What are the role or functionality of stakeholders in the business?

In business, a stakeholder is usually an investor in your company whose actions determine the outcome of your business decisions. Stakeholders don’t have to be equity shareholders. They can also be your employees, who have a stake in your company’s success and incentive for your products to succeed. They can be business partners, who rely on your success to keep the supply chain going. Every business takes a different approach to stakeholders. The roles of stakeholders differ between businesses, dependent on the rules and responsibilities laid out at the founding of your company or as your business evolved over the years. The most common definition of a stakeholder, however, is a large investor that has the clout to hold a viable “stake” in your company.

The most common gathering of stakeholders in a publicly traded company is the board of directors, comprised of high-ranking executives and occasional outsiders who hold large amounts of equity in the company. Any one of these stakeholders has the power to disrupt decisions or introduce new ideas to the company. The board of directors has the power to appoint all levels of senior management – including the CEO – and remove them if necessary. Members of the board dictate the future of the company and are involved in all major business decisions.

While the board of directors is a more “hands off” approach to controlling a company, some stakeholders prefer the “hands on” approach by directly assuming management positions. Stakeholders can take over certain departments – such as human resources or research and development – to micromanage the business and insure success. In privately owned and publicly traded companies, large investors often directly participate in business decisions on the management level.