1.4 - Stakeholders

Pressure groups and employees

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

Boycott

The refusal to buy or use goods or services from a specific organisation.

What stakeholder group is interested in the creation of job opportunities

Local community or government

Customers and suppliers

- Customers demand high quality + 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

Shareholders

- owners of the company - invest in a business to receive a return on their investment, thus they are primarily concerned with the company's profitability. - profits allow them to receive a return on investment, in the form of dividends/an increase in value of their ownership interest (capital gains) - sometimes considered external stakeholders because in the case of large publicly owned companies, the aren't generally involved in day to day running of the company. However, they do appoint a board of directors that choose a CEO who runs the company in the shareholders' interest, explaining why most sources consider shareholders to be internal stakeholders - discussions related to shareholders tend to focus on corporations. In terms of unincorporated businesses (etc sole traders/partnerships) shareholders = managers, there's no difference between the individuals who own + run the organisation

Shareholders and government

< 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 no tin the interest of governments where the company's operations are located.

potential conflicts between Managers and employees + their potential remedies

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

potential conflicts between shareholders and managers + their potential remedies

< managers may look after their own interests rather than those of the firm. They may engage in activities that improve personal reputation/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.

- Managers and unions

< managers may oppose unions' intervention in the relationship between managers and employees at a particular firm, because unions can assist employees in obtaining better wages and benefits from management than employees might otherwise negotiate on their own.

Arbitration

A process of conflict resolution in which an independent person makes a final, binding decision on how a dispute should be resolved.

External stakeholders

Individuals/groups of people who don't directly work with the company but affect it/are affected by it, such as customers, suppliers, unions,, the government and society as a whole

Who usually has more influence over the organisation, internal/external stakeholders?

Internal stakeholders. However this does not mean that external stakeholders and their influence can be ignored

SUPPLIERS 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) A stable relationship, decent prices and timely payment 2) Supply contracts 3) Negotiations, lawsuits, arbitration

Employees

- work for the company but aren't responsible for other employees - like managers, they're motivated by compensation, benefits, job security and working conditions - now, many workers,including those with fewer qualifications + skills, have the ability to contribute to their organisations while looking out for their own careers and interests - in the modern 'knowledge' economy, many employees (etc accountants, engineers + computer programmers) may not have managerial responsibilities, however, they're highly educated with sophisticated expertise, perhaps decreasing the line drawn between management and employees than in the past, resulting with them having similar interests as stakeholders

Mutual benefits between stakeholders

- Employees and managers, both benefit from profit and job security - Employees and owners like shareholders both get something from business, employees get profit while owners get return on investment - customers and suppliers idk what - general mutual benefit for business to succeed

Unions

- Exist to protect employees' livelihoods + rights - usually represent employees in many different firms, they have more resources to defend employees' interests than the employees in a single firm acting alone

Governments

- Regulate organisations to protect the public interest - enforce laws + reprimand companies when necessary - (particularly local governments:) dependent upon companies to provide tax revenues + employment - in some cases, they are also customers of industry, as is the case of defence and pharmaceutical industries

Competitors Tip: Although most sources consider competitors to be stakeholders, it is preferable to not include them for the purpose of exam questions. Some IB source material does not consider competitors to be stakeholders.

- do not have interest in success of company, unlike previous stakeholders - greatly impacted by a company's practices - at a minimum, companies expect their competitors to engage in fair competition by adhering to laws + ethical business practices.

Suppliers

- individuals + businesses that sell goods + services to another organisation - want to be paid fair + reasonable prices for their inputs - wish to maintain stable business relationships with companies they supply, to ensure a reliable market for their goods, therefore are concerned about the health and continued existence of the companies to which they sell

Managers

- individuals who run the organisation - responsible for setting aims and objectives and making sure they are met - must create an environment where employees can work together to meet these objectives - interested in success of their enterprise + advancement of their own careers - sensitive to level of their compensations + benefits, as well as their working conditions, job security and content of their work - considered part of management range from CEO + senior managers setting strategic direction of the company, to middle managers carrying out this vision, down to a more junior level where day to day operations are more of a concern ^at this lower level, managers might be called line managers/operating managers/supervisors/foremen, depending upon context and industrial sector

Customers

- individuals+ other businesses that purchase the output of the organisation - demand good service + quality products that are also safe + sold at a reasonable cost - may be sensitive to company's reputations and impact of its practices on society and the environment

Banks

- lend organisations funds so they can invest and carry out their operations. They want to be sure these loans are paid back, with interest, on schedule -Closely monitor organisations' liquidity and solvency using financial accounts.

MANAGERS 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Compensation and career advancement, good working conditions 2) labor laws, employment contracts 3) negotiation, resignation

EMPLOYEES 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Compensation, career advancement and good working conditions 2) Labor laws, employment, contracts and unions 3) - Negotiation, arbitration, resignation, strikes -use of the media to highlight unacceptable corporate behaviour

PRESSURE GROUP/SOCIETY AS A WHOLE 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Environmental + social protections 2) Associations, media 3) Boycotts, lawsuits, lobbying for better regulation, use of the media

LOCAL COMMUNITIES 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Protection of the environment and community, stable employment 2) Pressure groups 3) Negotiations, use of the media

BANKS 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Repayment of principal and interest of loans, company stays solvent 2) Loan agreements, financial statements 3) negotiations

OWNERS 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Return on investment in the form of dividends and/or capital gains 2) - Deed of partnership for partnership. - For limited companies. there's articles of association; annual meetings, board of directors, shareholder lawsuits etc. 3) -shareholders through the board of directors, choose a CEO to run the company. - Shareholder suits are possible if there is wrongdoing by managers. - Shareholders can always sell their shares

CLIENTS, CUSTOMERS, CONSUMERS 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Safe products, honest service and fair prices 2) Product warranties, contracts in the case of B2B consumer associations 3) Lawsuits, boycotts, buy from the competition, arbitration

GOVERNMENTS 1) what do they expect from the company? 2) what structure + provisions exist to represent their interests? 3) how can they act, what can they do, to get what they want?

1) Taxes and environmental + social protections 2) Central and local governments 3) Laws and regulations, lawsuits, negotiations, arbitration

Negotiation

A process of conflict resolution that reaches a compromise or agreement through discussion.

Internal Stakeholders

An individual/groups of people that affects/is affected by the business due to their internal relationship with the business, such as CEO's, different level managers, employees and shareholders/owners.

Stakeholders

Any individual or group that affects/is affected by an organisation. They are often classified as internal/external. Internal stakeholders include: CEO, different level managers, employees and shareholders/owners. External stakeholders: Customers, suppliers, unions, competitors, government and society as a whole

Who's job is it usually to reconcile the competing interests of stakeholders in the company's interest

Managers

Society as a whole + the environment

When society's interests are not adequately defended by government, pressure groups may step in to ensure corporate behaviour doesn't adversely impact the planet and it's residents - local communities might be considered as a subset of society at large, they are most directly impacted by corporate decisions to locate in a given region/to shut down their operations there. They benefit from jobs and tax revenues, but may also experience disadvantages, like traffic and pollution