and complementary environmental levels

Specific

stakekeepers

Generic stakekeeper

Associated stakeholders

stakewatcherstake-

holder

FIRM / CORPORATION

management

StakewatcherStakekeêper

Non Stakeholder

non stakeholdersstakekeeper

Ring

Figure 4. The triangular relation between stakeholder,stakewatcher and stakekeeper transposed on the newframework as a solar system.

Civil Society

Shareholders

Unions

ManagementCommunities

Business

Government

Customers

Others Media

Employees

Competitors Consumers

organizations

Funds, …

NGOsSpecial

interest groups

Civil society

…

Non stakeholders

Figure 5. The stake model of the firm.

124 Yves Fassin

taken from the PPS view. Again, it has to be pointedout that the adapted, refined stake model, as everymodel, is a simplification. The stake model whenapplied in detail should therefore show the necessarynuances in function of each specific situation. Amore detailed application to each specific firm canpresent variations of different degrees. Stakeholdershave a dynamic aspect (Post et al., 2002b, p. 26),‘‘situation and issue specific, and thus temporary’’(Winn, 2001). Pressures, threats and opportunities ina corporation’s environment vary over time (Jawaharand McLaughlin, 2001; Phillips, 2003b). Somepressure groups as specific interest groups can bevery cooperative with the company and can meritthe status of a stakeholder rather than a stakewatcher;some shareholder activists may have more of astakewatcher approach than a stakeholder one, whileit is hard to see daytraders as genuine stakeholders.The media can be helpful on some occasions andaggressive on others, and can, in turn, presentcharacteristics of stakekeeper, stakewatcher andstakeholder. The government is also a complexstakeholder since it provides infrastructure and leviestaxes, while simultaneously enacting laws andimposing regulations. Through its tax administrationrole, government is even considered by someobservers as a ‘silent’ shareholder – one that imposestaxes of up to one-third or even one-half of thefirm’s profits before dividends. Government canindeed present the characteristics of stakeholder,stakewatcher and stakekeeper, in line with its mul-tiple functions. Regulation originating from law,government and administration, belongs to thestakekeepers, while self-regulation that generallyemanates from the industrial sectors or from pro-fessional associations, as voluntary actions, has to belocated in the appropriate stakewatcher group.

For the sake of simplification, but keeping theseclarifications and nuances in mind, the figure aspresented here (Figure 5) places the stakeholdergroups in the appropriate oval section for their most-likely dominant function. For the same obviousreasons of clarity, the multiple linkages betweenstakeholders (Phillips, 2003a, p. 127) and the net-work relations among the various stakeholders, asquite rightly addressed by Rowley (1997), are notrepresented on the graph (by superposition), buthave been tacitly and implicitly accepted (Fassin,2008).

Justification of the stake model

This section will attempt to validate the proposedstake model. Starting from Freeman’s stakeholdermodel, the following criticisms levelled against it areconsidered: the identification and selection of stake-holder groups, the position of pressure groups andregulators and the different levels of the environment.The extent to which the various adaptations to thestake model proposed here respond to them areexplored. The analysis concentrates on pragmaticmanagerial and organisational implications.

The identification and selection of stakeholder groups

In a stakeholder approach, the first critical phaseconsists of identifying the stakeholders. A differen-tiation among stakeholders, stakewatchers andstakekeepers, on the basis of the attributes of theMitchell, Agle and Wood typology and responsi-bility criteria, will facilitate the identification phase.The model visibly distinguishes between internaland external stakeholders. It underlines the tripartitenature of stakeholders, making a clear distinctionamong real stakeholders, pressure groups and regu-lators. In so doing, it also better separates the‘legitimate’ stakeholders from the rest. The newgraphical representation better visualises this morerealistic categorisation of stakeholders. This ‘solarsystem’ scheme corresponds more closely with theview of the corporation as a complex network ofconstituencies (Clarkson, 1995) and also bettercoincides with the definition of organisations ascoalitions of individuals and organised sub-coalitions(Cyert and March, 1963, p. 27).

