Talk:Stakeholder (law)

Split the Article?

I think that the two usages of this word have diverged enough to warrant two articles. Even though the second meaning clearly has its "linguistic" origins in the first, wikipedia is not a dictionary - therefore I suggest we have Stakeholder (Legal Term) and Stakeholder (Management Concept) or something similar. Thom2002 17:13, 8 November 2006 (UTC)

Nice job, Thom2002! I don't think there's any real benefit from splitting the articles now, but go ahead if you like.--ARAJ 19:09, 3 January 2007 (UTC)

I would prefer to see the "management-speak" contortion removed from the law section.Rpclod (talk) 17:00, 26 March 2008 (UTC)

Case law suggesting "stakeholder" has NO interest

Below is a review of some pertinent case law. I am unsure if this is appropriate for the article or the talk page and appologize in advance if it is not.

"A stakeholder is defined as '[a] disinterested third party who holds money or property, the right to which is disputed between two or more other parties.' Black's Law Dictionary 1440 (8th ed.2004)." Booth v. Booth, 134 P.3d 1151 at footnote 6 (Utah App.,2006).

State v. Dudley, 127 N.J.L. 127 at 129-130, 21 A.2d 209 at 210 (N.J.Sup. 1941): "The function of a stakeholder as commonly conceived, is to receive the sums wagered and hold them against the determining event, whether that event be a horse race or otherwise, and then pay them over to the winner; and the framer of the indictment apparently held that view. 2 Bouv.Law.Dict., Rawle's Third Revision, p. 3116, defines ‘stakeholder’ as ‘A third person chosen by two or more persons to keep in deposit property the right or possession of which is contested between them, and to be delivered to the one who shall establish his right to it. * * * A mere depositary for both parties of the money advanced by them respectively with a naked authority*130 to deliver it over upon the proposed contingency.’ This definition, deduced from cited cases, is given in 27 C.J. p. 982, § 77 E 6: ‘A stakeholder is a mere depositary of both parties to a wager for the money deposited by them, respectively, with a naked authority to deliver it over on the proposed contingency; a person with whom money is deposited pending the decision of a bet or wager; one holding a fund which two or more claim adversely to each other; one who has received the funds of another or others in special deposit for a given purpose, to be paid to one party, or divided between both, or among all the parties, on the happening or not happening of some anticipated event.’"

First Nat. Bank v. Bininger, 26 N.J. Eq. 345, 1875 WL 6892 at 4 (N.J.Ch. 1875): "A stakeholder is a third person, chosen by two or more persons, to keep in deposit property, the right or possession of which is in dispute, until some one of them establishes his right to it."

Roche v. Country Mut. Ins. Co., Civil No. 07-367-GPM, 2007 WL 2003092 at *4 (S.D.Ill.2007): "In general, a nominal party is simply a stakeholder in a litigation. As this Court explained recently, '[a] ... nominal defendant ... is a person who can be joined to aid the recovery of relief without an assertion of subject matter jurisdiction only because he has no ownership interest in the property which is the subject of litigation.' Yount v. Shashek[]. 'A nominal defendant holds the subject matter of the litigation ... in a subordinate or possessory capacity as to which there is no dispute.... Because the nominal defendant is a ... trustee, agent, or depositary, ... who has possession of the funds which are the subject of litigation, he must often be joined purely as a means of facilitating collection.' Id. See also Matchett v. Wold[] ('The addition to a lawsuit of a purely nominal party-the holder of the stakes of the dispute between the plaintiff and the original defendant-does not affect diversity jurisdiction.'). In this case it is clear that Country is not merely a stakeholder or otherwise a nominal party to this dispute."

In Aaron v. Merrill Lynch Pierce, Fenner & Smith, 502 F. Supp. 2d 804 at 807 (N.D. Ind. 2007), the court found: "Merrill Lynch has never claimed a legal interest in the disputed funds; rather, its role in this litigation has been that of a stakeholder because it holds the accounts containing the funds." The court then discusses how a fund manager is a "stakeholder" in a statutory interpleader action pursuant to 28 U.S.C. § 1335.

See also 7 A.L.R.5th 976, "Stakeholder's liability for loss of interpleaded funds after they leave stakeholder's control" ("A party possessing, but having no interest in, funds subject to the claims of disputing parties can, as stakeholder, relinquish its control over the funds and be absolved of any liability to the claimants, and avoid further litigation, by depositing the funds with the adjudicating court.")

