Shareholders versus Stakeholders
Internal and external stakeholders: a stakeholder is a person, a group or organisation who can after or be affected by the organization’s actions, objectives and policies. Stakeholders can be directors, employees, owners, suppliers, Union and customers. The interest each stakeholder has Will vary according to the nature of the stake; for example, whether they are inside or outside the business.
Internal stakeholder: some groups of people inside the personal have a direct interest in its Survival and well-being. These may be referred to as internal stakeholders
- Business owners: a business is the property of the owners. Owners are stakeholders because they stand to gain, or lose, financially from the performance of the business period if the business does well, they will enjoy a share of profits. They will also benefit if the value of business increases. However, if the business fails owners may lose the money they invested in the business. With larger companies, such as large PLC, the shareholders may be internal and external. Most unlikely to be external since the majority of large PLC owned by financial institution, such as pension funds, investment banks insurance company, their interests are discussed later. However, in most large PLC some of the senior managers and members of the board are likely to share. One reason for this is because part of the remuneration often consists of Shares. Finally, in some company’s employee may earn a small number of shares. For example, about one-third of all BT workers are signed up to save share scheme. They contribute to the scheme from their monthly salary and get the right to buy shares at discount when the scheme matures. It was widely reported that in August 2014, around 23000 BT workers received an average of £42,000 when one of the schemes matured. If employees’ own shares in the company they work for, then they are also part owners of that company.
- Employees: employees are internal stakeholders because they work for the business period employees depend on businesses for their livelihood most employees have no other source of income and relying wages to live on period some employees are represented at work by trade unions. If this is the case, then trade unions also become stakeholders. The needs of employees are often in conflict with the stakeholders, Such as owners and managers
- Managers and directors: in small businesses managerial tasks, such as organising, decision-making, planning and control, undertaken by the entrepreneur themselves. However, in large businesses, the key decisions relating to company policy and strategy on made by the board of directors. It is the responsibility of Managers to ensure the policies and strategies are implemented. Large businesses and play specialist and managerial positions. For example, managers are often employed during the different departments in business, such as marketing, production, finance and Human resources. They are response for the work carried out in their departments and for the people employed to do the work.
- Managers have to show leadership, solve problems, make decisions, settle disputes, and motivate workers. Managers are likely to help plan their direction of the business with owners. They also have to control resources, such as finance, equipment, time, and people. Managers are also accountable. This means they are responsible for their actions and the actions of the subordinates. Managers are accountable to senior managers and their managerial hierarchy. The board of directors is accountable to the shareholders.
- External stakeholders: a range of groups outside a business may have an interest in its activities. Search groups are called external stakeholders.
- Shareholders: most shareholders in large companies are not involved in the day-to-day running of the business. They are investors and have a purely financial interest. External shareholders, who might be individuals, or more likely, large financial institutions, investing money to get a financial return. Shareholders are also entitled to vote at the AGM of a PLC. They can vote to re-elect or dismiss the current board of directors. However, many external shareholders do not take this. If they’re not happy with the way the company is being run or their turn the gas is inadequate, external shareholders can sell their share invest their money elsewhere
- Customers: customers buy the goods and services that businesses sell. Through their purchases they provide the revenue and profit that businesses need to survive. However, customers need businesses because they provide the goods and services they require and one. Most customers or consumers who use or consume products. However, they may be other businesses. For example, JCB manufacturers a range of construction machinery that sells to other businesses.
- Creditors: creditors lend money to a business. There may be bugs, but could also be individuals, such as family members, or private investors, such as venture capitalists. Clearly these stakeholders have a financial interest in the business and will be keen for it to do well. Creditors will expect that interest paid on time and their money return at the end of the loan period. There will also want clear communication links with the business.
- Suppliers: businesses that provide raw material, components, commercial services and utilities to other businesses are called suppliers. Relations between businesses and their suppliers need to be good because they rely on each other. Businesses one good quality resources at reasonable price. They also want prompt delivery Trade Credit and flexibility period in return, suppliers require prompt payment and regular orders. As with customers and businesses, there is a mutual dependence between suppliers and businesses.
