STAKEHOLDER THEORY

Presented by,
Kheerthana.R
Kiruthika. G
Kavi Priya.k
Deepa.R.
Devi. D
 STAKEHOLDER THEORY

The word “stakeholder” was first recorded in 1708 as “A

person who holds the stake or stakes in a bet”;

Recent definition:,
“A person with an interest or concern in something”
“Any group or individual who can affect, or is affected by, the
achievement of a corporation’s purpose.”
 The objectives of a business or other
organization, there are two traditional view

The Stakeholder Concept

The Shareholder Concept

 Goals relating to
Shareholder earnings per share,
total sales,
concept numbers employed,
Increasing the Stakeholder measures of employee
welfare,
value for the
shareholders
concept manager satisfaction,
environmental
protection
Profit And welfare of the
maximization. society
• The Stakeholder Concept in setting business objectives is the
recognition that businesses are affected by the "environment"
in which they operate.
• Businesses come into regular contact with several
"stakeholder groups“ like,
Who Are Business Stakeholders?
 Why Stakeholders are included?

Employees

• The employees of a company have an interest in the company

because it provides their livelihood.
• Companies need to consider and work with the employees’
trade unions.
 Financial Institutions (Banks and Financial institutions)

• Providers of credit want to be confident that the companies to which they

lend are going to be able to repay the debts

• They will seek assurance from the annual report and accounts and from
various management accounts and forecasts that companies produce.

• So the company must maintain the confidence of providers of finance to

ensure that no calls are made for repayment of funds.
 Suppliers

Suppliers have an interest in the companies that they supply on two

grounds
• Having supplied the company with goods or services, they want to be sure
that they will be paid for these in a timely fashion.
• They will be interested in the continuance of the company because they
will wish to have a sustainable outlet for the goods and services.
 Customers

• A company’s customers will want to try to make sure that they can buy the
same product time and again from the company.
• Customers are also aware of social , environmental and ethical aspects of
corporate behavior and will try to ensure that the company supplying them
is acting in a corporately socially responsible manner.
 Society/Community

• Companies will be employing a large number of local people and if the

company’s fortune declines unemployment may rise and may lead to part
of the workforce moving away from the area to seek job elsewhere.
• This will have effect on the schools, housing market and on other things
also.
• Local communities will be concerned about the environmentally friendly
way.
 Government

The government has an interest in companies

• Concerning the local and environmental groups

• Corporate trends like employment levels, monetary policy, and market and
supply and demand of goods and services
• Fiscal policy, capital allowances , incentives for investing in various
industries or various parts of the country and the taxes are raised from the
companies.
 RIGHTS OF STAKEHOLDERS

CUSTOMERS RIGHTS
• Customers have the right to be treated with courtesy and respect.
• Customers have the right to timely service when seeking service in person
and by phone.
• Customers have the right to receive service from knowledgeable,
competent and cooperative staff.
• Customers have the right to complete, accurate, reliable information and
feedback.
• Customers have the right to consistent and fair application of codes, and
rules.
• Customers have the right to request second opinions and to formally appeal
staff decisions.
• Customers have the right to communicate their dissatisfaction about staff,
Department policies, procedures or requirements
 INVESTORS RIGHTS

• To receive the share certificates, on allotment or transfer as the case may be,
in due time.
• To receive copies of the abridged Annual Report, the Balance Sheet and the
P&L A/c and the Auditors' Report.
• To participate and vote in the general meeting, either in person or in proxy.
• To receive dividends in due time once approved in General Meetings.
• To receive corporate benefits such as rights, bonus, etc. once approved.
• To apply to the Company Law Board (CLB) to call or direct the Annual
General Meeting.
• To inspect the minute books of the General Meetings and to receive copies
thereof.
• To proceed against the company by way of civil or criminal proceedings.
• To apply for the company's winding-up.

• To receive the residual proceeds.