152 A.L.R. 1120, "Right of trustee, executor, or administrator to maintain interpleader": "an attitude of perfect disinterestedness on the part of the stakeholder is necessary in order to sustain an action of interpleader." This is based on U.S. Supreme Court decisions, such as Sanders v. Armour Fertilizer Works, 292 U.S. 190 at 201, 54 S.Ct. 677 (1934): "Assertion by the complainant of entire disinterestedness is essential to a bill of interpleader. Groves v. Sentell, 153 U.S. 465, 485, 14 S.Ct. 898, 38 L.Ed. 785. 'In such a bill it is necessary to aver that the complainant has no interest in the subject-matter of the suit; he must admit title in the claimants and aver that he is indifferent between them, and he cannot seek relief in the premises against either of them.' Killian v. Ebbinghaus, 110 U.S. 568, 571, 4 S.Ct. 232, 233, 28 L.Ed. 246."

The above definitions correspond with the entry for "stakeholder" in Webster's Third New International Dictionary. Hence, I believe that the current Wiktionary "stakeholder" definition is "unwarrantable misuse of well defined term". Bininger at 4.

However, there does seem to be some confusion even in legal opinions. In re El Comandante Management Co., LLC, 359 B.R. 410 at 417 (Bankr.D.Puerto Rico 2006): "Generally, any person or entity, who holds a financial stake in the outcome of the debtor's estate, is a party in interest. [] A person who has a 'significant legal stake' in the debtor's estate, as opposed to a financial stake, is also a party in interest. Collier ¶ 1109.02[1]. In In re Overview Equities, Inc., 240 B.R. 683, 686-687 (Bankr.E.D.N.Y.1999), the court followed the test set forth in Amatex, to determine whether a party qualifies as a 'party in interest,' a determination to be made on a case-by-case basis. 'The test employed under section 1109(b) is "whether the prospective party in interest has a sufficient stake in the outcome of the proceeding so as to require representation."' []. Thus, the right of 'individual stakeholders to have a voice in the chapter 11 process is fundamental.' Collier ¶ 1102.02[2][a]."

Also, even in an interpleader action, courts find certain stakeholders to be "interested" and thus consider such stakeholder's citizenship for diversity purposes. See Federal Insurance Company v. Tyco International Ltd., 422 F.Supp.2d 357 at 392 (S.D.N.Y.,2006). Rpclod (talk) 17:00, 26 March 2008 (UTC)

Talk before 08/11/06

It occurs to me that we might be in a situation in which the same term is being used for very different concepts.

It's possible, but I doubt it. I believe the term as it's used in management of large corporations was adopted to make the persons with management responsibility understand that they are fiduciaries (or trustees) and therefore held to the highest legal standard in holding property that rightly belongs to someone else, to whom they are responsible for it. If I'm right about that, then it's precisely the same concept. -- isis 08:03 Sep 29, 2002 (UTC)

It might be the same concept, but it is used in a different way in non-profits. In non-profits, stakeholders typically have little or no legal fiducial duties, but their support or input is necessary for a decision to be made. For example, a professor in a university committee is under no legal fiducial duty to the university when it makes a decision on curriculum policy (if anything the professor would probably argue that his moral obligations to academic standards outway whatever obligations he has to the university). The board of regents has the legal power to theoretically overrule the university committee, but that doesn't happen.

In non-profits, the people who have the actual power to make a decision are often very different from the people who have the legal power to make a decision, and the people who have legal power tend to have very little real power. The term stakeholders is to address this political reality. -- Roadrunner

Where did you get the idea that officers of non-profit orgs don't owe it (and its members) any fiduciary duties? I suggest you demand your tuition back from whatever law school taught you that and, if it was a non-profit one, you'll probably have to explain to them that they breached the duty they owed you when they misinformed you. In any event, if you think there's a different meaning to "stakeholder" in the corporate context now, you should explain it in the article; the paragraph I put at the beginning is what the word has meant for centuries in the law. -- isis 08:32 Sep 29, 2002 (UTC)

I would be curious to learn the source of the "evolved" or "late 20th Century" usage of "stakeholder" to mean an "interested party," as it is the exact opposite of the traditional meaning of the word. I have a 1966 edition of Webster's Collegiate Dictionary (7th ed.), a standard U.S. dictionary, and it only has the traditional definition: "a person entrusted with [bettors'] stakes." Could it be that the "evolved" sense was due to a plain, simple mistake?

