5. Stakeholders in business Flashcards
Shareholder and stakeholder concept
The traditional view of business is often called the shareholder concept. The shareholders are the owners of the company and the company has a legally binding duty to put their needs first – to take actions and to
make decisions that will increase shareholder value. It is important to remember that directors and managers ultimately owe their positions to shareholders, so it is important to keep them satisfied. In recent times, this limited view of business responsibility has been extended to include the interests of
other stakeholders too. The stakeholder concept is that there are many other parties involved and interested in business activity than just the owners.
Responsibilities to customers
In a world of increasing free trade and international competition, it is essential to satisfy customers’ demands in order to stay in business in the long term. Decisions about quality, design, durability and customer service should consider the customers’ aims for well-made, attractive goods that perform as intended, all at reasonable prices. Businesses also have responsibilities to customers not to break the law concerning consumer protection and accurate advertising. Avoiding taking advantage of vulnerable customers, such as the elderly, and not using high-pressure selling tactics are other policies of responsible businesses. The benefits of accepting these responsibilities include consumer loyalty; repeat purchases; good publicity when customers give word of mouth recommendations to others; and good customer feedback, which helps to improve further goods and services
Responsibilities to suppliers
The quality of a product is only as good as the supplies that the business purchases. If these are of poor quality or frequently late, then the same problems will exist with the finished products and these will not satisfy customer requirements. Good, reliable suppliers must be found and given clear guidance on what is required. In return, the purchasing department should take decisions that satisfy suppliers’ aims and requirements, such as prompt payment, the placing of regular orders and the offer of long-term contracts. The benefits of accepting these responsibilities include supplier loyalty, the likelihood of securing reasonable credit terms and a preparedness to meet deadlines and special order requests.
Responsibilities to employees
All countries have some laws that outline business responsibilities to workers. These laws are stricter in some countries than others. Apart from not breaking these laws, do businesses have other responsibilities to employees? Many people think they do. Business decisions that reflect the aims of employees include providing training opportunities and job security, paying rates above minimum wage, offering good working conditions and involving employees in some of the decision-making. The benefits of accepting these responsibilities include employee loyalty and low labour turnover; ease of recruiting good workers; employee suggestions for improving efficiency and customer service; improved motivation; and more effective communication
Responsibilities to local community
Businesses that fail to meet responsibilities to the local community may experience serious problems with opposition to plans or changes to the use of premises. The stakeholder concept assumes that businesses will meet responsibilities to the local community. Examples of business decisions that focus on the aims of the local community include offering secure employment so that there is less local fear of job losses, using local suppliers where possible to generate more income, reducing the transport impact of the business and keeping other adverse environmental effects to a minimum.
The benefits of accepting these responsibilities include local councils being more likely to give planning permission to expand the business and giving contracts only to businesses with a record of community involvement. Also, local communities will be more likely to accept some of the negative effects caused by business operations if they provide financial support for community groups and projects, such as children’s playgrounds.
Responsibilities to government
Clearly, all businesses should meet their legal responsibilities as defined by government legislation. In addition, businesses should decide to pay taxes on time, complete government statistical and other forms
accurately and, where possible, seek export markets. The foreign currency earned by exports allows a country to pay for important imports of food, materials, new technology and so on. The benefits of accepting these responsibilities include:
- developing good relations with government, so planning permission for future expansion projects is more likely to be granted
- more likely to receive valuable government contracts
- requests for subsidies to expand businesses more likely to win government approval
- licences to set up new operations more likely to be awarded to businesses that meet their responsibilities to the government and the wider society.
Responsibilities roles and rights of stakeholders
go through the book, too much information
