3.4.3 shareholders vs stakeholders

Question 1

define stakeholder

Answer 1

a person with an interest or concern in the business.

Question 2

define shareholder

Answer 2

an owner of shares in a company

Question 3

stakeholders can be ….

Answer 3

These can be:
Internal i.e. from within the business
External i.e. from outside of the business

Question 4

examples of Internal stakeholders

Answer 4

Employees
Managers
Owners

Question 5

examples of External stakeholders

Answer 5

Customers
Suppliers
Shareholders
Government
Local community
Society
Creditors

Question 6

for the following stakeholder name one objective for each

employees

managers

owners

customers

suppliers

shareholders

government

local community

society

creditors

Answer 6

e-fair pay

m- financial incentives

o- profit

c- quality product

s- prompt payment

s- accurate information

g- abide by legislation

lc- jobs

s- less pollution

c- prompt payments

Question 7

define the stakeholder concept

Answer 7

The stakeholder concept suggests that a business’ responsibilities are towards all of its stakeholders

Question 8

describe the stakeholder concept/ stakeholder influence

Answer 8

Therefore, the business must consider all of its stakeholders in its decisions and objectives

• Consult with stakeholders before making strategic decisions
• Treat stakeholders fairly e.g. prompt payment to suppliers, fair pay and conditions for employees
• Address the business’ impact on the wider community e.g. environmental footprint

Stakeholder influences should be seen as a genuine concern and not just a PR exercise

Question 9

describe the shareholder concept / shareholder influence

Answer 9

Therefore, it has profit maximisation as its main corporate objective
Higher profits will lead to higher dividends and shareholders will receive income growth i.e. an increase in the income received from dividends
Good performance of the company will see its share price rise and shareholders will receive capital growth i.e. a rise in the value of their assets
The stakeholder v shareholder concept underpins a business’ ethical approach, suggesting who is more important to the business

Question 10

define shareholder concept

Answer 10

The shareholder concept suggests that a business’ responsibilities are solely aimed at meeting the requirements of the shareholders

Question 11

describe Stakeholder conflict

Answer 11

It is difficult to meet the needs of all stakeholders
Stakeholder needs may overlap in which case they can join together to increase their power
-e.g. the community may support the employees when taking industrial action in order to strengthen their voice

There is a potential conflict between the profit-based objectives of shareholders and the wider objectives of other stakeholders
Stakeholder conflict occurs when the actions or objectives of one group may weaken the power of another
-e.g. suppliers may lower prices to try and encourage a business to stay in the UK which may reduce the power of shareholders wanting the business to relocate abroad for lower costs