Stakeholder Vs Shareholder Flashcards
Stakeholder
Anyone affected by operations of a business
Shareholder
An individual or organisation that owns at least one share of a company
Internal stakeholders
Groups inside the busines with an interest in activities This includes: Owners Employees Managers and directors
External stakeholders
Groups outside a business with an interest in its activities
This includes:
Customers
Suppliers
Creditors (money lenders)
Pressure groups- trade unions, environmental groups
Local community- businesses can have a positive or negative impact on the community
The government
The environment
Stakeholder objectives
Shareholders- want the business to maximise shareholder value. Over time they want this to grow and if dissatisfied, they may sell their shares, which can result in a fall in the share price making the company at risk of takeover.
Employee objectives- want the business to be successful and profitable to be able to maximise their financial rewards. Want a safe and interactive environment. Also flexibility, health insurance and more
Managerial objectives- managers and directors have part of their remuneration linked to the performance of the business so they want it to perform well. Similarly to employees they want financial rewards, health insurance etc..
Customer objectives- want good-quality products at a fair price. Also want high-quality customer service and clear information on all products. Safety is also an important factor, with things such as children toys, machinery etc..
Supplier objectives- to be treated fairly by businesses. Fair price for their goods and services and to be paid in regular time and not be bullied/ exploited by businesses.
Government objectives- want businesses to grow and make more profit. Also to follow laws and not exploit vulnerable groups.
Environmental objectives- want businesses to avoid having negative impacts of the environment. To use eco-friendly materials, not waste resources etc..
Local community objectives- want businesses to contribute to the success of the community. Also to provide jobs for local population, build links with schools and charities and minimise congestion and pollution in the area.
Stakeholder model
The business should consider all of its stakeholders in its business decisions and objectives
Shareholder model
The business should focus on maximising shareholder returns (by increasing both dividends and share price) in its decisions and objectives
The potential for conflict between shareholders and stakeholders
Shareholders are more profit-based and their objectives may at times clash with those of other stakeholders.
Shareholders and employees- meeting employees’ objectives in terms of higher wages, bonuses, training etc.. comes at a cost, which will likely negative impact profits and dividends. Employees may try to put pressure on the business of objectives aren’t met and turn over rates may rise.
Shareholders and customers- likely to occur if business charger very high prices. High prices will help to increase shareholder return but reduce the buying power of the employee. If businesses fail to invest in r&d for innovation or train staff for good customer service, customers might enter into conflict with the business as well.
Shareholders and directors and managers- a common conflict between shareholders and directors as well sas senior managers is the balance between retaining profit for investment and paying dividends. If senior managers focus too much on their own objectives then dividends and profit may suffer.
Shareholders and the environment- in an attempt to maximise profit businesses may forget their responsibilities towards the environment. Things such as factory emissions and wasted resources can contribute to global warming.
Shareholders and the government- this is likely if the business breaks the lay. Such as not paying tax, which would leave bigger profits for shareholders to enjoy.
