Question

In our discussion about stakeholder theory, we considered two ways to categorize or prioritize the firm's various stakeholders. Briefly describe what is meant by Primary and Secondary stakeholders and the characteristics of Power, Legitimacy and Urgency.

Answer 1

Primary stakeholders are directly involved with a firm, while secondary stakeholders are indirectly affected by its actions. Stakeholder theory suggests balancing all interests, with stakeholder salience determined by Power, Legitimacy, and Urgency.

Step-by-step explanation:

Primary stakeholders are those with a direct interest or involvement in the business, like shareholders, employees, customers, and suppliers. They have a direct stake in the company's success or failure. Secondary stakeholders are those not directly linked to the business but are affected by its actions, such as the community, activists, and the government.

The characteristics of Power, Legitimacy, and Urgency define stakeholder salience. Power is the ability of the stakeholder to influence the company. Legitimacy refers to the legitimacy of the stakeholder's relationship with the company. Urgency indicates the degree to which stakeholder claims require immediate attention.

Stakeholder theory suggests that firms should consider the interests of all stakeholders rather than prioritizing shareholder wealth above all.