In selecting individual stakeholder groups, choiceshave to be made, and choices imply a degree ofarbitrary decision-making. The selection here wasbased on an analysis of the major papers in the lit-erature on the subject. The various stakeholderswere grouped on the basis of a thorough review inorder to select and retain an acceptable number ofthem, and to end up with something comparable tothe classical stakeholder model. The original con-stituencies have been accepted as ‘real’ stakeholders.This process resulted in the following categories ofstakeholders: shareholders, employees, customers,business, communities, and the wider world – each

The Stakeholder Model Refined 125

with an associated stakewatcher. The government,civil society, the media, ‘others’ and non-stake-holders act as stakekeepers and orbit in the outer ring.The stake model thus integrates virtually all of theclassical stakeholders and pressure groups found inthe existing models.

The different levels of the environment

Following the PPS viewpoint, the new stake modelbetter visualises the boundaries of the firm and thethree levels of the company, the business environ-ment and the social political arena. The stakeholderswithin the ring represent the firm; the adjacentsegments of the associated stakewatchers largelycover the business environment; and beyond thering and segments is the wider environment of thesocial political arena with its stakekeepers. The var-ious economic levels are included in the model: thefirm at the microeconomic level, the broader eco-nomic community and the world on the macro-economic level. Beyond the economic world, themodel also integrates the public sector, the generalpublic and society, largely outside of the ring.

The ambivalent position of pressure groupsand regulators

The new stake model better illustrates the status ofthe various stakeholders and stakewatchers, and re-flects their attributes. Within the firm-level circle,the power and influence of the firm dominates thestakeholders, whereas the stakewatchers outside thefirm generally have the greater influence in theirrelationship with the firm. In this stake model, it ismainly the stakeholders that can be heavily affectedby the firm, whereas the firm is mainly affected bythe stakewatchers and the stakekeepers. The firm hasa moral obligation towards the stakeholders – to careabout them – but has no moral obligation to attendto the wellbeing of the stakewatchers who holdpower over the firm. Since both stakewatchers andstakekeepers derive their power from their legiti-macy, they can call firms to account. They conse-quently can exert both beneficial and harmfulinfluences on a firm (Phillips, 2003b). As stake-keepers impose additional responsibilities upon the

firm they should be considered in a strategicperspective.

The refined stakeholder modelas a strategic instrument

Returning to the stakeholder model’s graphicalrepresentation has contributed to clarifying the dis-cussion on stakeholder definition, stakeholderidentification and categorisation. It has re-centredthe debate to the strategic origin of stakeholdertheory. This confrontation from different perspec-tives has lead to a few incremental improvements inthe graphical scheme, with better defined boundariesof the firm, in conjunction with a new terminology.This refined stakeholder model offers greater help inidentifying and selecting stakeholder groups, the firststep for stakeholder analysis and strategic stakeholdermanagement.

The similarity to Freeman’s stakeholder model

Originally a different visual presentation had beenenvisaged, one closer to reality and more reflective ofcertain criticisms (see Note 14). However, this is seenas deviating too far from Freeman’s widely acceptedstakeholder model whose powerful visual value isrecognised and acknowledged. Freeman started froma strategic and managerial approach. Therefore, thenew model was further developed such that it did notlose the familiarity of the accepted basic schemewhile absorbing the logical evolution based onstakeholder research. Indeed, the new model fits thelogic of the evolutionary line that started withFreeman’s original version, includes his later adap-tation and continues to beckon future research.

The essentials of the graphical presentation arepreserved. The major elements of Freeman’s modelremain unchanged: the central oval with a number ofsurrounding ovals, plus a number of external ovals.The desire for clarity has, however, required a fewminor but essential modifications. The three princi-pal differences are the adjacency of the stakeholdersand their associated pressure groups in a single ovalfor each group, the ring that cuts the various asso-ciated stakeholder groups, and the replacement of thefirm at the core by its management.

