3.4.3 - Shareholder Concept Flashcards
Def shareholder
Individual or institution which legally owns one or more stock shares in a private or public corporation and is mainly interested in growing the value of their shareholding
Def stakeholder
Is any individual or organisation who has a vested interest in the activities and decision making of a business
The stakeholder concept argues
The purpose of a business is to create value for stakeholders, not just shareholders
Stakeholder concept believes in order to keep sustainable overtime…
Business management must keep the interests of customers suppliers employees and communities aligned and going in one direction
3 internal stakeholders
Employees, managers and owners
4 external stakeholders
Customers, suppliers, shareholders, government and local community
Objective of local residents
Clean, green production, few deliveries
Banker objective
Stable profits
Customers objectives
Good quality of products
Innovation
Suppliers objective
Growth
Shareholders objective
Rising profits both short term and long term
Manager/directors profits
Growth, investing in new technology, rising profits for bonuses
Stakeholder conflict
- difficult to meet all needs and wants of everyone
- potential conflict between profit based shareholders and wider objective stakeholders
Advantages of stakeholder concept
- takes economical and ethical considerations into consideration
- promotes fairness to everyone in company
- gives directors an objective
- social wealth promoted
Shareholder concept
Business responsibilities are aimed at meeting requirements of shareholders - profit maximisation leading to higher dividends and economic growth
