3.4.3 Shareholders versus stakeholders

• What are internal stakeholders?

  Individuals or groups inside the business.

  • Employees
  • Managers and directors
  • Business owners
• What are external stakeholders?

  Individuals or groups outside of a business.

  • Customers
  • Shareholders
  • Creditors
  • Suppliers
  • The local community
  • Local and national government
  • Pressure groups
• What objectives may owners have?

  • Owners may be sole traders, a partner in a business or a shareholder in a private limited company.
  • Owners are likely to work within the business as well as own it and so will be relying on the business to provide an income.
  • They will want all, or a share of the profit and will want the business to succeed.
• What objectives may employees have?

  • Their primary objective is to earn a living, have job security and be compensated fairly for their work, and have a safe work environment.
• What objectives may managers have?

  • Managers are individuals who are responsible for the day to day operations of a company.
  • Their primary objective is to meet the company's goals and objectives.
  • They want to maximise profits and minimise costs while ensuring the company operated efficiently.
• What objectives may consumers have?

  • Their primary objective is to receive high quality products or services at a fair price.
  • Customers also want good customer service and a positive experience with the company.
• What objectives may shareholders have?

  • They invest in the company with the goal of making a profit.
  • Their primary objective is to maximise their returns on investment.
  • They want the company to be profitable and generate a high return on their investment.
• What objectives may suppliers & creditors have?

  • Their primary objective is for the business to pay what it owes promptly and in full.
  • Suppliers often want to be able to establish long-term arrangements with customers to improve business stability.
• What objectives may the local community have?

  • Their primary objective is for the business to have a positive impact on the community.
  • This may include the business being environmentally responsible, providing jobs, and contributing to local causes.
• What objectives may the local and national government have?

  • Their primary objective is to promote the public good and protect the interests of citizens.
  • The government wants companies to operate within the law and contribute to the economy.
• What objectives may pressure groups have?

  • Their primary objective is to promote a specific cause or agenda.
  • Pressure groups want the company to support their cause or take action on an issue.
• What is a stakeholder approach?

  It focuses on interdependence between stakeholder groups and takes steps to ensure that the benefits and drawbacks of its operations are shared equally amongst them.

  • This is likely to decrease profits as competing stakeholder needs may require solutions that involve increased costs.
• What is the shareholder approach?

  It focuses on meeting the needs of shareholders.

  • Maximising profits in order to increase dividends and improve the share price.
• What is the potential for conflict between shareholders & employees?

  • Shareholders aim to maximise the return on their investment which usually requires the business to make as much profit as possible.
  • Employees aim for higher wages and better conditions which is likely to increase costs and reduce profits.
• What is the potential for conflict between shareholders & customers?

  • Customers aim for fair prices as well as good customer service.
  • As shareholders demand high profits to achieve maximum dividends there is a pressure on a business to raise prices.
• What is the potential for conflict between shareholders & management?

  • Management aims to run the business effectively and ensure it pleases shareholders.
  • Management may recommend the decision to retain profits to invest and grow the business rather than issue it to shareholders as dividends.
• What is the potential for conflict between shareholders & the government?

  • Governments want businesses to create good quality jobs, whilst complying with laws and tax contributions.
  • Shareholders are less interested in job creation and more interested in profit maximisation.