Stakeholder/Shareholder - Short/long terminism

Question 1

Stakeholders

Answer 1

A stakeholder is any individual or organisation who has a vested interest in the activities and decision making of a business.

Different decisions can cause conflict between stakeholders

Question 2

Short - termism

Answer 2

Short - termism is where a business’s prioritises short - term rather than long - term performance

Short - termism emphasises certain performance measures: (shareholder approach)
- Share price
- Revenue growth
- Gross and operating profit
- Unit costs and productivity
- Return on capital employed

Possibly at the expense of long term performance measures: (stakeholder approach)
- Market share
- Quality
- Innovation
- Brand reputation
- Employee skills and experience
- Social responsibility and sustainability

Question 3

Business Ethics

Answer 3

Ethics - Moral guidelines which govern acceptable behaviour

Common areas where ethics are tested
- Advertising
- Personal selling
- Suppliers
- Pay and rewards
- Contracts
- Pricing

Benefits:
- Higher revenues - demand from positive consumer support
- Improved brand and business awareness and recognition
- Better employee motivation and recruitment
- New sources of finance - E.G Ethical Investors

Possible drawbacks:
- Higher costs - E.G sourcing from fair trade suppliers
- Higher overheads - E.G training and communication of ethical policy
- A danger of building up false expectations
- Greenwashing - business says they are doing something however it is very difficult to prove

Tax avoidance by multinationals is legal - but is it ethical
Tax evasion isn’t legal

Question 4

What is a shareholder?

Answer 4

A shareholder is an individual who holds shares in a business.