Shareholders Vs Stakeholders

Question 1

What’s a stakeholder

Answer 1

A person, group or organisation who can affect or be affected by organisations actions

E.g. consumers, employees, owners, suppliers

Question 2

Who are internal stakeholders

Answer 2

Groups of people inside the business who have a direct interest in its survival and well-being

E.g. business owners, employees, managers

Question 3

Who are external stakeholders

Answer 3

Range of groups outside a business may have an interest in its activities

E.g. customers, shareholders, suppliers, government, environment

Question 4

Businesses should do what to take into account objectives of stakeholder groups

Stakeholder influence

Answer 4

• Recognise interests of other stakeholders and take their views into account when making decisions
• Communicate with stakeholders and consult them before making radical changes
• Ensure benefits of enterprise are shared fairly after taking into account risk and effort of each group

Question 5

Shareholder approach on businesses

Answer 5

-Many businesses focus on profit and growth so shareholders gain highest dividends as possible and to raise the share price

Question 6

Potential conflict between shareholders and other stakeholders

Shareholders and employees

Answer 6

• Meeting objectives of employees like higher wages and better working conditions. There’s likely to be a negative impact on profit and dividends
• Conflict will arise if shareholders think regards to employees shouldn’t come at the expense of dividends

Question 7

Conflict between shareholders and customers

Answer 7

Charge a higher price to gain higher dividends, however this will reduce purchasing power of buyers and cause demand to decrease

Question 8

Conflict between shareholders and managers

Answer 8

If managers prioritise their objectives like satisfying customer needs over maximising profit, dividends may suffer