126 Yves Fassin

Schemes, diagrams, visual or graphical representa-tions are sensemaking constructions. Like all syn-thesised representations, the stakeholder frameworkinevitably simplifies and reduces reality (Pesqueux andDamak-Ayadi, 2005; Fassin, 2008). Whereas thecomplexity and subtlety of some meanings can be nearimpossible to put into words (Kress and Van Leeuwen,1996; Meyer, 1991), visual representations can sim-plify and aggregate complex information into mean-ingful patterns (Worren et al., 2002). Diagrams canhelp people comprehend their environments(Anderson, 1980; Meyer, 1991). The stakeholdermodel fits in perfectly to these criteria. In ‘‘revealingthe data at several levels of analysis, and in inducing theviewer to think about substance rather than aboutmethodology’’ (Meyer, 1991, p. 232), the refinedstakeholder model corresponds even better to therequirements for schemata. As a means for concep-tualisation, schemes ‘‘allow for simultaneous percep-tion of parts as well as a grasp of interrelations betweenparts’’ (Maruyama, 1986 cited in Meyer, 1991, p.229), which has always been the principal aim of thestakeholder graphical model.

The strategy for managing stakeholders, stakewatchersand stakekeepers

In order to be useful, ‘‘stakeholder theory mustprovide an account of how stakeholders try to act toinfluence the firm’s decision making and, ultimately,the firm’s behaviour’’ (Frooman, 1999, p. 192). Theproposed refined model clearly offers some benefitin terms of more efficient stakeholder management(as recommended by Caroll and Buchholtz, 2006,pp. 75–89). Following the identification phase,threats and opportunities can be evaluated whiletaking into account the responsibilities of the firmtowards each group of stakeholders. ‘‘Who isdependent on whom and by how much will deter-mine the type of influence strategy’’ (Frooman,1999, p. 201). The assessment of a stakeholder’scapacity and willingness to threaten or cooperate willallow the firm to elaborate the appropriate response– in either an offensive or a defensive way. Thenature of their interdependency and the influence onthe environmental uncertainty facing the firm willhelp determine the priorities (Harrison and St. John,1996).

‘‘Stakeholder theory is about managing potentialconflict stemming from divergent interests.’’ (Froo-man, 1999, p. 193). The relationships with themajority of stakeholders will be seen as a potential forcooperation, whereas the relationships with moststakewatchers will be considered as a potential threat(Freeman, 1984; Savage et al., 1991). Applying thetypology of strategies put forward by Savage et al.(1991) will help in developing a strategy for actionwith respect to each stakeholder: accommodate,negotiate, manipulate or resist. For the majority ofsupportive stakeholders, a strategy of involvementwill be preferred. Non-supportive stakewatchers willbe handled with a defensive strategy, or throughmonitoring in the case of marginal stakewatchers.

Due to the complexity of their role, involvingcontrol and signalling, the relationship with stake-keepers may be somewhat more complicated andelaborated. Depending on their potential for coop-eration with the firm, the strategy for stakekeeperswill be one of collaboration, or monitoring, oftenexpressed in lobbying.

‘‘Stakeholders who are strategically importantshould be managed as partners’’ (Harrison andSt. John, 1996, p. 51). The refined stakeholdermodel helps in better understanding organisationsand thus facilitates both the strategic analysis ofassessing stakeholders and the elaboration of theappropriate strategy for managing stakeholders.

While our refined stakeholder model is for reasonsof clarity predominantly firm-centred, as Freeman’soriginal model, the network view of stakeholdersshould still be considered as an implicit assumption.The firm is only a node in a network of relationsamong stakeholders, a perspective that has even morerelevance for issues in business and society than forstrategic management.15

Conclusion

The conceptualisations in Freeman’s original stake-holder model and in its revised version have beenwidely accepted as a management tool for develop-ing corporate strategy. However, over the years, theuncontrolled broadening of its scope and applica-tions, coupled with the parallel multiplication ofstakeholder definitions, has created confusion. Crit-ics have attacked the vagueness and ambiguity of the

The Stakeholder Model Refined 127

underlying theory. A strong need for clarificationand a clear delimitation of the stakeholders was thusurgently needed.

