A stakeholder is any individual or organization that is affected by the activities of a business. They may have a direct or indirect interest in the business, and may be in contact with the business on a daily basis, or may just occasionally.
The main stakeholders are:
Shareholders (not for a sole trader or partnership though) – they will be interested in their dividends and capital growth of their shares.
Management and employees – they may also be shareholders – they will be interested in their job security, prospects and pay.
Customers and suppliers.
Banks and other financial organizations lending money to the business.
Government – especially the Inland Revenue and the Customs and Excise who will be collecting tax from them.
Trade Unions – who will represent the interests of the workers.
Pressure Groups – who are interested in whether the business is acting appropriately towards their area of interest.
Stakeholders versus Shareholders
It is important to distinguish between a STAKEHOLDER and a SHAREHOLDER. They sound the same – but the difference is crucial!
Shareholders hold shares in the company – that is they own part of it.
Stakeholders have an interest in the company but do not own it (unless they are shareholders).
Often the aims and objectives of the stakeholders are not the same as shareholders and they come into conflict.
The conflict often arises because while shareholders want short-term profits, the other stakeholders’ desires tend to cost money and reduce profits. The owners often have to balance their own wishes against those of the other stakeholders or risk losing their ability to generate future profits (e.g. the workers may go on strike or the customers refuse to buy the company’s products).
Social Responsibility
Social responsibility is the duty and obligation of a business to other stakeholders.
Stakeholder Example of responsibility to that stakeholder
Shareholder Good return on investment
Employee Fair pay and working conditions
Supplier Regular business and prompt payment
Customer Fair price and safe product
Local community Jobs and minimum disruption
Government Employment for local community
Environment Less pollution
Social responsibility for one group can conflict with other groups, especially between shareholders and stakeholders.
Introduction to stakeholders
Let’s start with a definition of stakeholders, which are:
Groups /