1.4 Stakeholders

Internal Stakeholders

- CEOs - Managers - Employees - Shareholders/owners

External Stakeholders

- Customers - Suppliers - Unions - Competitors - Banks - Government - Pressure Groups - Local community

Customers and Suppliers - benefits + conflicts in stakeholder interests

- Customers demand high quality and low prices, which is in conflict with suppliers' interest in being paid fairly - This conflict is played out between agricultural producers and consumers, with supermarkets in the middle coming under pressure from both stakeholders

UNIONS - interests of external stakeholders

- Exist to protect employees' livelihoods and rights > important stakeholders for many organisations - Represent employees in many different firms; they may have more resources to defend employees' interests than the employees in a single firm acting alone

Shareholders and Government - benefits + conflicts in stakeholder interests

- Government expects businesses to pay fair taxes, according to the law of the country, but shareholders may pressure management to reduce the company's tax burden through sophisticated accounting and legal schemes - Minimising taxes is not in the interest of governments where the company's operations are located

CUSTOMERS - interests of external stakeholders

- Include individuals + other businesses that purchase the output of the organisation - Demand good service + quality products that are also safe and are sold at a reasonable cost - May also be sensitive to the reputation of the company & impact its ethical objectives/actions

SUPPLIERS - interests of external stakeholders

- Individuals and businesses that sell goods and services to another organisation - Want to be paid fair and reasonable prices for these inputs - Also want to maintain a stable business relationship with the companies they supply to ensure a reliable market for their goods

BANKS - interests of external stakeholders

- Lend organisations funds so they can invest and carry out their operations - Want to ensure that loans are paid back, with interest, on schedule - Closely monitor the organisation's liquidity and solvency using financial accounts - Pay attention to other indicators of the organisation's health as reported in the community and in the media

Managers and employees - benefits + conflicts in stakeholder interests

- Management may wish to maximise productivity, while employees may prefer to work less or under less stressful conditions - Potential remedy: employee participation in management and performance-related pay

Shareholders and Managers - benefits + conflicts in stakeholder interests

- Managers may sometimes look after their own interests rather than those of the firm - They may engage in activities that improve their personal reputation or remuneration without improving profits - Potential remedy: Granting managers stock options to buy shares to try to align their interests with those of shareholders - This solution, however, has become controversial in recent years, as explained here

Managers and Unions - benefits + conflicts in stakeholder interests

- May oppose unions' intervention in the relationship between managers and employees at a particular firm - This is because unions can assist employees in obtaining better wages and benefits from management than employees might otherwise negotiate on their own

LOCAL COMMUNITIES - interests of external stakeholders

- Most directly impacted by corporate decisions to locate in a given region, or to shut down their operations there - Want jobs and tax revenues - Experience disadvantages, like traffic and pollution

Pressure groups and Employees - benefits + conflicts in stakeholder interests

- Pressure groups may oppose certain projects that have the potential to harm the environment - These same projects may benefit the local community in terms of employment

GOVERNMENTS - interests of external stakeholders

- Regulate organisations in order to protect the public interest - Also enforce laws and reprimand companies when necessary - Local governments, in particular, are dependent upon companies to provide tax revenues and employment - Can also be customers of industry, eg. defence and pharmaceutical industries

MANAGERS - interests of internal stakeholders

- Run the organisation - Interested in success of enterprise + own careers - Sensitive to the level of their compensation and benefits, as well as their working conditions, job security and the content of their work

PRESSURE GROUPS - interests of external stakeholders

- Want to ensure corporate behaviour does not adversely impact the planet and its residents - Local communities might be considered as a subset of society at large

EMPLOYEES - interests of internal stakeholders

- Work for company > not responsible for managing - Motivated by compensation, benefits, job security, and working conditions - want to contribute to their organisations + look out for their careers + interests

COMPETITORS - interests of external stakeholders

- do not have an interest in its success, but more its failures - Greatly impacted by the business' practices - Companies expect their competitors to engage in fair competition by adhering to laws and ethical business practices

SHAREHOLDERS - interests of internal stakeholders

- owners of the company > invest in a business in order to receive a return on their investment - Primarily concerned with the company's profitability + receiving dividends

Stakeholder

Any group or individual that affects an organisation or is affected by it