Curiously, while the graphical representation ofthe stakeholder model has generally been adopted bymost scholars and has contributed to the acceptanceof the stakeholder concept by the business com-munity, the graphical model has hardly been used inmost of the extensive debate and critique in aca-demic literature. Confronting the dichotomy ofdefinitions with the graphical representation hasbeen both innovative and revelatory. It has con-tributed to clarifying many of the misunderstandingsand misinterpretations that have threatened toundermine the model. The systematic, graphicalanalysis of the major criticisms levelled at the modelleads to modest adaptations that provide a new andinsightful extension to the existing stakeholderliterature.

Drawing on the various criticisms and sugges-tions, a new, refined stakeholder model is proposed,the stake model, incorporating minor changes butrespecting the logical line of evolution initiated byFreeman’s first conceptual stakeholder model and itssubsequent adaptation. The ambition was to adaptFreeman’s framework, but with as little alteration aspossible, so as to retain the visual power of itsfamiliar scheme.

To help in clarification, the new concepts ofstakewatchers (mainly pressure groups) and stakekeepers(largely regulators) have been introduced. This viewbetter reflects the distinct activities of stakeholders inone of three groups: the stakeholder who holds a stake,the stakewatcher who watches the stake and the stake-keeper who keeps the stake. This clear delimitationshould enhance understanding. Graphical modelscan help in the sensemaking. The refined stake-holder model offers an improved conceptualisationof the firm and its environment, its parts and theinterrelations between the parts. The simple graph-ical representation of the adapted stake model, as asolar system, will hopefully contribute to silencing anumber of criticisms and objections, and so enablethe focus within the stakeholder discussions toreturn to its essence: the managerial implications.With its better delimitation of the boundaries of thefirm and its integrated visualisation of the categori-sation options, the refined stake model will facilitate

the strategic analysis needed to better managestakeholders. This neatly brings us back to Freeman’sstrategic view that saw stakeholder theory as‘‘managerial, intimately connected with the practiceof business and of value creation’’ (Freeman, 1984,p. 43; 2000), with the concept of fairness and thenotion of the common good as the core underlyingthemes and values.

Notes

1 Donaldson and Preston (1995) note more than onehundred articles on the stakeholder concept between1984 and 1995, Wolfe and Putler (2002) 76 articles be-tween 1990 and 1999. Gibson (2000) finds 200 articlesin the 1990s alone. A search on ABI-Proquest, at thebegin of 2008, produced over 14,000 references tostakeholder, including 6,000 in academic journals. Sev-eral leading journals have dedicated special editions tothe stakeholder concept (such as Infra 5). A search onGoogle at the same time gave 230,000 entries under‘stakeholder theory’ and 7.4 million on the term ‘stake-holder’.

2 The popularity of Michael Porter’s model of indus-trial competition at the beginning of the 1980s maywell be responsible for the incorporation of competitorsas a distinct stakeholder group. Both models also see thefirm holding the central position in the stakeholdermodel.

3 This leads to critical distortions and managementmisinterpretations involving ‘‘well-meaning, but per-haps overzealous commentators who stretched the the-ory beyond its proper scope’’ (Phillips et al., 2003).The stakeholder theory has also invaded public man-agement (Bingham et al., 2005) and other areas thanmanagement (Stoney and Winstanley, 2001). Its termi-nology has been claimed by political parties. In NewLabour campaign communications and in debatesaround the ‘Stakeholder Society’, Blair introduced theterm stakeholder capitalism as against shareholder capi-talism (Kay in Kelly et al., 1997; Metcalfe, 1998; Postet al., 2002a, p. 7; Wheeler and Sillanpaa, 1997), andthe concept has become one of the cornerstones ofindustrial democracy in Scandinavia. For more infor-mation on the Scandinavian development of industrialdemocracy see Nasi (1995) (source: Werhane andFreeman, 1997, Blackwell Encyclopedia, p. 612).