 SHAREHOLDERS RIGHTS

• Voting • Loans

• By Laws • Policies

• Annual General meetings • Reports and notices

• Dividends • Participation and services

• Accounts • Credit unions

 EMPLOYEES RIGHTS

• To be aware of the hospital wide policies

• To avail the benefits being extended by the organization

• If any one believes that he/she has been the victim of harassment, or know
of another employee who has, the right to report it immediately to the HR
department

• To be treated considerately and respectfully, and not discriminated on the

basis of caste, religion, sex or socio-economic background
• To be aware of the terms and conditions of his/her employment before
joining the organization
• To be entitled to the terms and conditions as specified in the
appointment letter
• To seek clarity on the targets to be achieved/job to be performed, and
the roles/responsibilities associated with the task to be performed
• To be aware of all the rights being conferred on an employee during
the course of employment
 RESPONSIBILITY OF STAKE HOLDERS

SHAREHOLDERS
• Appointing the responsible person to the board for checking the shares and
books of accounts. That person should be responsible, talent, values and
ethics to the organization.
• Attend the annual general meeting and vote attentively.

• Keeping current records with the Shareholder Relations Department.

(E.g.,)Address Changes; Name Changes; Stock Will Changes; and
Direct Deposit Changes to send annual reports, newsletters, proxies, or
dividends.
Contd.,

SUPPLIERS
• Dedication to the company by giving good quality product and latest
updated products.
• All documentation required under the Transportation of Dangerous Goods
Act and Regulations should be provided at the time of shipment. Containers
of "dangerous goods" should be appropriately labelled prior to shipment.
COMPETITOR
• Proactive strategy.
• Spend more time on research than competition.
Contd.,

GOVERNMENT
• Make sure that companies act in socially responsible in taking account of social, ethical,
and environment considerations. (e.g.) Tata – West Bengal
• Taking care of licensing procedure.
EMPLOYEE
• First responsibility of every employees is to know the companies rules and responsibility,
vision and mission, ethics and values.
• Suggestions and problems should be said properly to the company like any accident,
injury or disease that might be related or affect their work

• It is the responsibility of each employee to promptly notify their supervisor and HR

department of any changes in their personnel data for receiving the compensation
benefits.
Contd.,

• The employee are responsible for ensuring that the equipment allocated to
them or in use in their work is used and maintained in accordance with the
standard operating guidelines.
SOCIETY
• Honour the company by giving a feedback.
• Companies responsibility towards society is not polluting the environment,
reducing the unemployment.
Contd.,

CUSTOMERS
• Informing the company about their requirements properly make sure that the
Supplying them in corporately socially responsible manner.
• Honest response about the product quality to the company (e.g.) feed back
through customer service number or toll free numbers.

FINANCIAL INSTITUTIONS
• Inspect the books of accounts regularly.

• Appoint a responsible person to know whether the funds provided are utilized
properly.
• Helps in taking the right decision in investing the amount.
 ENRON SCANDAL

• In December, 2001 Enron, the seventh largest U.S. corporation, collapsed and produced

the second largest corporate bankruptcy to date in U.S. history

• First, rising stars like former Enron CEO Jeffrey K. Skilling and ex-Enron CFO

Andrew S. Fastow created and implemented business ideas that led to major

problems,.

• Second, among the big ideas was the creation of an “asset light” company by applying

Enron’s trading and risk management skills to power plants and other facilities owned

by “asset heavy” outsiders. To maintain a high credit rating and raise capital,

• Enron was left holding a financial liability of over $5 billion in debt. When its stock

and asset values began declining.

 ITS EFFECT ON STAKEHOLDERS

Shareholders:
• Huge financial losses for institutional and individual investors
• Loss of individual investor trust in the stock market
• Loss of foreign capital credibility in U.S. markets due to crony
capitalism
EMPLOYEES

• Violation of moral right to accurate and timely stock

information
• Devalued economic democratic participation in corporate governance;
employee whistleblower ignored
• Violation of freedom to diversify retirement funds
• Lifetime pensions lost
• Injustice occurred due to disproportional harm inflicted on loyal employees
• Disrespect for the contribution of labor to firm success
Customers:
• Price gouging that unfairly deprived West Coast and other
customers of market alternatives

Government:
• Risks increase in violence to redress grievances or secure
remedies from lower socioeconomic groups
• Eroded public trust in government protection from business

• abuse of power
• Eroded credibility of regulatory standards and their enforcement
Public:
• Risk of tax increases and/or existing public resources allocated to picking
up the pieces of industry sector negligence and malfeasance.

Creditors/Suppliers:
• Loss of business reputation for inadequate due diligence

• Increased risk of future civil litigation

• Unjust, disproportionate harm to trusting creditors and suppliers
• Caving into pressures out of fear of lost business
• Eroded credibility of credit rating agencies and U.S. financial markets due
to perception of crony capitalism
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