A number of different stakeholders hold a number of varying stakes to the organization and the relevance differs amongst them that concerns power to the managers. Instead of aiming at a number of varying targets in finance and economy, the success of the organization is because of satisfying a number of stakeholder claims, in accordance with one perspective. There are a number of different incentives for the agent and the principal, resulting towards that there will be no performance of agent in the interest of the stakeholders. The solution for the problem of agency can be found through the contracts in different contracts (Ballou et al. 2012). There can be applicability of the principal agent theory can be done to the shareholders along with the stakeholders.
According to what is implied by the stakeholder theory, the interaction of business takes place with a number of different actors in the environment. These groups or actors are referred to as the stakeholder and can include government, suppliers, association of trade, employees, communities, customers, and groups from politics, investors and many other related to the organization (Blomquist 2005). The influence or communication is bidirectional in nature that influence of business is on the stakeholder and vice versa as well.
Stake is referred to as the benefit with great potentiality. Businesses show consideration towards groups or people who seem to be having a significant interest within the business organization. The theory of stakeholder can be considered as being descriptive, normative or instrumental in nature. A description of conditions from the future, present and the past of the organization and the stakeholders hold the perspective being descriptive in nature. If there is relationship amongst the profitability and stakeholders, this states that the perspectives are instrumental in nature.
The theory of stakeholder shows concern towards ethics and management, and is more than the focus for maximizing the profits (Hopwood 2009). This means that the perspective of the shareholders is important. A number of groups can prevent or facilitate for reaching the objectives and goals of the organization, and the firm should be taking these groups of interest into consideration. The concept of stakeholder can be considered as being both, complex as well as simple. It is often instead simple for identifying the individuals or groups which can be influenced or can influence the goal of the organizations. When there is identification of these groups, it is a complicated mission for handling the relationships with the stakeholders.