Summary
Summary Shareholders vs Stakeholders
- Institution
- PEARSON (PEARSON)
Describes the difference between the stakeholder and shareholder approach, and the potential conflicts between shareholders and stakeholders
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Theme 3 Topic 11Shareholders vs Stakeholders
Stakeholders – a person, group or organisation who can affect or be affected by the organisations action,
objectives and policies
The Theory
Internal or
Stakeholder Objective/Interest
External?
Wants the business to be successful, high market share,
Business Owners Internal
profitability and growth
Employees Internal Job security and satisfaction, employee welfare, renumeration
Managers & Want same as employees but more focused on achieving targets
Internal
Directors and being competitive
Shareholders External Wants the business to do well so they get dividends
Customers External Good quality products/services, low prices, good customer service
Creditors External Good relations with businesses, know payments will be made
Suppliers External Interested in the cashflow of a business – will they get paid?
Impact
The Local Impact of business activity on them e.g. job opportunities, noise
External
Community pollution, increased traffic
The Government External Legislation businesses must abide by, CMA, taxes
The Environment External Businesses try to remain ethical and protect the environment
Stakeholder Influences
The Stakeholder Approach
Some businesses consider the objectives of a wider group of stakeholders (in addition to shareholders) when
making business decisions
According to the Clarkson Principals it means that corporations should:
Recognise the interests of their stakeholders and take their views into account
Maintain open communication channels with other stakeholders and consult with them before
making big changes
Recognise the interdependence that exists between different stakeholders
Minimise or eliminate the adverse effects of business activity
Corporations are coming under increasing pressure from stakeholders, the media and wider public to be more
socially responsible and take this approach
The Shareholder Approach
Many corporations have focused on growth or profit when making important business decisions
The objectives of shareholders have more influence on decision making than those of other
stakeholders
Approach based on the idea that directors and managers are employed by shareholders and should
serve their interests
They should make as much profit as possible for the owners as long as they are within the law
Some businesses still take this approach and their main objective is to maximise shareholder returns by raising
both dividends paid to shareholders and the share price
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