3.4.3 Shareholders Vs Stakeholders

Question 1

Stakeholders Defined?

Answer 1

• A stakeholder is anyone who has an interest in the business, or who may be affected by the activities of the business

Question 2

Shareholders Defined

Answer 2

• A shareholder is a person, business or organisation that owns at least one share of a company
• A shareholder is a stakeholder of the business

Question 3

Internal stakeholders?

Answer 3

• Internal stakeholders are those inside a business who may be affected by corporate decision making;
1. Employees
2. Managers
3. Owners

Question 4

External stakeholders

Answer 4

• External stakeholders are those outside the organisation who are affected by decisions made by the business. These vary depending on the business and its location, but the main general ones are;
1. Customers
2. Competitors
3. Suppliers
4. Community groups (pressure groups)
5. Unions

Question 5

Stakeholder objectives

Answer 5

1.Shareholders : maximise shareholder value
2. Employees: want the business to grow because if the business grows profitable employees are likely to get higher wages.
3. Managerial objectives : mangers and directors are likely to have similar needs to those of employees may also get bonus payments
4.Customer objectives : good quality products at a fair price
5. Supplier objectives: treated fairly by businesses. They prefer long term contracts and regular orders. Also a fair price for their goods and service and paid in reasonable time.
6. Government: comply with legislation and not exploit vulnerable groups
7. Environmental: avoid having any negative impact on the environment
8. Local community: contribute to the prosperity of the community and be good corporate citizens. Create employment and build links with schools and charities whilst avoiding congestion and pollution in the area.

Question 6

Shareholder value

Answer 6

A measure of company performance that combines the size of dividends with the share price.

Question 7

Conflict between shareholders and stakeholders :
Shareholders and employees

Answer 7

Meeting objectives of employee welfare comes at cost. Of the needs of employees are met there is likely to be a negative impact on profit and dividends. Conflict will arise if shareholders insist that the rewards to employees should not come at the expense of dividends.

Question 8

Conflict between shareholders and stakeholders :
Shareholders and customers

Answer 8

Conflict between shareholders and customers is most likely to arise if a business charges prices that are too high. High prices will help boost shareholder returns but reduce the purchasing power of customers

Question 9

Conflict between shareholders and stakeholders :
Shareholders and directors and managers

Answer 9

Conflict might arise if they start to prioritise their own objectives, such as maximising remuneration, expenses and other perks. If this is too high profit and dividends may suffer.

Question 10

Conflict between shareholders and stakeholders :
Shareholders and the environment

Answer 10

In an effort to maximise profit , a business might neglect its responsibilities towards the environment.

Question 11

Conflict between shareholders and stakeholders :
Shareholders and the government

Answer 11

Conflict between shareholders and the government is likely if businesses break the law.