Shareholders vs. Stakeholders

Question 1

Define a SHAREHOLDER

Answer 1

A shareholder is a person or organisation that owns at least one share in a company.

Question 2

Define a STAKEHOLDER

Answer 2

A stakeholder is a person or individual who has a vested interest in the activities and decision making of a business. Stakeholders can be internal (owners, managers, employees) or external (shareholders, customers, suppliers, creditors, government, the community).

Question 3

What are the different types of stakeholders in a business?

Answer 3

Shareholders/owners, employees, managers, customers, suppliers, creditors, the government, the community.

Question 4

What is the shareholder approach?

Answer 4

Their interests are the most important when making decisions. Shareholders are the most powerful and influential as they are the owners of the business.

Question 5

What are the benefits of shareholder approach?

Answer 5

• Consistent decision making
• Higher revenue
• Lower investment costs
• Increased profit

Question 6

What are the drawbacks of the shareholder approach?

Answer 6

• Potentially ignores other important stakeholders like customers
• Can be a short-termist approach
• Possible loss of competitive advantage due to lack of investment

Question 7

What is the stakeholder approach?

Answer 7

Takes the interests of all affected stakeholders into account when making decisions

Question 8

What are the benefits of the stakeholder approach?

Answer 8

• High staff morale and retention
• Improved brand image
• Greater investment
• Sustainable growth
• Improved long term profits and dividends

Question 9

What are the drawbacks of the stakeholder approach?

Answer 9

• Slower decision making
• Risk of losing competitive advantage in the short term
• Lower profits and dividends in the short term

Question 10

Define STAKEHOLDER POWER

Answer 10

Stakeholder power relates to the level of influence that each stakeholder has over the business objectives and decision making. Their power depends on the extent to which they:

• can disrupt the business’ plans
• can cause uncertainty in the plans
• are needed by the business

Question 11

Define STAKEHOLDER MAPPING

Answer 11

Stakeholder mapping is a technique that can help the business visualise the stakeholders that may be affected when it makes a decision. It is based on the stakeholder’s power, influence and the nature of their interest. Not all stakeholders have equal influence.