3.4.3 Shareholders versus stakeholders Flashcards
What is a stakeholder?
A stakeholder is any individual or organisation that has a vested interest in the activities of a business.
What is a shareholder?
The owners of a company (PLCs and LTDs) are the shareholders who own the share capital.
How can you classify stakeholders?
internal and external
What are some internal stakeholders?
- employees
- managers
- owners
What are some external stakeholders?
- suppliers
- society
- government
- creditors
- customers
- shareholders
- pressure groups
- trade unions
- competition
Give objectives for each: employees managers owners customers suppliers shareholders government local community society competitors
employees: pay, good working conditions, job security
managers: authority and power, incentives
owners: profit and consistent quality
customers: quality and fair prices
suppliers: short trade credit and large orders
shareholders: short ROCE, aligning to rules set by directors
government: abide to legislation and providing tax revenue
local community: jobs and other opportunities
society: jobs and renewable sources of energy
competitors: new products that motivate employees
What is the stakeholder concept?
Where a business chooses to accept the duty to fulfil as many stakeholder needs as possible. This is more longtermist and the business focuses on practicing good ethics/values.
What is the shareholder concept?
As described by Martin Freidman, this involves keeping the shareholders happy maximising profit resulting in short-term gain.
What are shareholders more important that stakeholders?
- can block takeovers
- important for long-term growth (finance)
- satisfaction = increased share value = better investment
- contribute in decision-making
What are ethics?
Concern actions which can be assessed as right or wrong by reference to moral principles
What is CSR?
It is about the organisation’s obligation to all stakeholders, not just shareholders.
What are the 4 approaches to ethics?
Ethical = ethical practice is at the core of the business Responsive = Accepts that being ethical can pay off Legalistic = Will obey the law but nothing more than that Amoral = Seeks to win at all costs, anything acceptable
