Shareholders vs stakeholders Flashcards
What are stakeholders?
Any individuals or organisations that have a direct influence on or interest in a business
Define internal stakeholder and give 3 examples
Any individual or group inside the organisation with a direct interest in the business e.g., employees, managers, existing shareholders
Define external shareholders and give me 3 examples
Any individual or group outside the organisation with a direct interest in the business e.g. customers, suppliers, creditors, government, and the local community
What are 8 different types of stakeholders?
- Shareholders
- Suppliers
- Government
- financial institutions and other creditors
- customers
- employees
- local community
- pressure groups
What are shareholders stakeholders objectives?
- To increase share price and to get more dividends (more profit)
What are suppliers stakeholders objectives?
- frequent and regular orders
- to be paid on time
- fair prices
What are The governments stakeholders objectives?
- increased tax revenue which comes from growth and high profits
- environmental awareness
What are financial institutions stakeholder objectives?
- Repayment of money on time
- minimum risk of failure
- return on their investment (interest)
What are customers stakeholders objectives?
- low prices
- quality and safe products
- good service
What are employees stakeholders objectives?
- steady regular income
- job security
- safe working conditions
- career progression
What are the local communities stakeholders objectives?
- Low noise, disruption and pollution
- local jobs
- save place to live
What are pressure groups stakeholders objectives?
groups such as green peace campaign for environmental causes
What is the conflict between Shareholders and the local community and what is the implications and however?
Shareholders may want the business to grow but this could cause pollution in the local area.
If the business doesn’t consider the effects on the local area it can lead to bad press and damage the reputation of the business.
However, business growth could create more jobs and income for the local community.
What is the conflict between Shareholders and Employees what is the implications and however?
Employees want higher wages and better working conditions but this increases costs therefore shareholders get less dividends.
If working conditions are poor and wages are low staff turnover could increase leading to more costs for training and recruiting.
However, Higher wages and working conditions can attract skilled workers and increase employees productivity leading to higher profitability
What is the conflict between Shareholders and The government what is the implications and however?
Government want higher taxes to be paid so they can invest in infrastructure and education. But this increases costs and lowers profit.
MNCs may relocate to countries with lower levels of tax leading to rising unemployment and lower tax for the government.
However, Businesses benefit from educated, healthy workforces and good infrastructure.
What is the conflict between Shareholders and Customers what is the implications and however?
Shareholders want more profit and cutting costs or increasing prices will leave consumers with either lower quality products or lower purchasing power.
Can cause loss of customer loyalty and a loss of sales leading to a fall in market share
However, more profit for the business can be used to fund R&D to create better products for customers
What is the conflict between Suppliers and creditors what is the implications and however?
Paying bank loans may mean paying suppliers later.
This could lead to the business losing out on supplier discount for quick payment.
Bank loans can help businesses survive and that means more business for the supplier in the long term.
Define shareholder
The legal owners of the business
What is the shareholder concept?
The belief that the purpose of a business is to maximise return for the owners
What is the stakeholder concept?
The belief that less importance should be given to the interests of owners and more importance should be given to the other stakeholder groups
What are some argument supporting the Shareholder concept?
- increased costs from the stakeholder approach will reduce profitability (due to higher costs) and this can slow growth down which is not good for businesses that want to grow rapidly.
- Increased costs from the stakeholder approach will lead to higher costs and damage the profit margins which could cause the business to have to increase prices which could lead to less sales and less profit.
What are some arguments supporting the Stakeholder concept?
- The stakeholder approach may increase positive publicity and create a good brand image which will differentiate the business and allow them to charge higher prices and be more profitable
- The shareholder approach is more damaging in the long term as cutting costs and having less employees can lead to more mistakes which reduces quality and hurts brand image.
- Also the shareholder approach means the business has less retained profits to expand as it gives more away in dividends to shareholders.
