Stakeholders and public policy

The notion of stakeholder processes is considered a crucial element not only of corporate governance but also of policy making in the broadest sense. In some cases, it has even been proposed as a platform for widespread economic and political reform to restore the state’s legitimacy through major participation in the decisions of public institutions. Authority within a public system conventionally comes from the state. However, democracy is founded on citizens’ representation and participation, which, for efficiency reasons, is traditionally limited to elections of representatives to a people’s government. Multistakeholder decision making, with the direct involvement of citizens in the process of decision making, could therefore be seen as an evolution toward a more participative, and even deliberative, democracy.

Stakeholding in policy making provides a framework for dealing with the crisis of legitimacy that the modern state has experienced because of globalization, the complexities derived from the so-called knowledge economy, and the challenges of global environmental change. On one hand, a growing number of stakeholder groups (e.g., the private sector, nongovernmental organizations, and civil society) are entering both the national and international political arenas. Stakeholder groups are defined here as more or less organized groups of people that could be affected by the implications of a decision and that can directly or indirectly influence the decision and its consequences. These new players are constantly challenging the state’s authority and the legitimacy of its power. By seeking consensus between different social actors, the state can restore its legitimacy and defend its weakened role more effectively. On the other hand, the emergence of increasingly complex issues on the political agenda is constantly challenging the limits, structure, and modus operandi of the state. In contrast to traditional policy making, which takes place within ministries and governments, these new issues demand multi-scale and interdepartmental responses requiring the involvement of diverse actors beyond institutional and traditional political arenas. This relevance of stakeholding for policy making has been formalized through the explicit reference made to stakeholder processes in the Rio Declaration (1992), the United Nations Millennium Development Goals (2000), and the World Summit on Sustainable Development Plan of Implementation (2002). These international policy instruments acknowledged the importance of stakeholders’ involvement for sustainable development. Stakeholding is said to provide the state with an opportunity to show its capacity to deal with increasingly high expectations and maintain its legitimacy and position as the most relevant actor within the public system. Stakeholder processes create an appearance of deliberative democracy, which has become increasingly critical for liberal democratic states.

The articulation of multistakeholder processes implies a certain reconstruction of public policy frameworks toward a more participative democracy with significant implications for societal governance. In contrast to rational and centralized explanations of decision making, this reconstruction implies incremental decision-making methods. Incremental decision making is based on the hypothesis that decisions result from pressures, compromise, coalitions, and negotiations among a plurality of interdependent actors. The method of analysis implies successive comparisons among the consequences for each group of available alternatives. The objective is to reach an agreement that allows reconciling the diversity of interests as an outcome of the adjustments among the involved parts. Depending on the subject, representatives from different fields of society are not only consulted but also directly integrated in deliberative decision-making processes. Therefore, stakeholders are given the opportunity to shape the policies that affect them.

Nonetheless, stakeholding for public policy faces significant oppositions grounded on methodological, theoretical, and ethical questioning. From a methodological perspective, there exists a critical difficulty in the definition of what really constitutes a legitimate stakeholder. There is not an objective method for distinguishing those individuals and groups that should be counted as stakeholders from those that should not. In addition, even if there were an accepted method for their identification, there is still the issue of how much relative and absolute importance is to be assigned to stakeholders. Identifying and assigning relative importance is a crucial factor for both the fairness and efficiency of any multistakeholder process. Furthermore, this factor will also determine the ability of an initiative to engage the different stakeholders after having identified them. From a theoretical perspective, stakeholding can be criticized for imposing a too-simplified view of society in which people and groups are only concerned about defending their own interests. From an ethical perspective, stakeholding for societal governance is mostly justified for its contribution to participation and democracy. However, participation can be limited by how representation is defined, the type of processes designed, and the benefits in relation to the effort required.

Decision makers, who are the stakeholder group charged with analyzing and justifying the final decision, are usually responsible for choices about the stakeholding process itself. In this sense, it has been argued that governmental bodies can be tempted to set up fake stakeholding processes and use them as a means for increasing the legitimacy of existing decisions.