Distinguish Shareholders On The Management Of A
Distinguish Shareholders On The Management Of A

Distinguish Shareholders On The Management Of A

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  • Pages: 5 (2172 words)
  • Published: October 16, 2017
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Introduction

This paper specifically tries to distinguish between shareholder and stakeholder in business context.

Firstly, there will be analysed main ideas of stakeholder theory, main principles of it. Secondly, the importance and characteristics of stakeholder interdependence will be shown. Thirdly, clear identification of main stakeholder groups and relationship between those groups will be outlined. In order, to distinguish shareholders from other stakeholders there will be paragraph analysing identity of this group.This analysis is followed by exceptionally important rights of shareholders which are giving them power to influence both company’s direction and through this other stakeholders.

Stakeholder theory and concept According to Freeman stakeholder (1984) can be defined as any individual or group which is affected by or can affect achievement of the organization’s objectives (Freedman and Miles 2006). In this context organization is seen as a grouping of stakeholders and its purpose should be to manage their interests, needs and viewpoints.The fundamental role of stakeholder management is lying on top- level managers. Freeman in whose seminal work (1984) emerged new conception of stakeholder theory has elaborated two principles of this model as follows: 1.

The stakeholder – enabling principle. Corporations shall be managed in the interests of stakeholders. 2. The principle of director responsibility. Directors of the corporation shall have a duty of care to use reasonable judgment to define and direct the affairs of the corporation in accordance with the stakeholder – enabling principle. Freidman and Miles (2006

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)So stakeholders are those individuals or groups who depend on the organization to fulfil their own goals and on whom, in turn, the organization depends.

In other words, any actors in the environment that is affected by an organization’s decisions and policies or/ and can influence the organization traditionally can be defined as stakeholders of an organisation. Individuals may belong to more than one stakeholder group and stakeholder groups can interact with each other in different ways, it depends on issue and situation at particular moment. Specific strategies usually trigger off the formation of stakeholder groups.Identifying the stakeholders Having in mind stakeholder theory organisation should account interests of two main stakeholder groups.

Internal stakeholders; who have to run business, for example, the managers and employees. External stakeholders; who have stake in the outcome, for example, the shareholders, government, customers, suppliers and other interested parties. Together these groups form the stakeholders – the individuals and groups who have an interest in the organization and may therefore wish to influence its purpose, mission and objectives.

In simple words, internal stakeholder group can be perceived as those who ‘runs’ or owns business, this includes executive officers, Board of Directors, employees and external stakeholders as those who invest, supply or use its product/ service, typical example of external stakeholders of the organization would be financial institutions, customers, suppliers, shareholders and unions. They can seek to influence company’s strategy through their links with internal stakeholders. Concept of stake holding can be defined as those working in the organization or those who have different interest in organisation.Here are few examples of how some groups have stake in a company: shareholders in public or private company has bough

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some shares, in other words invested money to the business in return expects good future dividends or selling share at a better price in the future; banks which have lent the organization money and expects to be paid back with interest; governmental institutions concerned about employment, taxes and other economic or legislative issues which can be affected by organisations policies or actions; customers which uses product or service can be affected by price, quality and others.Stakeholder groups can have formal interest, such as shareholder through owning companies shares, or informal, such as government legislation influence on a private company.

All stakeholders can be expected to be interested in and possibly wish to influence the future direction of the organization (Lynch, 2003). Stakeholder analysis can be used to identify a link between internal analysis and external analysis. Internal stakeholders are the management, the different departments within the organization and its employees. The eeds, wants and motivating factors for each of these groups are different. What may please management could cause unease among the workforce. On their own, any group is able to completely influence the direction and activities of the company.

There are groups, however, who posses greater power than others. External stakeholders cannot simply be identified or listed; they differ between organizations and industries. However, external stakeholders may be grouped into segments which are frequently involved in the organization’s activities: owners (shareholders), suppliers, customers and financiers.Other groups which could also have stakeholder status for an organization are the government (central and local), guilds and associations, and pressure groups who may or may not have an interest in the success of an organization with its present or future activities (Cook & Farqularson, 1998). It is important to understand that different groups of stakeholders vary in both the level of interest in organisations strategy and extent to which it can influence it.

Stakeholders’ relationship Stakeholder theory which main principles were overviewed above and empirical research (Clarkson, 1995) indicates that companies do explicitly manage their relationships with different stakeholder groups. Donaldson & Preston (1995) point out that although this is descriptively true, companies appear to manage stakeholders for both instrumental (i. e. , performance based) reasons and, at the core, normative reasons.Building on the work of others, Clarkson (1995) defines primary stakeholders as those “without whose continuing participation, the corporation cannot survive as a going concern,” suggesting that these relationships are characterized by mutual interdependence.

He includes here shareholders or owners, employees, customers, and suppliers, as well as government and communities. This view of corporations as fundamentally relational, that is, as a “system of primary stakeholder groups, a complex set of relationships between and among interest groups with different rights, objectives, expectations and responsibilities” (Clarkson, 1995: 107).As Clarkson (1995) argues, making corporate social responsibility a business objective is best undertaking by changing intangible social and environmental issues into tangible stakeholder interests. Thus stockholder approach fits perfectly within the view of the company that strives to deliver sustainable value to its various stakeholders. Shareholder A shareholder is any person who owns stock issued by a corporation- so a shareholder is an owner of that business.

Shareholders get to vote

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