3.4.3 Shareholders vs Stakeholders

Shareholders

🔗 Any person who owns shares of a company's stock.

Stakeholders

🔗 People or groups that have a direct interest in a business with the ability to influence its activities.

Three types of stakeholder groups

• Internal – Stakeholders within the business (E.G directors, managers, employees)
• Connected – E.G Shareholders, customers, suppliers, competitors
• External – Stakeholders outside of the business (E.G government, pressure groups, media).

Motives of main stakeholders

• Shareholders want to maximise profits to maximise their return on investments (dividends)
• Customers want products that improve their welfare, either via high-quality or low prices
• Pressure groups want to make their opinion/appeal heard and achieve their aim (E.G Environment activists, trade unions)
• Suppliers want to maximise their own profits, preferring quick and adequate payments from businesses
• Employees want safe working conditions, to feel valued by the business and to have as high wages as possible
• Government want high tax revenue from high business profits and people in local communities to be employed by businesses

Interests of different groups

Stakeholder	Main Interests	Power & Influence
Shareholders	Profit growth, share price growth, dividends	Election of directors
Banks & Other Lenders	Interest and principal to be repaid, maintain credit rating	Can enforce loan covenants can withdraw banking facilities
Directors and managers	Salary, share options, job satisfaction, status	Make decisions, have detailed information
Employees	Salaries & wages, job security, job satisfaction & motivation	Staff turnover, industrial action, service quality
Suppliers	Long-term contracts, prompt payment, growth of purchasing	Pricing, quality, product availability
Customers	Reliability quality, value for money, product availability, customer service	Revenue/repeat business, word of mouth recommendation
Community	Environment, local jobs, local impact.	Indirect via local planning and opinion leaders
Government	Operate legally, tax receipts, jobs	Regulation, subsidies, taxation, planning

Business Decision	Supported by	Opposed by
Cut jobs to reduce costs	Banks Shareholders	Employees Local community
Extra shifts for workers to increase factory capacity	Management Customers Suppliers	Local community Trade Unions
Invest in new machinery as a substitute for workers	Customers Shareholders	Employees
Increase selling prices	Shareholders Management	Customers Government