Shareholders vs stakeholders

Question 1

What are stakeholders?

Answer 1

Any individuals or organisations that have a direct influence on or interest in a business

Question 2

Define internal stakeholder and give 3 examples

Answer 2

Any individual or group inside the organisation with a direct interest in the business e.g., employees, managers, existing shareholders

Question 3

Define external shareholders and give me 3 examples

Answer 3

Any individual or group outside the organisation with a direct interest in the business e.g. customers, suppliers, creditors, government, and the local community

Question 4

What are 8 different types of stakeholders?

Answer 4

• Shareholders
• Suppliers
• Government
• financial institutions and other creditors
• customers
• employees
• local community
• pressure groups

Question 5

What are shareholders stakeholders objectives?

Answer 5

• To increase share price and to get more dividends (more profit)

Question 6

What are suppliers stakeholders objectives?

Answer 6

• frequent and regular orders
• to be paid on time
• fair prices

Question 7

What are The governments stakeholders objectives?

Answer 7

• increased tax revenue which comes from growth and high profits
• environmental awareness

Question 8

What are financial institutions stakeholder objectives?

Answer 8

• Repayment of money on time
• minimum risk of failure
• return on their investment (interest)

Question 9

What are customers stakeholders objectives?

Answer 9

• low prices
• quality and safe products
• good service

Question 10

What are employees stakeholders objectives?

Answer 10

• steady regular income
• job security
• safe working conditions
• career progression

Question 11

What are the local communities stakeholders objectives?

Answer 11

• Low noise, disruption and pollution
• local jobs
• save place to live

Question 12

What are pressure groups stakeholders objectives?

Answer 12

groups such as green peace campaign for environmental causes

Question 13

What is the conflict between Shareholders and the local community and what is the implications and however?

Answer 13

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.

Question 14

What is the conflict between Shareholders and Employees what is the implications and however?

Answer 14

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

Question 15

What is the conflict between Shareholders and The government what is the implications and however?

Answer 15

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.

Question 16

What is the conflict between Shareholders and Customers what is the implications and however?

Answer 16

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

Question 17

What is the conflict between Suppliers and creditors what is the implications and however?

Answer 17

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.

Question 18

Define shareholder

Answer 18

The legal owners of the business

Question 19

What is the shareholder concept?

Answer 19

The belief that the purpose of a business is to maximise return for the owners

Question 20

What is the stakeholder concept?

Answer 20

The belief that less importance should be given to the interests of owners and more importance should be given to the other stakeholder groups

Question 21

What are some argument supporting the Shareholder concept?

Answer 21

• 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.

Question 22

What are some arguments supporting the Stakeholder concept?

Answer 22

• 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.