Stakeholders

A stakeholder is anyone who is affected by the performance of the company, while shareholders own one or more shares in a company, which makes each of them a part-owner of the company.

How it works

Because shareholders part-own the company, they have the right to vote on how it is managed and to receive a share of its profits. All shareholders are stakeholders, since the performance of the company has a direct impact on the value of the shares they own: when the company does well, the share value rises, and when it performs badly, the share value falls However, stakeholders can also be non-shareholders— individuals or groups who have an interest in what the company does or whose financial situation depends on the company. Some stakeholder groups are interested in a company mainly for its ethical treatment of workers, sustainable approach to the environment, and attitude to society. These are known as environmental, social, and governance (ESG) criteria.

Stakeholders’ areas of interest

Stakeholders have no direct involvement, but believe that companies have a responsibility to the communities they operate in, to respect the environment, human rights, and animal welfare.

Nongovernmental organizations

❯ Contribution to enviromental and social causes

❯ Legal compliance

Community

❯ Impact on local inhabitants

❯ Concern for broader social welfare

Stakeholders with economic and ESG concerns

Stakeholders use ESG—a recognized part of policy and reporting for most companies—to evaluate corporate behavior and to determine future financial performance. Concerns range from profits to ethics.

Government

❯ Tax payments

❯ Legal compliance

Shareholders

❯ Ability to pay dividend

❯ Increase in share value

Customers

❯ Quality product

❯ Good value

❯ Customer service

Trade unions

❯ Treatment of workers

❯ Fair pay, benefits, and working conditions

Suppliers

❯ Ability to pay debt

❯ Enough liquidity

Employees

❯ Pay and benefits

❯ Longevity of the company

❯ Employment prospects

Lenders

❯ Ability to repay loans

❯ Integrity of management

❯ Financial strengths of the company

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Stakeholders in action

Compared with other stakeholders, shareholders have the most interest in the financial performance of a company. They are also forced to take an interest in how seriously the company takes its corporate social responsibility (CSR), whether or not they are socially and environmentally conscious themselves. Several high-profile cases have shown how stakeholder reaction has caused a significant decline in share prices. By using social media, stakeholders can generate a storm of public disapproval, leading to angry consumers and nervous investors