Stakeholders Management

Proper stakeholder management is critical to the success of any organization. It involves taking appropriate steps to identify, prioritize and understand each stakeholder group so as to manage them effectively. Effective communication and engagement are, therefore, necessary if an organization wants to reap optimal benefits from its stakeholder management.

The approaches to stakeholder management may vary across organizations. Typically, however, organizations try, as much as possible, to balance stakeholder interests. This has the effect of limiting any potential conflicts.

Stakeholder Management Components

To facilitate balancing of stakeholder interests, corporate governance and stakeholder management frameworks reflect legal, contractual, organizational, and governmental infrastructures. These four components define the rights, responsibilities, and powers of each stakeholder group.

Legal Infrastructure

Legal infrastructure defines the framework for legally establishing rights as well as the remedial action to be taken for violations of these rights.

Contractual Infrastructure

Contractual infrastructure refers to the contractual arrangements which are entered into by an organization and its stakeholders and which help to define and secure the rights of both parties. An organization has the most control over this component of stakeholder management as compared to other components.

Organizational Infrastructure

Organizational infrastructure refers to the internal systems and governance practices that an organization uses to manage its stakeholder relationships.

Governmental infrastructure

Governmental infrastructure refers to the regulations which are imposed on an organization by the government.

Question

The component of stakeholder management which refers to the internal systems, governance procedures, and practices which are adopted and controlled by an organization in managing its stakeholder relationships is called:

1. Legal infrastructure.
2. Contractual infrastructure.
3. Organizational infrastructure.

Solution

The correct answer is C.

Organizational infrastructure refers to the internal systems, governance procedures, and practices that are adopted and controlled by an organization in managing its stakeholder relationships.

A is incorrect. The legal infrastructure is established by law.

B is incorrect. The contractual infrastructure refers to the contractual relationship between an organization and its stakeholders.