Stakeholders Flashcards
What is a stakeholder?
Someone with a vested interest in how a business is run
What do shareholders want?
For the firm to make a large profit, so their share price increases and the value of their dividned goes up
What do employees want?
High wages and good working conditions
What do consumers want?
High quality, low price goods
What do managers want?
To earn large bonuses and salaries, as well as personal benefits, such as leisure time and company cars
What do the government want?
To tax a firm’s profits
What do suppliers want?
Because firms are customers of suppliers, they want firms to remain in business
What is the principal agent problem?
An assymetric information problem. It comes about because the owners of the firm can’t directly oversee the day-to-day decisions of management
Who are principals?
Owners of a business with a specific equity stake
Who are agents?
Hired by principals to make the day to day decisions affecting a business
How is the principal agent most commonly solved?
By trying to align their interests
What are royalties?
A proportion of the revenue per item
