Stakeholders in a Business

March 2, 2024

Stakeholders Summary:
Definition: Stakeholders are individuals or groups with an interest in or direct impact on a business’s
performance.

Table 1: Stakeholders’ Roles, Rights, and Responsibilities

Stakeholders Roles Rights Responsibilities
Internal Stake-
holders
1. Sharehold- - Provide finance - Receive a share of profits - Set targets for managers;
ers/Owners give managers time and
resources
2. Workers - Provide labor services - Receive regular payment - Seek job satisfaction and
security; benefit from mo-
tivation
3. Managers - Control business deci- - Higher salaries; secure - Report to stakeholders;
sions job act legally and ethically
External Stake-
holders
4. Customers - Purchase goods and ser- - Quality products; com- - Honest payment; not to
vices pensation for failures steal; avoid false claims
5. Government - Pass laws; provide stabil- - Expect legal compliance; - Treat businesses equally;
ity taxes on time prevent unfair competi-
tion
6. Banks - Provide financial help - Repayment with interest - Provide agreed finance
on time and for the agreed
period
7. Local Commu- - Provide labor services - Consultation on major - Cooperate on expansion
nity changes and other plans
8. Local Govern- - Provide local services - No adverse effects on the - Meet reasonable requests
ment community for local services

Business in Action 5.1 Example:

0. External Stakeholders in Powerful Governments:
• Government and consumers are influential external stakeholders.
• Limited influence of media, suppliers, lenders, and environmentalists.
0. Corporate Social Responsibility (CSR):

• Businesses are becoming more accountable to stakeholders.

• CSR involves understanding stakeholder aims in decision-making.
0. Responsibilities to Customers:

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 • Meeting demands for quality, design, durability, and fair pricing.
• Legal compliance, accurate advertising, and ethical treatment are essential.
0. Responsibilities to Suppliers:

• Quality of products depends on reliable suppliers.

• Clear guidance and fair treatment foster supplier loyalty.
0. Responsibilities to Employees:
• Compliance with employment laws is essential.
• Employee-focused decisions include training, job security, and involvement in decision-making.

Example 5.2:
1. Issues in UK Construction Industry:

• Lack of permanent contracts and pension schemes.

• Dangerous working conditions with a high rate of fatalities.
2. Long-term Impact of Neglecting Employee Responsibilities:
• Negative impact on company reputation.
• Difficulty in recruiting skilled workers.
• Potential legal and ethical consequences.

Responsibilities to Local Community:

• Key Considerations:
• Secure employment to reduce local fear of job losses.
• Use local suppliers to boost income.
• Minimize adverse environmental effects.

• Benefits:
• Increased likelihood of planning permission.
• Contracts favor businesses with community involvement.

Example 5.3:
• Shell Foundation’s Flower Valley Project:
• Supports entrepreneurs in low-income countries.
• Promotes sustainability, fair prices, and community development.
• Part of Shell’s comprehensive CSR policy.

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 Table 2: Business Decisions: Impact Summary
Business Impact on Employees Impact on Local Com- Impact on Customers
Decision munity
Build a
New Fac- • More jobs, potential • More jobs, increased • Potential lower
tory skill requirements spending; concerns prices, concerns
about disruption about quantity
focus
• Increased consump-
tion if prices are
competitive

Horizontal
Integration • More promotion op- • Mixed impact on • Possible lower
- Takeover portunities, poten- jobs, potential prices, concerns
tial job losses government inter- about reduced com-
vention petition
• Possible consumer
boycott if prices rise

Purchase
of Au- • Training, promo- • Local IT benefits, • Improved quality,
tomated tion; potential job fewer unskilled jobs; more variety; poten-
Machines loss for untrained demand for retrain- tial delays
workers ing
• Increased demand
for quality products

Stakeholder Reactions
Build a
New Fac- • Job seekers, unions • Opposition seeks to • Trade unions might
tory seek higher pay refuse permission, demand higher pay;
organizes petition possible consumer
or boycott boycott

Horizontal
Integration • Possible industrial • Encourages govern- • Possible consumer
- Takeover action, unions de- ment intervention, boycott
mand higher pay possible consumer
boycott

Purchase
of Au- • Industrial action by • Demand for retrain- • Increased demand
tomated redundant workers ing, potential in- for quality
Machines creased demand for
quality

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Location Machu Picchu, globally renowned cultural and heritage site.
Issue Controversial decision to build a new airport near Machu Picchu, facing widespread oppo-
sition.
Perspectives
• Tourist Industry & Government: Support the airport for economic growth, job cre-
ation, and increased tax revenues.
• Opposition (Archaeologists, Historians, Conservationists, Local Community):
Strongly against due to potential harm to the historical landscape.

Art Histo-
rian’s View • Leads a petition against the airport.
• Highlights the built landscape’s historical and cultural significance.
• Warns that airport construction would result in destruction.

Themes
• Conflict of Interests: Struggle between economic benefits from tourism and the preser-
vation of cultural heritage.
• Stakeholder Divergence: Varied interests among stakeholders, especially between the
tourism industry, government, and preservation advocates.
• Cultural Preservation: Concerns about potential harm to Machu Picchu’s historical
significance and built landscape from the airport’s construction.

Table 3: Conflicts of Stakeholders’ Objectives

Summary Stakeholders’ unique aims may lead to conflicts, e.g., workers seeking higher
salaries vs. shareholders aiming for increased profits. Business growth objec-
tives may clash with the community’s desire for clean environments.
Handling Conflicts arise from differing aims. Traditional views may resist meeting other
Conflicts stakeholders’ needs, while a stakeholder approach suggests compromises, such
as gradual closures or adjusting project sites.
Management Senior management faces complex decisions, prioritizing stakeholders and as-
Decisions sessing potential revenue losses due to unmet interests. Compromises play a
key role in resolving conflicting stakeholder interests.

Table 4: Impact on Stakeholders of Changing Business Objectives

Dynamic Changing corporate objectives due to dynamic environments significantly im-
Business pact stakeholders. Examples include Volkswagen shifting to electric cars and
Environ- The Body Shop’s focus on cost-cutting, conflicting with social and environmen-
ment tal objectives.
Stakeholder Changes in objectives affect stakeholder groups differently. Employees may lose
Impact jobs, customers experience reduced choices, while owners’ returns and lenders’
reassurance become focal points.

Table 5: Palm Oil Production - Activity 5.5

Versatile Palm oil’s versatility benefits customers and employs millions but raises envi-
Raw Mate- ronmental and social concerns due to deforestation and displacement of native
rial populations.
Industry Palm oil’s negative impact on wildlife and communities tarnishes its image.
Image Ethical codes aim for sustainable production, yet accusations of irresponsible
practices persist. Balancing profitability and consumer demands pose chal-
lenges for socially responsible businesses.
Figure 5.4 Illustration of a deforested area in Borneo for palm oil production.