What is a Stakeholder?

• A stakeholder is any individual or organisation that has a vested interest in the activities and decisions of a business

Difference between Stakeholders and Shareholders:

Stakeholders:

• Have an interest in the business- but do not own it

• May work for (employees) or otherwise transact with the business

Shareholders:

• Own the business

• May also work in the business

• Benefit directly from increases in the value of the business

Examples of Business Stakeholders:

• Owners

• Society

• Creditors

• Suppliers

• Government

• Customers

• Managers

• Employees

Stakeholders have different interests in a business:

Shareholders/Owners:

Mainly interested in:

• Return on investment and profits+dividends

• Success and growth of the business

• Proper running of the business

Managers and Employees:

Mainly interested in:

• Rewards, including basic pay and other financial incentives

• Job security and working conditions

• Promotion opportunities + job satisfaction & status- motivation, roles and responsibilities

Customers:

Mainly interested in:

• Value for money

• Product quality & Customer service

Stakeholders have different interests in a business:

• Suppliers:

  • Continued, profitable trade with business

  • Financial stability- can the business pay its bills?

• Banks and other financial providers

  • Can the business repay amounts loaned or invested?

  • Profitability and cash flows of the business

  • Growth in profits and value of the business

• Government:

  • The correct collection and payment of taxes (e.g. VAT)

  • Helping the business to grow- creating jobs

  • Compliance with business legislation

• Society:

  • The success of the business- particularly creating and retaining jobs

  • Compliance with local laws and regulations (e.g. noise, pollution)

Potential conflicts between Stakeholders:

• Cutting jobs or closing business units will be supported by shareholders and banks but opposed by Employees and the local community

• Adding extra shifts to increase capacity will be supported by Management, Customers and suppliers but opposed by the local community

• Introducing greater automation will be supported by Customers and shareholders but opposed by Employees

• Increasing selling prices will be supported by the shareholders and management but opposed by customers

Stakeholder power:

• Some stakeholders have more power over a business than others