Download 1.4 Stakes and Stakeholders

1.4 Stakeholders
Stakeholders
Not to be confused with Shareholders.
Shareholders own a share in the company.
Stakeholder is anyone
with an interest in the
business activity.
Stakeholders
 Internal Stakeholders:
Employees
Managers
Shareholders
 External Stakeholders:
Suppliers
Customers
Government
Banks and creditors
Special interest groups
- pressure groups, community action groups
Competitors
INTERNAL Stakeholders Employees
Stakeholder Interest
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Business Responsibility to
Stakeholder
Employment security
 Adhere to country's laws
Wage levels and benefits that outline treatment of
that compare well with
workers
similar jobs in other
 Provide training, job
businesses
security, more than
Good working conditions minimum wage, good
(health and safety)
working conditions, staff
Some participation in
involvement with some
decision making within
business decisions
the business
INTERNAL Stakeholders Managers
Stakeholder Interest
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Employment security
Salary and benefits that
compare with similar
posts of responsibility in
other businesses
Responsibilities offered
and status of the post
Opportunity for profit
sharing
Business Responsibility to
Stakeholder
 Job security
 Competitive salary and
other benefits
 Opportunities for
responsibility and career
advancement
INTERNAL Stakeholders Shareholders
Stakeholder Interest
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Annual dividends
comparable to similar
firms
Share price rising over
time
Security of investment
Ability to sell shares
when required
Business Responsibility to
Stakeholder
 Incorporated businesses
should be operated in
accordance with the law
 Annual accounts
presented to
shareholders (financial
statements)
 Strategies taken to
increase shareholder's
value over time
EXTERNAL Stakeholders Customers
Stakeholder Interest
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Value for money
Product quality and
safety
Guarantees
Service levels
Long-term rewards for
loyalty
Business Responsibility to
Stakeholders
 Not to break the laws on
consumer protections
and accurate advertising
 Not taking advantage of
vulnerable customers
(young or the elderly)
 Not using high pressure
sales tactics
 Assurances about
quality, delivery dates,
and servce
EXTERNAL Stakeholders Suppliers
Stakeholder Interest
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Business Responsibility to
Stakeholders
Speed of payment
 Two-way relationship
Level and regular orders
that are a benefit to each
Fairness of treatment
other
(not being exploited by a  Avoid excessive
large customer base)
pressure on small or
weaker suppliers to cut
price
 Pay fair prices and pay
invoices promptly
EXTERNAL Stakeholders Government
Stakeholder Interest
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Business Responsibility to
Stakeholders
Creation of jobs and
 Pay taxes
incomes that boost the
 Keep accurate
economy
accounting records so
Taxes paid for
true profit can be shown
employees and on profit  Provide information that
Value of output produced the government requests
adds to the GDP
 Keep within the legal
Impact on wider society
limits
(is production
environmentally
sustainable)
EXTERNAL Stakeholders Banks and other creditors
Stakeholder Interest
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Security of their loans
and the ability of the
business to repay them
Prompt payment of
interest and capital owed
by the business
Business Responsibility to
Stakeholders
 Pay interest
 Pay back capital owed
EXTERNAL Stakeholders Special Interest Groups
Stakeholder Interest
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Business Responsibility to
Stakeholders
Pressure groups –
 Pressure groups –
campaigning to achieve
recognize genuine
a change in business
concern over business
decisions/activities
activity; business may
Local community –
respond by changing
encouraging business to
decisions or operations
act in the community's
 Local community – avoid
best interest and to
pollution and other
avoid harmful production damaging operations;
methods
support for local groups
EXTERNAL Stakeholders Competitors
Stakeholder Interest
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Fairness of competitive
practices
Strategic plans of the
business
Business Responsibility to
Stakeholders
 To compete fairly and
within the law
 It is NOT a responsibility
of business to provide
details of its strategic
plans to competitors
Managing Stakeholder Conflict
Profit Sharing (between workers & shareholders)
Advantages: Annual profits are shared with workers before shareholders are
paid dividends
Disadvantages: Paying workers can reduce retained profits limiting business
expansion.
Share ownership schemes (between workers,
managers, and shareholders)
Advantages: The right to buy shares at a specific price or time allows workers
to benefit from the success of the business and aligns the employee interests
with the shareholders.
Disadvantages: Administration costs; decline in employee motivation if stock
price falls; dilution of stock for all shareholders; motivation maybe limited for
employees if there is a time requirement to earn shares.