1.4 Stakeholders Flashcards
A stakeholder
A stakeholder is any individual or group that affects an organisation or is affected by it. Stakeholders are often classified as internal (CEO, different level managers, employees and shareholders/owners) or external (customers, suppliers, unions, competitors, the government and society as a whole).
Internal stakeholders
Managers, employees and usually shareholders
Managers
Managers are the individuals who run the organisation. They are responsible both for setting aims and objectives and making sure they are met
Employees
Employees include individuals who work for the company but who are not responsible for managing other employees.
Shareholders
Shareholders are the owners of the company. Shareholders invest in a business in order to receive a return on their investment. They are therefore primarily concerned with the company’s profitability.
External stakeholders
Customers, Suppliers, Governments, Unions, Banks, Society, Environment, pressure groups, Competitors
Customers
Customers include both individuals and other businesses that purchase the output of the organisation.
Suppliers
Suppliers are the individuals and businesses that sell goods and services to another organisation.
Governments
Governments regulate organisations in order to protect the public interest; governments also enforce laws and reprimand companies when necessary.
Unions
Unions exist to protect employees’ livelihoods and rights, and as such are important stakeholders for many organisations
Banks
Banks lend organisations funds so they can invest and carry out their operations.
Society
Society as a whole, as well as the environment, is affected by corporate behaviour. When society’s interests are not adequately defended by government, pressure groups may step in to make sure corporate behaviour does not adversely impact the planet and its residents.
Competitors
Competitors, unlike the previous stakeholders, a company’s competitors do not have an interest in its success. However, they are greatly impacted by its practices. At a minimum, companies expect their competitors to engage in fair competition by adhering to laws and ethical business practices.
Managers and employees.
Management may wish to maximise productivity, while employees may prefer to work less or under less stressful conditions. Potential remedy: employee participation in management and performance-related pay.
Shareholders and managers.
Managers may sometimes look after their own interests rather than those of the firm. They may engage in activities that improve their personal reputation or remuneration without improving profits. Potential remedy: Granting managers stock options to buy shares to try to align their interests with those of shareholders. This solution, however, has become controversial in recent years.
Shareholders and the government.
Managers and unions.
Managers may oppose unions’ intervention in the relationship between managers and employees at a particular firm. This is because unions can assist employees in obtaining better wages and benefits from management than employees might otherwise negotiate on their own.
Customers and suppliers.
Customers demand high quality and low prices, which is in conflict with suppliers’ interest in being paid fairly. This conflict is played out between agricultural producers and consumers, with supermarkets in the middle coming under pressure from both stakeholders.
Pressure groups and employees.
Pressure groups may oppose certain projects that have the potential to harm the environment. These same projects may benefit the local community in terms of employment.
