1.4 Stakeholders

Stakeholders Not to be confused with Shareholders. Shareholders own a share in the company. Stakeholder is anyone with an interest in the business activity.

Stakeholders Internal Stakeholders: Employees Managers Shareholders External Stakeholders: Suppliers Customers Government Banks and creditors Special interest groups - pressure groups, community action groups Competitors

INTERNAL Stakeholders - Employees Stakeholder InterestBusiness Responsibility to Stakeholder Employment security Wage levels and benefits that compare well with similar jobs in other businesses Good working conditions (health and safety) Some participation in decision making within the business Adhere to country's laws that outline treatment of workers Provide training, job security, more than minimum wage, good working conditions, staff involvement with some business decisions

INTERNAL Stakeholders - Managers Stakeholder InterestBusiness Responsibility to Stakeholder Employment security Salary and benefits that compare with similar posts of responsibility in other businesses Responsibilities offered and status of the post Opportunity for profit sharing Job security Competitive salary and other benefits Opportunities for responsibility and career advancement

INTERNAL Stakeholders - Shareholders Stakeholder InterestBusiness Responsibility to Stakeholder Annual dividends comparable to similar firms Share price rising over time Security of investment Ability to sell shares when required Incorporated businesses should be operated in accordance with the law Annual accounts presented to shareholders (financial statements) Strategies taken to increase shareholder's value over time

EXTERNAL Stakeholders - Customers Stakeholder InterestBusiness Responsibility to Stakeholders Value for money Product quality and safety Guarantees Service levels Long-term rewards for loyalty Not to break the laws on consumer protections and accurate advertising Not taking advantage of vulnerable customers (young or the elderly) Not using high pressure sales tactics Assurances about quality, delivery dates, and servce

EXTERNAL Stakeholders - Suppliers Stakeholder InterestBusiness Responsibility to Stakeholders Speed of payment Level and regular orders Fairness of treatment (not being exploited by a large customer base) Two-way relationship that are a benefit to each other Avoid excessive pressure on small or weaker suppliers to cut price Pay fair prices and pay invoices promptly

EXTERNAL Stakeholders - Government Stakeholder InterestBusiness Responsibility to Stakeholders Creation of jobs and incomes that boost the economy Taxes paid for employees and on profit Value of output produced adds to the GDP Impact on wider society (is production environmentally sustainable) Pay taxes Keep accurate accounting records so true profit can be shown Provide information that the government requests Keep within the legal limits

EXTERNAL Stakeholders - Banks and other creditors Stakeholder InterestBusiness Responsibility to Stakeholders Security of their loans and the ability of the business to repay them Prompt payment of interest and capital owed by the business Pay interest Pay back capital owed

EXTERNAL Stakeholders - Special Interest Groups Stakeholder InterestBusiness Responsibility to Stakeholders Pressure groups – campaigning to achieve a change in business decisions/activities Local community – encouraging business to act in the community's best interest and to avoid harmful production methods Pressure groups – recognize genuine concern over business activity; business may respond by changing decisions or operations Local community – avoid pollution and other damaging operations; support for local groups

EXTERNAL Stakeholders - Competitors Stakeholder InterestBusiness Responsibility to Stakeholders Fairness of competitive practices Strategic plans of the business To compete fairly and within the law It is NOT a responsibility of business to provide details of its strategic plans to competitors

Managing Stakeholder Conflict Arbitration (between workers & managers) Advantages: 3 rd party independently resolves issues Disadvantages: no one gets what they want Worker participation (between workers & managers) Advantages: Workers contribute and are motivated to work effectively Disadvantages: Can be a time waster; sensitive information cannot be shared with workers

Managing Stakeholder Conflict Profit Sharing (between workers & shareholders) Advantages: Annual profits are shared with workers before shareholders are paid dividends Disadvantages: Paying workers can reduce retained profits limiting business expansion. Share ownership schemes (between workers, managers, and shareholders) Advantages: The right to buy shares at a specific price or time allows workers to benefit from the success of the business and aligns the employee interests with the shareholders. Disadvantages: Administration costs; decline in employee motivation if stock price falls; dilution of stock for all shareholders; motivation maybe limited for employees if there is a time requirement to earn shares.