Could be. This sense of the term seems to have achieved currency following R. E. Freeman's 1984 book Strategic Management: A Stakeholder Approach which defines the term [apparently; I don't have access to the actual text] as: "any group or individual who can affect or is affected by the achievement of the organisation's objectives". See, for example:

"Stakeholder theory is a critique of the strong stockholder doctrine in U.S. corporation law and financial-economics theory positing that management's clear fiduciary responsibility is to maximize economic rents on behalf of the firm's legal owners (the residual claimants). Strong stockholder doctrine was articulated in Dodge Brothers v. Ford (1919), in which the Michigan Supreme Court ordered Ford Motor Co. to pay a special dividend. Dodd (1932), using the term "constituencies," criticized Berle's (1931) defense of strong fiduciary responsibility on the grounds that other contributions are vital to the firm's success; Berle subsequently conceded that Dodd was right (Orts, 1992: 21–22, n. 31). Tracing the term "stakeholder" to a 1963 Stanford Research Institute (SRI) internal memorandum, Freeman (1984) crystallized the stakeholder perspective (cf. Barnard, 1938). His approach corresponds to the notion of an organic community of "interests" developed independently in Scandinavia by Rhenman (Näsi, 1995). " (http://www.ruf.rice.edu/~odw/98Def'nStakeh'rStatusIABS.html)

"The term “stakeholder” was introduced by the Stanford Research Institute in 1963 as a generalization of the notion of “stockholder”. The stakeholder concept was originally defined as “those groups without whose support the organization would cease to exist.” In the 1970s systems theorists, especially Russell L. Ackoff and C. West Churchman “rediscovered” stakeholder analyses. Ackoff (1974) argued that many societal problems could be solved by the redesign of fundamental institutions with the support and interaction of the stakeholders in the system. During the 1980s the stakeholder approach won considerable acceptance in organization theory, in the corporate social responsibility literature, and in strategic management. The standard definition of the concept can be stated as follows:

"stakeholder in an organization is any group or individual who can affect or is affected by the achievement of the organization’s objectives (Freeman, 1984, p. 46)." http://iris.emerald-library.com/info/about_emerald/emeraldnow/archive/emerald_now_pdf_archive/2960010103.pdf)

See also Stakeholder Theory: The State of the Art (2002) by Thomas M. Jones, Andrew C. Wicks, and R. Edward Freeman

--ARAJ 17:35, 8 August 2006 (UTC)

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Stakeholder, in modern usage, has evidently come to mean anybody who stands to benefit.

Thus, a town council dreaming new parking regulations might interview shop owners with the idea that they are stakeholders likely to be affected by the new parking regulations.

But, as anybody knows, sweepstakes means a type of betting associated with horse racing:  and a stakeholder  is a person holding other peoples money pending the outcome of an event.

But what about the word stake, which takes up two full pages of the Oxford English Dictionary.

The notion to have a stake is defined in the Oxford Full; just as it ought to be.

I propose that what we have here is confusion between having a stake and holding a stake.

Thus the shop owners (v.s.) have a stake in how the new parking regulations turn out:  but they are not stakeholders.

The elected governmental officials who will decide the parking issue are the stakeholders.

Robertjkoenig 20:11, 10 December 2005 (UTC)

Untitled

What position do vampires have in a stakeholder society? Jackiespeel 18:18, 24 July 2006 (UTC)

I've restructured the article to give a clear summary of the two usages at the top. I've tried to avoid implying that one or the other is "more correct". Thom2002 15:12, 27 October 2006 (UTC)

1984 Freeman describes the complete history of the term from the management perspective.

Is there an answer to this question? In the REACH conferences, considering that the conference was deciding legislation solely for the European Community, in what way were representatives from Switzerland, Canada, the US and Japan considered Stakeholders? And were they allowed to vote because they were stakeholders? Bettineolive January 10th 2007

I doubt whether we could agree on an answer to this question. To an extent, the term "Stakeholder" has become almost empty of meaning: it often seems to mean little more than "people and groups et cetera". So it might be meaningful to ask whether whales are stakeholders in decisions about whaling, for example.

It may be useful to distinguish between "internal" and "external" Stakeholders: those who have the opportunity to affect the outcome (the do-ers) and those who are, or might be, affected by the outcome (the done-to). The internal Stakeholders (do-ers) are a self-modifying group: they can choose to include or consider others among their number, they can choose the manner and extent of their involvement, and they can choose to exclude some interested parties or types of interest. The external Stakeholders (done-to), on the other hand, though often hard to identify in practice, are determinable objectively, at least in principle: ultimately, you either are affected (whether you realise it or not) or you are not. (More on this subject.)

In the case of the REACH conferences, citizens (present and future) of non-EU nations may have been external Stakeholders; their representatives could be considered internal Stakeholders; and the extent and nature of these representatives' influence was, in a word, politics! --ARAJ 12:21, 22 January 2007 (UTC)