Stakeholders are categorised into primary and secondary. Why is it significant for businesses to make this distinction?
Classification of Stakeholders:
Stakeholders are the individuals or groups that have an interest in the organization and are affected by its actions (Carroll &Buckholtz, 2012). According to Freeman (1984),stakeholders were important to the organization and should be managed because they affect organization outcomes. Stakeholder management need be neither ethically motivated nor benefit all stakeholders equally, particularly since stakeholders are not homogeneous and they are not all satisfied by the same firm behaviours. Different stakeholders may have particular importance at a certain point in time or with regard to certain corporate activities, and firms think strategically about which stakeholders to satisfy and when to satisfy them (Freeman, 1984). Indeed, in their pursuit of multiple and contradictory goals, a firm’s efforts to satisfy one group of stakeholders may negatively impact another group of stakeholders.
In this regard, it is deemed to be supportive to achieve a peculiarity amid primary and secondary stakeholders (Clarkson, 1995). A primary stakeholder group’s continued involvement is imperative, as inclusive of that organization can’t keep up working without liquidity threats looming at large. They comprise of the subsequent shareholders, personnel, consumers, and suppliers (e.g., Clarkson, 1995: 106; Harrison et al., 2010). Secondary stakeholders instead are perceived on the grounds that they have no recognized right on the business and management in addition to it has no particular duty concerning them. This distinction is an important one, since business and society may react very differently to an action depending on who enjoys the benefits and who bears the costs (e.g., (Hillman &Keim, 2001; Karpoff& Lott, 1993).
