Stakeholders in Business

SOCIETY AS Presented by:
STAKEHOLDERS Dr Urvashi
Anand Ohri
MODULE:3
CHAPTER OVERVIEW
 The different groups affected by business behavior

 The relationship between a business and these groups
STAKEHOLDER GROUPS
STAKEHOLDER GROUPS
All businesses involve and affect many other people and groups
by their activities
Stakeholders are groups or individuals who

have an interest in a business
WHO ARE THE STAKEHOLDERS?
 Owners of the business (i.e. shareholders)

 Employees
 Managers that take tactical and strategic decisions
 Suppliers of goods and services
 Banks and other organizations that provide loans
 Customers who buy the products
 The government, which collects taxes and hopes for high
levels of employment
 The local community
Stakeholders Possible rights include Possible responsibilities include
Employees To be treated fairly, to be paid fairly, to be kept To work effectively, to turn up for work on
informed time
Suppliers To be paid on time, to be informed of any To provide good quality products meeting the
potential changes in orders in the future set specifications at the time set
Owners/ To receive a share of profits, to be kept informed To treat management fairly

shareholders by management
Customers To be supplied the right quality products on time To pay on time
Government To be paid taxes, to have businesses obey the To protect businesses, customers, employees
law and the environment
Managers To be rewarded appropriately for To carry out duties to best of ability, to be

responsibilities, to have duties commensurate discrete in handling sensitive business data
with seniority
Lenders To be repaid promptly and on time Not to charge excessive interest rates or to
withdraw loans without a reasonable period
of notice
The local To live in an area that is free from excessive To cooperate with the business in its daily
community noise or other forms of pollution, to have a say activities
in decisions which impact on the local
community and to benefit from employment
THEORY OF THE FIRM
Theory of
the Firm
The
The ownership
Stakeholder
theory of the
theory of the
firm
firm
The
The descriptive The normative
instrumental
argument argument
argument
Descriptive: This approach examines stakeholder salience, or the importance of
each stakeholder group to a company. This approach acknowledges that every
stakeholder group has its own interests that affect the company in various ways,
and the company must determine a fair system to balance the interests of each
group.
Instrumental: This approach uses data to determine the appropriate stakeholder

management method to achieve the company's financial goals.
Normative: The normative approach establishes corporate ethical guidelines.

Why Is Stakeholder Theory Important?
To identify, understand, and engage with stakeholders, a company can conduct

stakeholder engagement research and stakeholder analysis. The benefits of
engaging stakeholders include:
•Shared value creation: Business leaders who factor stakeholder theory and
ethical responsibilities into the decision-making process create a shared value
between the business and society.
•Financial gain: When all stakeholders in a company feel valued, a company's

public reputation improves, which can lead to financial profit. Employees will
likely be more productive, customers more loyal, and financiers more trusting
of the company.
•Societal gain: The tenets of stakeholder theory can encourage scientific

innovation, improve a company's local community, create a healthy
competitive market for other companies, and benefit the mental health of all
stakeholders.
THE STAKEHOLDER CONCEPT
Different Kinds of
Stakeholders
Market Non-market
stakeholders stakeholders
There are two different groups of stakeholders:
Market stakeholders include employees, suppliers,

customers, owners, and competitors.
Non-market stakeholders consist of the media,

community, government, and societal groups.
STAKEHOLDER POWER
Stakeholder Power
economic informational political

Voting power legal power
power power power
THE DYNAMIC ENVIRONMENT OF
BUSINESS
a) Evolving Government Regulation of

Business.
b) Growing Globalization.
c) Emphasis on Ethical Values.
d) Changing Societal Expectations.
e) Dynamic Natural Environment.
f) Explosion of New Technology.

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SOCIETY AS Presented by:

 The different groups affected by business behavior

Stakeholders are groups or individuals who

 Owners of the business (i.e. shareholders)

Owners/ To receive a share of profits, to be kept informed To treat management fairly

Customers To be supplied the right quality products on time To pay on time

Managers To be rewarded appropriately for To carry out duties to best of ability, to be

Instrumental: This approach uses data to determine the appropriate stakeholder

Normative: The normative approach establishes corporate ethical guidelines.

To identify, understand, and engage with stakeholders, a company can conduct

•Financial gain: When all stakeholders in a company feel valued, a company's

•Societal gain: The tenets of stakeholder theory can encourage scientific

Market stakeholders include employees, suppliers,

Non-market stakeholders consist of the media,

economic informational political

a) Evolving Government Regulation of

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