4 A few comprehensive overviews of current think-ing can be found including Frooman (1999), Freeman

128 Yves Fassin

(2000), Donaldson (2002) and Freeman (2004), anoverview of definitions is included in Mitchell et al.(1997) and in Friedman and Miles (2006, pp. 5–8).

5 The resulting ‘separation thesis’ engendered an intel-lectual debate between partisans and opponents of thetheories, separating the business from the ethics discourse(Freeman, 1994; Wicks, 1996). Some scholars have justi-fied stakeholder theory (Freeman and McVea, 2001,Hansen et al., 2004) using legal arguments such as prop-erty rights (Blair, 1998; Donaldson and Preston, 1995);others on a Rawlsian social contract argument (Child andMarcoux, 1999; Freeman and Evan, 1990; Phillips, 2003;Rawls, 1971); on economic arguments involving fidu-ciary relationships (Boatright, 1994; Goodpaster, 1991;Marcoux, 2003); on agency theory (Shankman, 1999); onmoral grounds (Gibson, 2000) with the principle of fair-ness (Metcalfe, 1998; Phillips, 1997), on Kantian theoryand the right to be treated as an end (Bowie, 1999; Evanand Freeman, 1988) or using the concept of the commongood (Argandona, 1998).

6 In some views, the importance of ‘having a stake’ isemphasised, in others it is ‘power or influence’, bi-direc-tional or one-way, that is decisive. In other cases, thenotion of a ‘relationship’ is central. Some researchers andpractitioners argue that stakeholders who have a rela-tionship but lack an element of risk do not hold a stakein the company (Attas, 2004; Clarkson, 1994, p. 6).While some groups or individuals do indeed bear a risk(Freeman and Evan, 1990; Williamson, 1985), or expressloyalty or add value (Post et al., 2002a, p. 8); othersclaim a share in the organisation’s benefits, or seek tohave a voice (Phillips, 2003a, p. 159) or to participate inthe firm’s decision-making or governance through rep-resentation (Harrison and Freeman, 2004; Kochan andRubinstein, 2000; Phillips, 2003a, p. 160).

7 Other scholars prefer terms such as ‘constituency’(Argenti, 1998; Mitnick, 1980, cited in Freeman, 1984,p. 40), ‘claimant’ or ‘influencer’ (Mintzberg, 1983, p. 27).For some authors, stakeholders are groups for which a‘‘firm’s decisions to act or not to act are responsible fortheir level of well-being’’ (Langtry, 1994); for others theyare ‘‘any individual or group that is the legitimate object ofmanagerial attention’’ (Phillips, 2003b), or any party ‘‘onwhich the organisation is dependent for its continued sur-vival’’ (Freeman and Reed, 1994). Some define stakehold-ers as groups to whom the company should be concernedor from whom they need loyalty (Campbell, 1997).

8 It is precisely this variation in the definition of astakeholder (Gond and Mercier, 2004) that leads toconfusion and, by the same token, demonstrates the ur-gent need for a clear identification of a stakeholder.Some elements come back in number of definitions of astakeholder.

The early vagueness in the definition of a stakeholderled a number of scholars to define the concept in slight-ly different ways with variations in emphasis, interpreta-tion and scope. From Mitchell et al.’s (1997) extensiveanalysis of 27 definitions of stakeholders one can distil anumber of elements: stakeholders are groups that have a‘stake’ or an interest in the firm, that is they bear a risk;groups that have a claim, a contract, ownership or right;or groups that have a relationship with the firm, affector are affected by, influence or are influenced by thefirm. Some scholars incorporate responsibility in thedefinition.