- The local community: most businesses are likely to have an impact on the local community
- Positive impact: a business may employ people locally in if the business does well the community may prosper. There may be more jobs, overtime and possibly higher. This will have a knock-on effect in the community. For example, show, restaurants and Cinemas may benefit from extra spending
- Negative impact: a business may be criticized by the local community. For example, if a factory is noisy, please sing a works at night then maybe complaints from local residents. Stamped a lot of local people closes down, the impact on the community can be devastating. In 1980 when many coal mines were closed in the UK, the mining Communities suffered badly due to a very high unemployment.
- The government: the government has an interest in all businesses. January the government want businesses to be successful. They provide employment, generate well and pay taxes. Taxes from businesses and their employees used to fund government expenditure. However, the government will also require businesses to comply with the law. A significant amount of legislation exist check those who might be exploited by businesses if they were too powerful.
- The environment: business activity can have an impact on the environment. For example, if a business releases toxic waste into the water system, wildlife and its habitats could be destroyed. Thus, representatives of the environment have an interest in business activity. These representatives may be individual or environmental groups, such as friends of the Earth and Greenpeace. Increasing number of people are concerned about environmental issues, consequently environmental groups are becoming more influential in business decision making.
- Stakeholder objectives: many stakeholders have common objective. For example, stakeholders want a business to survive and be successful. However, each group of stakeholders will have some of their own specific objectives.
- Shareholders: the majority of shareholders we want the business to maximize shareholder value. This is a measure of company performance that considers the size of dividends and the share price. Over time shareholders will want this to grow. If the growth and shareholder value is not to the satisfaction of external investors the amaze sell their shares. This could result in a fall in the share price, which might make the company vulnerable to a takeover
- Employee objectives: If employees feel secure in their jobs it could be argued that, according to Herzberg, employees expect good pay and comfortable working conditions. However, there are also want responsibility, interaction with colleagues, to the values, personal development, fair and honest treatment opportunities for promotion. Safety at work is also important as are issues to do with equal opportunities. Generally, employees will want to maximize their financial rewards and welfare
- Managerial objectives: management and directors are likely to have similar needs to those employees. Many managers have part of the remuneration linked to the performance of the business will therefore want the business to perform well. Managers may also price for other benefits for instance bonus payments if they perform well, expense allowances when travelling on company business, I benefit such as a company car and free health insurance and more flexibility. Some senior Executives may see power as an objective; they like Empire Building. As a result, the shareholders may lose the ability to influence key decisions in the organisation.
- Customer objectives: customers want good quality products at a fair price. They also want clear and accurate information about products and high-quality customer service. They may also want tries, innovative products and flexibility. Some products such as machinery, electrical goods and children’s products, safety is important issue. If these needs are not met, customers will spend their money elsewhere. Customers have a powerful influence on the business. They are also more aware today about the range of products available and about their rights as consumers. In competitive markets only those businesses that me customer needs are likely to survive.
- Supplier objectives: suppliers want to be treated fairly by businesses. They were preferring to have long-term contracts and regular orders. There were also wants a fair price for their goods or services and to be paid and reasonable time period in 2013 / 14 it was suggested in a major some businesses might pulley suppliers. For example, some stores may put pressure on suppliers and Demand price cuts because of falls in commodity prices. They might threaten to withdraw product if suppliers refuse to comply. In cases such as these, investigation might take place buy the groceries code adjudicator for example.
- Government objectives: the government will want businesses to grow and make more profit. They will also want them to comply with legislation and not exploit vulnerable groups.
- Environmental objectives: environmental groups were wanting businesses to avoid having any negative impact on the environment. For example, they will demand of business activity does not damage wildlife and its habitat, pollute the atmosphere or waste resources.
Local community objectives: local Communities will want businesses to contribute to the prosperity of the community and be good corporate citizens. Communities would probably want businesses to create Employment and, depending on the size, nature of business and capabilities, both links of school and charity, maintain open communications and avoid or minimise congestion and pollution in the area.