1.4 Stakeholders

Question 1

A stakeholder

Answer 1

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).

Question 2

Internal stakeholders

Answer 2

Managers, employees and usually shareholders

Question 3

Managers

Answer 3

Managers are the individuals who run the organisation. They are responsible both for setting aims and objectives and making sure they are met

Question 4

Employees

Answer 4

Employees include individuals who work for the company but who are not responsible for managing other employees.

Question 5

Shareholders

Answer 5

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.

Question 6

External stakeholders

Answer 6

Customers, Suppliers, Governments, Unions, Banks, Society, Environment, pressure groups, Competitors

Question 7

Customers

Answer 7

Customers include both individuals and other businesses that purchase the output of the organisation.

Question 8

Suppliers

Answer 8

Suppliers are the individuals and businesses that sell goods and services to another organisation.

Question 9

Governments

Answer 9

Governments regulate organisations in order to protect the public interest; governments also enforce laws and reprimand companies when necessary.

Question 10

Unions

Answer 10

Unions exist to protect employees’ livelihoods and rights, and as such are important stakeholders for many organisations

Question 11

Banks

Answer 11

Banks lend organisations funds so they can invest and carry out their operations.

Question 12

Society

Answer 12

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.

Question 13

Competitors

Answer 13

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.

Question 14

Managers and employees.

Answer 14

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.

Question 15

Shareholders and managers.

Answer 15

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.

Question 16

Shareholders and the government.

Question 17

Managers and unions.

Answer 17

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.

Question 18

Customers and suppliers.

Answer 18

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.

Question 19

Pressure groups and employees.

Answer 19

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.