The New Era of Stakeholder Engagement: Gaining, Maintaining, and Repairing Legitimacy in Nonprofit Organizations

ABSTRACT

The need for nonprofits to foster legitimacy within their communities has led to growing calls for mechanisms of sound governance based on the engagement of stakeholders in organizational activities. Previous studies have investigated the mix of governance mechanisms used by nonprofits to manage legitimacy, without paying attention to the different challenges of legitimacy these organizations face. Aiming to fill this gap, this article employs a multiple case study methodology to explore how mechanisms for engaging stakeholders in governance can be shaped by the need to gain, maintain, or repair legitimacy. The findings show that formal mechanisms based on the direct designation of board members by local stakeholders play a pivotal role in repairing legitimacy. Gaining legitimacy requires actual participation of stakeholders, while maintaining legitimacy calls for formal mechanisms that balance representativeness and competencies of the leadership.

KEYWORDS:

• Legitimacy
• representation
• participation
• foundations
• governance
• multiple case study

Notes

1. According to ACRI (2016), the classification of IBFs by size is based on the amount of net assets. Five groups of IBFs of similar size have been identified using the criterion of statistical quintiles. Net assets of large-size IBFs range from 501 million Euros to 6.9 billion Euros.