Shareholders vs Stakeholders (3.4.3)

Question 1

Who are shareholders in a business?

Answer 1

Shareholders are individuals, companies, or institutions that own shares in a business. A share represents a unit of ownership in a company.

Question 2

What are the two groups shareholders can be classed into? And what do these two types of shareholders mean?

Answer 2

1. Common Shareholders: Own common stock which gives them the right to vote on major company decisions and receive dividends. Have the potential for higher returns, but they also carry more risk, as they are last in line to be paid if the company goes bankrupt.

2.Preferred Shareholders: Own preferred stock, which often comes with a fixed dividend but typically doesn’t offer voting rights. In the event of liquidation, preferred shareholders are paid before common shareholders, but after debt holders.

Question 3

What are Business stakeholders?

Answer 3

Individuals or groups that affect or are affected by the actions of a business

Question 4

What does a business need to do if they have stakeholders?

Answer 4

Business needs to take into account the needs and interests of its stakeholders in order to operate successfully and ensure long term success

Question 5

What are Internal Stakeholders?

Answer 5

Internal stakeholders are individuals or groups inside the business

Question 6

What are External Stakeholders?

Answer 6

External stakeholders are individuals or groups outside of a business

Question 7

What are examples of Business stakeholders?

Answer 7

-Shareholders
-Employees
-Managers
-Suppliers
-Lenders
-Community
-Government
-Pressure groups
-Customers

Question 8

Out of all these stakeholder which ones are internal stakeholders and which ones are external stakeholders?

Answer 8

Internal:
-Employees
-Managers and Directors
-Business owners

External:
-Customers
-Shareholders
-Creditors
-Suppliers
-The local community
-Local and national government
-Pressure groups

Question 9

What does each of those stakeholder groups want from a business?

Answer 9

-Shareholders- Short-Term profit
-Employees- Higher wages, longer
holidays, better working conditions
-Managers-Higher salaries, Job satisfaction, status
-Suppliers-Paid on time, long-term contracts
-Lenders-Regular repayments with interest
-Community-Less pollution, less traffic, more jobs
-Government-More jobs, international competitiveness, tax revenue
-Pressure groups-Ethics, sustainability
-Customers-Lower prices or higher quality, value for money

Question 10

What are some examples of conflict between shareholders and stakeholders?

Answer 10

-Shareholders wanting profit but workers wanting better working conditions
-Customers wanting lower prices but workers wanting higher pay
-Staff in unstainable company wanting more shifts but households wanting less pollution

Question 11

What are the two approaches a business can take?

Answer 11

A business can either take a shareholder approach or a stakeholder approach in its business strategy.

Question 12

What does the stakeholder approach focus on?

Answer 12

Focuses on interdependencies between stakeholder groups. This is likely to decrease profits as competing stakeholder needs may require solutions that involve increased costs

Question 13

What does the shareholder approach focus on?

Answer 13

Often being used by large corporations and it is focused on meeting the needs of shareholders (maximizing profits in order to increase dividends and improve the share price)