Answer to Question #212366 in Management for Erza Scarlet

Question

Discuss the pros and cons/opportunities and challenges of involving external constituencies and stakeholders to the decision-making process in public management in your own country (make sure to mention the country you come from). Link your answer to good governance principles. 

Answer 1

Answer

The significance of stakeholders becomes deceptive when stakeholders help a business owner do in advance things that might go wrong. Stakeholders often come from a variety of backgrounds and levels of experience, which help them see a bigger picture that a business owner might not see. This is one reason that some small businesses owners bring an accountant or an attorney onto the board of directors so that the accountant or attorney might be able to foresee potential legal or financial issues. It is also possible that a stakeholder has experience with a potential vendor the company needs and can provide valuable first-hand testimony to working with the vendor. This type of stakeholder insight often proves invaluable.

Besides, there are are times in which stakeholders are focused on their own interests. Often, external stakeholders are community groups or political appointees who might not act in a company's best interest if the company is not offering anything that helps the stakeholder with his constituents. However, while situation crops up often for external stakeholders, it's not exclusive to them.

According to Forbes, even an internal stakeholder, such as an inexperienced investor, might vote against a proposal for growth in fear of losing money. He is focused on his own financial needs and not on the needs of the business. Stakeholders who weigh their own interests over their companies' may disadvantage the companies in question.