3.4.3 Shareholders V Stakeholders Flashcards
Main aims of stakeholder- Employees
- A safe and secure job
- A good level of remuneration and holiday time
- Good working conditions
- Rewarding and satisfying work
Main aims of stakeholder- Owners
- Long term survival and success of the business
- A growth in profits
- A worthwhile return on investment
- Rising share prices and dividends for shareholders
Main aims of stakeholder- Directors and Managers
• Similar to employees
• Other benefits such as share options, private health care, pension
schemes and other fringe benefits
Main aims of stakeholder- customers
- Good quality products and services
- Low prices or value for money
- Good customer service during and after purchase
- Innovation and choice
Main aims of stakeholder- creditors/ investors
- Good return on investment
* Prompt repayment/payment within agreed trading terms
Main aims of stakeholder- Suppliers
- Positive working relationship
- Fair prices and trading terms
- Prompt payments
Main aims of stakeholder- Competitors
- A competitive advantage over the business
- Increased market share
- Reduction in competition
Main aims of stakeholder- Local Community
- Increased employment; a positive effect on the community
- Reduction in externalities such as noise and pollution
- Improved infrastructure
- Protection of the environment
Main aims of stakeholder- Pressure Group
• Depends on the cause involved: it may be protecting the
environment, campaigning for better working conditions,
sustainable production, an end to child labour etc.
Main aims of stakeholder
• Successful businesses that help to reduce unemployment and
contribute to GDP growth
• Sources of tax revenue
• Higher exports or reduced reliance on imports i.e. a smaller
international trade deficit.
There are two main models that show how a business may interact with its stakeholders,
the shareholder
model and the stakeholder model.
Shareholders are the owners of the business and have taken a risk and invested their capital into the
business. As a result, the obligation of the business is to maximise shareholder value by:
) making profits that can be distributed as healthy dividends, and/or
achieving increased share prices (capital gains).
Other stakeholder groups are seen as being of secondary importance and should there be a clash of
interest, the shareholders will get priority.
The Stakeholder Model
The stakeholder model takes a much broader approach; shareholders are seen as one of many
stakeholder groups that the business must consider. This model recognises that the interests of the
business are best served by considering and catering for all stakeholder groups rather than just one.
Stakeholder Model 2
The stakeholder model may have a narrow focus with priority given perhaps just to shareholders and
customers. At the other extreme it may be broad in scope and involve all groups. Many organisations will
fall somewhere in between.
Many businesses today make a point of behaving ethically and responsibly. Raw materials may be from
sustainable sources; employees may be treated fairly and paid a good wage while customers are given
good service and so on.
The potential for conflict
It may seem that looking after the interests and wider objectives of stakeholders is likely to cause conflict
with the shareholders who prioritise profit. Safeguarding pay and working conditions for employees,
looking after the local community and behaving responsibly and ethically may mean increased costs and
reduced profits and dividends for the shareholders. There is a real potential for conflict here. In terms of
pure profit, this does not appear to be a profit maximising strategy and some shareholders may well be
unhappy about the extra cost incurred by some measures.
