1.20 - Business Stakeholders
The main stakeholders in a business
Stakeholders are individuals or groups with an interest in how a business operates and performs. They can influence or be affected by the business's decisions and activities. The term "stakeholder" is broader than just shareholders, as it includes a wide range of groups both inside and outside the organisation.
Groups of stakeholders in a business
- Owners (or shareholders in limited companies) - Those who invest capital and have a financial stake.
- Customers - People or organisations that buy the business's products or services.
- Suppliers - Providers of materials, goods, or services needed by the business.
- Employees - Workers who provide labour, including managers and their families who may be indirectly affected.
- Local communities - Residents and groups near the business's operations.
- Government and government agencies - Bodies that regulate and tax the business.
- Special interest groups - Organisations like pressure groups focused on issues such as environmental protection or ethical practices (e.g., opposing pollution or animal testing).
- Lenders - Institutions or individuals providing finance, such as banks.
Types of stakeholders: internal and external
Stakeholders can be classified based on their relationship to the business. This distinction helps in understanding how closely they are involved in day-to-day operations and decision-making.
Internal stakeholders
These are groups within the business who are directly involved in its operations:
- Owners
- Managers
- Other employees
External stakeholders
These are groups outside the business but still affected by or able to influence it:
- Customers
- Suppliers
- Local communities
- Government and government agencies
- Special interest groups
- Lenders
Most stakeholders fall into this category.
Roles, rights, and responsibilities of key stakeholders
Each stakeholder group has specific roles they play in relation to the business, along with rights they can expect and responsibilities they must fulfil. These elements help maintain balanced relationships and ensure the business operates effectively and ethically.
Stakeholders and their roles, rights, and responsibilities
| Stakeholder | Roles | Rights | Responsibilities |
|---|---|---|---|
| Customers | Buy products or services, providing revenue that supports business operations and growth. | Receive safe, well-designed products or services that comply with health, safety, and performance laws; obtain repairs, replacements, or compensation for substandard items. | Pay for purchases honestly and on time; avoid theft or false claims about product quality or service failures. |
| Suppliers | Deliver materials or services to enable the business to produce and sell its offerings. | Receive timely payments as per agreements; be treated fairly without exploitation. | Supply items or services as specified in contracts, meeting agreed timelines and quality standards. |
| Employees | Supply labour and skills according to their contracts, supporting business functions. | Receive contracts meeting legal standards (e.g., minimum wage); be paid and treated as agreed; join trade unions if desired in most countries. | Act honestly; fulfil contract terms; cooperate with reasonable management requests; follow ethical codes. |
| Local community | Offer labour and support for business activities. | Be consulted on significant changes affecting them, such as factory expansions or production alterations. | Cooperate reasonably with business plans, like those for growth or infrastructure. |
| Local government | Supply services and infrastructure (e.g., roads, waste management) to enable legal business operations. | Ensure business activities do not negatively impact community life. | Respond to reasonable business needs, such as employee transport or waste services. |
| Government | Enact laws regulating business; maintain stability, law, and order for economic activity. | Expect businesses to comply with laws, produce legal goods, and pay taxes promptly. | Apply laws fairly; prevent unfair competition; promote international trade links. |
| Lenders | Offer various forms of finance to support business needs. | Receive repayments on schedule; collect agreed charges like interest. | Provide the agreed finance amount on time and for the specified duration. |
| Managers | Direct and control resources to achieve business goals. | Have employment contracts; possess authority to perform duties effectively. | Report to other stakeholders; act legally and ethically. |
| Owners/shareholders | Invest capital to fund the business. | Receive profit shares; obtain accurate performance reports. | Establish targets for managers; provide sufficient time and resources to meet them. |