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1.4 Stakeholders Summary

  • Stakeholders
    • People who can be affected by and therefore have an interest or stake in the actions of the business
      • e.g. shareholders, employees, suppliers, customers, competition, government/state, pressure groups, etc.
    • Stakeholder Concept – priority to stakeholders rather than shareholders
  • Interests of internal stakeholders vs. interests of external stakeholders
    • Internal
      • Employees
        • Employment security, wage levels, conditions of employment, participation in the business
      • Managers
        • Employment security, salary and benefits offered, responsibilities given
      • Shareholders
        • Owners of shares in the company, have decision-making power, receive dividends (share of profit)
        • Annual dividends, share price, security of investment
    • External
      • Suppliers
        • Speed of payment, level, and regularity of orders, fairness of treatmentCustomersValue for money, product quality, quality of service Government Job creation, tax payments, value for the output produced, impact on wider society/economy
        Special Interest groups (SIGs)
        • Banks, creditors, pressure groups, local community, trade/labor unions care about individual interests: payment of debts, environment, etc.
      • Competitors
        • Fairness of competitive prices, strategic plans of the business
  • Stakeholder conflict
    • Not possible to satisfy all stakeholders all the timeConflict will always arise from new developments, business activities, etc.Stakeholder conflict resolution
      • Arbitration
        • To resolve industrial disputes between workers and managers
        • Advantage
          • Both sides agree to an independent arbitrator who will decide
          • Disadvantage neither stakeholder group will likely receive what they want. The decision is bindingWorkforce ParticipationTo improve communication, and
          decision-making and reduce potential conflicts between employees and managersAdvantage
          • Gain cooperation of workers – better motivated and involved
          Disadvantage
          • Waste of time and resources to be able to get all the information
        Profit-sharing scheme
        • Reduce conflict between workers and shareholders over allocation of profits and benefits
        • Advantage
          • Sharing profits can encourage workers to work in ways that will increase  long-term profit
          Disadvantage
          • Reduces retained profits and/or profits paid out to shareholders unless the scheme pays off
        Share-ownership scheme
        • To reduce conflict between workers , manager and shareholdersAdvantage
          • Provides share options; employees and shareholders benefit and align their interests with one another
          Disadvantage
          • Administration costs, decreased ownership, and qualification constraints may limit motivation

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