The first and most important includes employees, customers and investors, without whom the company will not be able to operate. Difficulties arise when we modify the list of priorities, for example,. When we put shareholders first and leverage the business of profits. Or when you consider that employees are more important than customers.
Sometimes we see this in some offices where staff are too busy with their own business to take care of the customer. A big problem arises if item 2 of the above list is divided and becomes 2nd top executives and 2b ordinary employees. This can lead to a situation where the executive team puts its own requirements first, especially in terms of bonuses, stock options, and other monetary rewards. We have seen recent examples of how divisive and provocative this can be.
Customers Customers are external stakeholders because, although they affect the daily operation of the company, they do not work within the company. Customers are interested in Tesco because they want to buy its products (food, clothing, electronics, etc.). Tesco has an interest in customers because it needs customers to buy its products and services in order to earn money. Customers are interested in McDonald's because they want to buy their food products quickly and at a reasonable price.
McDonald's is interested in customers because they need them to buy their food and be satisfied enough to come back and earn money. I believe that customers have the greatest influence on these companies because without them companies would not exist. Employees are internal stakeholders because how is that for a comment? Before 1974, you needed a broker to buy or sell shares from you. Now everyone, including you and me, can trade shares.
It's no longer just about people genuinely investing in companies for long-term benefits (their own and the company's), but about how much money we can make in the shortest possible time. Nowadays, shareholders are no longer “shareholders” in the true sense of the word: people who have a genuine interest in the long-term benefit of the company, that is,. The current shareholders, for the most part, are made up of institutions (investment funds, pension funds, etc.). These measures are government attempts to curb the excesses of these two groups of stakeholders: shareholders (merchants) and senior executive staff.
But is it too little and too late? The United States government (as well as governments elsewhere) began to propose guidelines for reducing executive salaries. Regulations passed by Congress limit the bonuses of the 25 top executives to no more than a third of their salary. The problem is that these executives are not likely to be subject to a salary cap. The legislation ends up being meaningless.
And as for the guidelines, who is likely to follow them? In other countries, laws have been passed to allow shareholders to control the salaries and bonuses of senior executives. For example, in Australia, the Australian Companies Act states that if 25% or more of the votes cast at two consecutive general meetings are opposed to the adoption of a compensation report (for salaries and bonuses of senior executives), the company must formally respond by asking all members of the board of directors, except the managing director, to stand for re-election within 90 days. In addition, key management personnel whose compensation is indicated in the compensation report are excluded from voting, ensuring that those with an obvious interest in the outcome cannot vote. However, for me, these types of regulations don't address the issue.
Still, it leaves the decision in the hands of the two most powerful stakeholder groups: the owners and the staff. After all, if the company is doing well and stock prices are high, why would shareholders want to reduce executive salaries? It's in their best interest to keep their staff stakeholders happy. Returning to the group of shareholders and stakeholders, now they are no longer owners, but traders. We can't go back to the era before the 1970s.
So why not have two classes of shareholders? The first class would be those who trade short-term stocks. They would not be eligible to vote as shareholders. In the strictest definition of the term, these merchants are not part of the shareholder group anyway, they are rather suppliers who provide capital to the organization. New Online Course: Summaries of the 50 Best Business Books You Should Read.
In business, a stakeholder is any individual, group, or party that has an interest in an organization and the results of its actions. Some common examples of stakeholders include employees, customers, shareholders, suppliers, communities, and governments. Different stakeholders have different interests, and companies often face trade-offs as they try to please them all. Employees have a direct stake in the company, as they earn income to support themselves, along with other benefits (both monetary and non-monetary).
Depending on the nature of the company, employees may also have interests in health and safety (for example, in the transportation, mining, oil and gas, construction industries, etc.). Investors include both shareholders and debt holders. Shareholders invest capital in the business and expect to earn a certain rate of return on that invested capital. Investors are often concerned about the concept of shareholder value.
This group includes all other providers of capital, such as lenders and potential buyers. All shareholders are inherently stakeholders, but stakeholders are not inherently shareholders. Communities are the main stakeholders of the large companies located in them. They are affected by a wide range of factors, including job creation, economic development, health and safety.
When a large company enters or leaves a small community, there is an immediate and significant impact on employment, income and spending in the area. In some industries, there is also a potential health impact, as companies can alter the environment. Governments can also be considered important stakeholders in a company, as they collect taxes from the company (corporate income taxes), as well as from all the people it employs (payroll taxes) and other expenses incurred by the company (sales taxes). Governments benefit from the overall gross domestic product (GDP) to which companies contribute.
Companies often struggle to prioritize stakeholders and their competing interests. When stakeholders are aligned, the process is simple. However, in many cases, they don't have the same interests. For example, if shareholders pressure the company to reduce costs, it can lay off employees or reduce their salaries, presenting difficult compensation.
Read more about Jack Ma's priorities for stakeholders here. Much of the prioritization will be based on the stage the company is in. For example, if it's a start-up or early-stage company, customers and employees are more likely to be the stakeholders considered most important. If it's a mature, publicly traded company, shareholders are likely to be front and center.
At the end of the day, it's up to the company, the CEO and the board of directors to determine the appropriate classification of stakeholders when competing interests arise. This is an important distinction to make. An interested party is anyone who has some type of interest in a company, while a shareholder is a person who owns shares (shares) in a company and therefore has an equity interest. Customers are an often overlooked stakeholder in a company, due to the fact that they are not a legal part of the company in the same way as employees or investors.
However, it could be argued that customers are the most important stakeholders a company can have, because without them, no business can survive. Depending on the type of company, customers can be individual consumers or other companies and their participation in the company is related to the product or service offered and the quality-price ratio offered by a company. Being inside a company, employees are an obvious stakeholder in any business. From entry-level positions at the bottom of the hierarchy to the top executives of larger companies, employees have the ability to both impact and be affected by the business.
Employees can have a significant impact across the company with the quality and consistency of their performance and, at the same time, are affected by the company when it comes to issues such as income and job security, benefits, job satisfaction and work culture. As an important source of funding for many startups, investors have the ability to directly influence the business with the amount of capital they decide to invest and sometimes hold a seat on the company's board of directors. On the contrary, investors are affected by the company's performance, as that determines the return they will get on their investment. Governments, both local and national, are direct stakeholders in businesses, collecting money from them through taxes such as VAT, corporate tax and employee income tax, as well as other forms of income generation, such as National Insurance contributions and business rates.
The local community is a particularly important stakeholder when it comes to larger companies, although it can be considered a stakeholder of a company of any size. The way a business operates can have a significant impact on the surrounding community, whether through job creation, acts of corporate social responsibility, investment in infrastructure, environmental impact (both positive and negative), and investment in the local economy. Ultimately, different companies will prioritize their stakeholders in different ways. Socially conscious companies can consider their relationship with the local community to be paramount, while large publicly traded companies can subscribe to the Friedman Doctrine, according to which a company's only responsibility is to deliver benefits to its shareholders.
How you prioritize stakeholders is up to you, but by employing an efficient stakeholder management system, you can maintain and nurture those relationships over the long term. When it comes to the relationship with one of the most important stakeholders, employees, the risks posed by difficult relationships can be mitigated through employer liability coverage, which is a legal requirement for any company that employs staff. If an employee were injured in the course of their job or were to file a lawsuit against the company for an issue such as workplace harassment, discrimination, or unfair dismissal, employer liability coverage would help pay for the legal and compensation costs involved. .