9 A major classification is based on priority. Propo-nents classify stakeholders into primary and secondarystakeholders (Clarkson, 1995), where primary stake-holders refer to those actors who enjoy a direct andcontractually determined relationship with the com-pany, while secondary stakeholders refer to actors atthe border of the firm who may be impacted upon byits actions without having any contractual connection(Carroll, 1991; Collier and Roberts, 2001). Prior tostakeholder theory, some authors had already referredto the different constituencies as claimants and influ-encers. Claimants are groups with a legal, moral orpresumed claim on the firm, whereas influencers aregroups that have an ability to influence the firm’sbehaviour, direction, process or outcomes (Donaldsonand Preston, 1995; Mintzberg, 1983, p. 27; Mitchellet al., 1997).10 I owe this valuable observation to an anonymousreviewer.11 Some of these ideas were already intuitively pres-ent in Dodd’s earlier view that corporate powers wereheld in trust for the community rather than in trust forjust the shareholders, as was the then prevailing viewof Berle (Dodd, 1932; Goodpaster, 1991, quotingRuder, 1985). Stakeholder theory explicitly encom-passes corporate responsibility and business ethics,thereby enlarging strategic thinking to include the roleof business in society. Stakeholder theory fits into alogical evolution of previous theories of organisationand management from individual disciplines in thisarea. In fact, in revealing the interconnectednessbetween the owners and the other constituents, MaryParker Follett, was, in 1918, the first author to developthe stakeholder concept, although without using theterm (Post et al., 2002b, p. 18). One of the world’smost widely quoted statements of business ethics, theFour-Way Test of Rotary International, also implicitlyimplies the notion of stakeholders within its questions:‘‘Of the things we think, say or do: Is it fair to all con-cerned?’’ and ‘‘Will it be beneficial to all concerned?’’ (cre-ated in 1932 by Herbert J. Taylor).

The Stakeholder Model Refined 129

Marketing management was quick to emphasise theimportance of listening to customers and to potentialcustomers (Kotler, 1967). Subsequently, innovationmanagement focused on the need to pay attention toexternal elements of information coming from thefirm’s wider environment (Allen, 1966). The influenceof the environment on management had already beenacknowledged much earlier (Dill, 1958) while the pub-lic affairs and public relations literature had recognisedthe concerns of the wider world surrounding the com-pany (Argenti, 1998). The impressive work of HenryMintzberg (1979, 1983) on the structure of organisa-tions, and the well-known model of industrial compe-tition in Michael Porter’s approach to competitivestrategy, have emphasised the importance of bothinternal and external factors to a company (Porter,1980, Figure I-2, xviii). These statements have beensupported by the literature on Japanese management(Ouchi, 1981; Pascale and Athos, 1981) and in thedescriptions/narratives on the characteristics of success-ful companies in Peters and Waterman’s bestseller ‘InSearch of Excellence’ (1982), and later in ‘Built toLast’ from Collins and Porras (1994). Finally, the needto inform all stakeholders is also stressed in Fombrun’swork on reputation (1996).12 The central hub in Freeman’s model (1984, p. 55) isthe firm. Curiously, when one goes back to his in-depthanalysis leading to the implementation of the stakeholderapproach for strategic management, this central place isfilled by the manager for the traditional business disci-plines of management (p. 218), by the marketing man-ager for marketing (p. 227), by the financial manager forfinance (p. 229), etc., while the CEO fills the centralplace in the illustration of the role of the CEO (p. 241)(Freeman, 1984, Chapter VIII).13 As for the concept of stakeholder, the notion ofstakewatcher and stakekeeper is a generalised notion.There may be some instances of stakeholder withoutassociated stakewatcher, for example when unions arenot present in the firm, or when consumers associationsare non-existent, as in emerging economies. In somecases, some stakekeepers may be absent, as local com-munities or NGOs; many investors feel not representedby regulatory agencies.

