Chapter 11: Stakeholders Flashcards
1
Q
The relationships of stakeholders with a company PACAI
A
- Principal – provides capital to the company and expects a return - fixed or variable returns exist
- Agency – appointed by the company to perform a specific role (directors, trustees, managers)
- Controlling – supervise the principals or agents; aim to minimise risk faced by various parties (regulators, government, professional bodies)
- Advisory – advises the principles or agents
- Incidental – affected by the behaviour of principals or agents
2
Q
How to manage agency risk BIC ACT
A
- Business plan and strategy should reflect interest and requirements of stakeholders
- Interest and objectives of stakeholders of stakeholders understood
- Communication needs of stakeholders acknowledged
- Align interest as far as possible
- Communicate misalignment and resulting action with stakeholder
- Transparent communication
3
Q
List of stakeholders GRAP DECS RCP
A
- Government
- Regulators
- Audit
- Public
- Directors
- Employees
- Customers
- Shareholders
- Ratings agencies
- Creditors
- Partners
4
Q
Areas where agency risk can arise MELD ERA
A
- Merger aversion
- Employee remuneration
- Low risk management decisions
- Dominant CEO risk (Hierarchy risk)
- Expected returns of finance providers
- Regulatory misalignment
- Asset allocation of pension schemes
5
Q
The importance of the separation of ownership IEC
A
- Expertise without capital
- Invest without getting involved
- Continuity of management despite ownership changes
6
Q
Benefits and pitfalls of strategic partnerships PENS WRIC
A
- Product development is faster
- Economies of scale achieved
- New markets accessed
- Share financial risks
- Wasted resources
- Reputational damage
- IP lost and conflict about IP ownership
- Conflict of interest
7
Q
Risk perspective of stakeholders determined by TRAC
A
- Term of interest of stakeholder: Path of least resistance vs. path of most benefit
- Remuneration/Investment return of stakeholder
- Appetite for risk: Risk-reward structure for the stakeholder
- Career growth prospects of stakeholder: Hierarchy & takeovers of a company
