1. Stakeholders in a business
Chapter 5

2. Chapter Overview The different groups affected by business behavior
The relationship between a business and these groups

3. stakeholder groups
5.1

4. Stakeholder Groups
All businesses involve and affect many other people and groups by their activities
Stakeholders are groups or individuals who have an interest in a business
Shareholders are persons or organizations that own a part of a company

5. Who are the Stakeholders?
Owners of the business (i.e. shareholders)
Employees
Managers that take tactical and strategic decisions
Suppliers of goods and services
Banks and other organizations that provide loans
Customers who buy the products
The government, which collects taxes and hopes for high levels of employment
The local community

6. Who are the stakeholders?
_____ are the people who work directly within the business.
External stakeholders
Shareholders
Internal stakeholders
When a business makes decisions, which group outside of the business is affected in some way?
Customers
Employees
Owners
When a company decides it will cut vacation time and increase production hours, which stakeholders will be most directly impacted?
Industry associations
Competitors

7. Who are the stakeholders?
In pairs, choose a company and determine who the stakeholders are

8. Roles, rights and responsibilities of the Stakeholders
Each stakeholder group will have their own objectives
Employees want good rewards, job security, safe work environment, possibility of promotion
Shareholders want financial rewards in return for risk to their investment
Suppliers want to be paid on time
The government will want the business to pay taxes on time

9. Roles, rights and responsibilities of the Stakeholders
Each stakeholder has certain legal rights
Employees have contracts of employment
Owners/Shareholders must be kept informed of all activities
Stakeholders also have responsibilities
In return for wages, employees are expected to complete their tasks to a high standard
In return for payment, suppliers should supply good quality products
Businesses are in a two-way relationship with their stakeholders

10. Stakeholders
Possible rights include
Possible responsibilities include
Employees
To be treated fairly, to be paid fairly, to be kept informed
To work effectively, to turn up for work on time
Suppliers
To be paid on time, to be informed of any potential changes in orders in the future
To provide good quality products meeting the set specifications at the time set
Owners/
shareholders
To receive a share of profits, to be kept informed by management
To treat management fairly
Customers
To be supplied the right quality products on time
To pay on time
Government
To be paid taxes, to have businesses obey the law
To protect businesses, customers, employees and the environment
Managers
To be rewarded appropriately for responsibilities, to have duties commensurate with seniority
To carry out duties to best of ability, to be discrete in handling sensitive business data
Lenders
To be repaid promptly and on time
Not to charge excessive interest rates or to withdraw loans without a reasonable period of notice
The local community
To live in an area that is free from excessive noise or other forms of pollution, to have a say in decisions which impact on the local community and to benefit from employment
To cooperate with the business in its daily activities

11. Case study: gold fields Ghana engages stakeholders
Explain why employees and customers might be Gold Fields Ghana’s major stakeholders.
Discuss the extent to which Gold Fields Ghana may have benefited from holding its “stakeholder forum”.

12. the importance and influence of stakeholders
5.2

13. The interaction between a business’s decisions or actions and its stakeholders
Any business decision can affect stakeholders
Reducing the size of a business would affect employees
Reduced profits would affect shareholders
Increased orders would affect suppliers
Expansion would affect community allowing for greater income to be earned
Creation of more jobs would affect the government regarding taxes
This impact can be both positive and negative
Sometimes one group will benefit and another may suffer
Cutting wages would benefit shareholders, but employees would suffer
Outsourcing would benefit new country’s government, but current community would suffer

14. The interaction between a business’s decisions or actions and its stakeholders
If stakeholders don’t like the changes, they can take various actions to avoid the effects of them
Shareholders can sell their shares
Banks can refuse to lend more or charge more for the business to borrow
Employees can resign
Employees can strike
Suppliers can refuse to supply or demand better payment terms

15. Accountability to Stakeholders
the extent to which an individual or a group is held responsible for a decision or a policy
Social responsibility
the philosophy under which businesses consider the interests of all groups in society as a central part of their decision-making

16. The Shareholder Concept
Businesses have legal responsibilities to their stakeholders
Laws on how products are promoted
Laws on ingredients a manufacturer is able to use
Some businesses will do the legal minimum and no more
They focus mainly on rewarding their owners
They will pay employees what they need to get the job done
They will try to get the lowest cost for supplies (often times threatening to take their business elsewhere if they don’t get it)
They will pay taxes, but invest no more in the local community
The shareholder concept regards rewarding owners as the key business objective

17. The Shareholder Concept
The owner of one or more shares of stock in a corporation is also known as a stockholder
The benefits of being a shareholder include:
receiving dividends for each share as determined by the Board of Directors
the right to vote (except for certain preferred shares) for members of the board of directors
to bring a derivative action (lawsuit) if the corporation is poorly managed
to participate in the division of value of assets upon dissolution and winding up of the corporation, if there is any value

18. Milton friedman
Famous economist who criticized all forms on government intervention in the economy
Argued that governments should not impose a minimum wage
Thought businesses would hire less of a more expensive resource
Also held strong views on business objectives
Businesses can best meet their social responsibilities by making the largest possible profit and using resources efficiently (legally)
Believer in the shareholder concept

19. The Stakeholder Concept
Businesses are increasingly trying to work with their shareholders and regard them more as partners
Cooperative approach
Better in the long term to treat stakeholders well
Aligns with Corporate Social Responsibility
Stresses benefits of treating stakeholders above what the law requires
Paying suppliers fair price for their work
Showing concern about employees careers and welfare
Being environmentally friendly

20. Case study: hitachi
Explain two ways in which Hitachi could claim to be a good corporate citizen.
Discuss whether or not working with stakeholders helps Hitachi.

21. The Stakeholder Concept
Businesses are made up of people with different opinions and views of what to achieve
Any major decision will leave some stakeholders better off, and some worse
This means almost any decision will be met with opposition from some stakeholders
Every decision involves different stakeholders
Managers must consider the power each stakeholder has
More likely to listen to unions, investors who own 60% of the company, key suppliers, etc.
Less likely to listen to individual employees, investor owning 1% of the company, supplier offering a product that’s not unique, etc.

22. Stakeholder map Groups in “D” are likely to influence decisions a lot
Major investors
Managers need to keep this group happy
Stakeholders in “A” are not very interested and are not powerful
Milk delivery service
Local news agent

23. How Conflict Might Arise From Stakeholders Having Different Aims
It might not be possible to please all groups all of the time
Investors may push for lower costs to increase their profits
May lead to lower pay for employees.
In order to meet the demands of the stakeholders the business may need to relocate to cheaper production facilities overseas
In order to meet government demands to be more environmentally friendly, a business might raise prices for the customers
A business will have to juggle different demands and compromise

25. Case study: foxconn changes its working practices
Explain why some of Foxconn’s stakeholders might not have approved of the changes that the company has implemented.
Discuss whether Foxconn has taken the right decision by introducing these changes.

26. How Changing Business Objectives Might Affect Stakeholders
As business objectives change, its relationship with stakeholders may change as well
A demand for higher profits will always drive to reduce costs and less investment in training, welfare and career development
A focus on better quality might lead to better treatment of suppliers
A greater emphasis on being environmentally friendly may lead to more concern for society and focus on recycling, less waste, etc.
It is very difficult for managers to make decisions to satisfy all stakeholders simultaneously
Especially true at times of change when major strategic decisions may be forced upon them