This latter problem results from the generalisingaspect of the concept of stakeholder that does not suffi-ciently take into account the heterogeneity within the

stakeholder groups. The individual stakeholder may notbe or not feel well represented by the stakewatcher ormay not feel well protected by the stakekeeper. Thisproblem poses the issue of representation, which may beanother neglected area of stakeholder theory. It containsthe legitimacy of the representation of stakeholder andthe perception by stakeholders of the representativenessof stakewatchers and of the legitimacy of stakekeepers.14 The proposed systematic categorisation of stake-holders led to a new version of the stakeholder model(Figure 6). This was built on the earlier concept of thestakeholder view of the corporation by Post, Prestonand Sachs. The superiority of the PPS view over Free-man’s model is that it clearly indicates the three levelsof operation – the resource base, the industry structureand the social political arena – in four concentric ovals.Unlike the PPS view which did not delimit the variousstakeholders but instead lumped them together withinthe appropriate level, and in line with Carroll and Buc-hholtz’s (2006, p. 9) graphic display, it was decided todivide the pie into a number of distinct segments, thatstart from the corporation, cross the resource base andthe industry structure, and flow into the social politicalarena where the delimitation will stop. The shareholdersare positioned in the resource base in this approach, theassociate stakewatchers within the industry structure le-vel and stakekeepers are found within the social politicalarena.15 This important observation was made by an anony-mous reviewer.

CORPORATION

Shareholders

Employees

Customers

RESOURCE BASE

INDUSTRY STRUCTURE

SOCIAL POLITICAL ARENA

Unions

Competitors

Investors Funds

Government

Others

Media

Publications

Business partners

Customer

organizations

State

Law

Special Interest Groups

Communities

Civil Society

Regulatory Authorities

Figure 6. The adapted PPS view.

130 Yves Fassin

Appendix A

List of stakeholder groups, as identified in the literature and regrouped

Stakeholder

Constituencies

Stakewatcher

Pressure groups

Stakekeeper

Regulators

Management

Board

CEO

Special interest groups

Activist groups

Legislator

Court

FinanciersOwners

Shareholders

Bondholders

Financiers

Institutional investors

Shareholder activist

Pension funds

Auditors

Security & Exchange Commission (SEC)

Rating agencies

Securities analysts

Sophisticated financial press

Professional associations of directors,

corporate secretaries and managers

Bankers Bank Commission

Employees

Employees Unions

Safety and health groups

Equal Employm. Opportunity Com. (EEOC)

Occupational Safety and Health

Administration (OSHA)

Customers

Customer

Client

Buyer

Distributors

Consumers

Customer advocate group

Customer association

Control laboratories

Food and Drug Administration (FDA)

Customer protection journals

Consumer Product Safety Com (CPSC)

Business Media

Business partners suppliers

Trading partners

Trade associations

Supply chain associates

Joint venture partners and alliances

Advertisers

Consultants

Laboratories

Competitors

New entrants

Substitutes

‘‘Big business’’ groups

Industry observers

Critics

Business press

Television news

Others

Global Reporting Initiative (GRI)

Academic commentators

Creditors

Communities Civil society

Local communities

Local government

Neighbourhood

Beneficiaries

Public interest groups General public

Private organizations

Citizens

Non-governmental Organizations (NGOs)

Wider world Government-state

The arts

Political groups

Religious groups

The military

Technology process

Academic institutes

Think-tank/Research group

Non-human species

Environment

Nature

Employees’ family

Students

Future generations

World issues

Political groups

Single-issue groups

Animal welfare organizations

Environmental groups

Watchdog groups

National government

Congress

Cabinets

Governmental agencies

Court

Environmental Protection Agency (EPA)

Non-governmental Organizations (NGOs)

Human rights associations

Non-stakeholders

Terrorists

Blackmailers

Thieves

The Stakeholder Model Refined 131

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Ghent University,Faculty of Economics and Business Administration,

Department of Management, Innovationand Entrepreneurship,

Tweekerkenstraat, 22, B 9000 Gent, Belgium

Vlerick Leuven Gent Management School,Reep 1, B 9000 Gent, Belgium

E-mail: y.fassin@skynet.be

The Stakeholder Model Refined 135