1.4 Stakeholders

Question 1

Conflict

Answer 1

Conflict refers to situations where stakeholders have
disagreements on certain matters due to differences in their
opinions. This can lead to arguments and tension between the
various stakeholder groups.

Question 2

External stakeholders

Answer 2

External stakeholders of a business are individuals and
organizations not part of the organization but have a direct
interest in its activities and performance, e.g. customers,
suppliers, pressure groups and the government

Question 3

Internal stakeholders

Answer 3

Internal stakeholders of a business are members of the
organization, e.g. the employees, managers, directors and
shareholders of the organization.

Question 4

Pressure groups

Answer 4

Pressure groups consist of individuals with a common concern
(such as environmental protection) who seek to place demands
on organizations to act in a particular way or to influence a change in their behaviour.

Question 5

Shareholders (or stockholders)

Answer 5

Shareholders (or stockholders) are the owners of a limited
liability company. Shares in a company can be held by
individuals and other organizations.

Question 6

Stakeholders

Answer 6

Stakeholders are individuals or organizations with a direct
interest (known as a stake) in the activities and performance
of a business, e.g. shareholders, employees, customers and
suppliers.

Question 7

Stakeholder conflict
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Answer 7

1. For example, if shareholders
   want more profit then this may come about by cutting staff
   benefits. However, this would obviously upset employees.
2. Suppliers would like their customers to pay the full price in
   one transaction, in order to improve their own cash flow, but
   businesses would expect to receive discounted prices for regular
   purchases and for buyinging large quantities.
3. A common cause of stakeholder conflict is the remuneration
   (pay and benefits) of the company directors. Shareholders and
   employees might argue that top management are overpaid’
   and that there should be a fairer distribution of profits to
   shareholders (in the form of dividends) and to staff(improved
   remuneration). However, senior executives would argue that
   their compensation needs to be adequate to pay for the higher
   risks involved in decision-making. They argue that this could
   ultimately increase profits for the business, leading to higher
   dividends and wages in the future.
4. Another source of potential conflict is that some stakeholders
   have more than one role or set of interests in an organization.
   For example, managers are employees too, whilst some
   employees might also be shareholders. Acustomer is alsolikely
   to be a member of the local community. Based on the differing
   objectives of these groups, some degree of conflict is likely to
   occur.

Question 8

Mutual benefits of stakeholders’

interests

Answer 8

1. For example, addressing
   the needs of both employees and managers can lead to a
   highly motivated and productive workforce with low rates
   of absenteeism and staff turnover. This can lead to improved
   customer relations, corporate image, market share and profits.
2. As a result, shareholders will also be pleased. Greater output
   might also lead to more employment in the local community.
   Hence, it is argued that meeting the needs of all stakeholder
   groups can be achieved, although this might only occur in the
   medium to long term.