Posted 17/10/2016 in Category 1

What is The Role of Stakeholders in Your Business?

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What is The Role of Stakeholders in Your Business?

Definition of a Stakeholder

A stakeholder is any person, organization, social group, or society at large that has a stake in the business. Thus, stakeholders can be internal or external to the business. A stake is a vital interest in the business or its activities. It can include ownership and property interests, legal interests and obligations, and moral rights. Alegal obligation may be the duty to pay wages or to honor contracts. A moral right may include the right of a consumer not to be intentionally harmed by business activities. Stakeholders can:

  • Affect a business
  • Be affected by a business
  • Be both affected by a business and affect a business

A stakeholder is often contrasted against a shareholder, which has an ownership interest in the business. R. Edward Freeman and his book Strategic Management: A Stakeholder Approach (1984) has had a major influence on stakeholder theory.

In and business or company, a stakeholder is usually an investor in your company whose actions determine the outcome of your business decisions. Stakeholders don't have to be equity shareholders. They can also be your employees, who have a stake in your company's success and incentive for your products to succeed. They can be business partners, who rely on your success to keep the supply chain going. Every business takes a different approach to stakeholders. The roles of stakeholders differ between businesses, dependent on the rules and responsibilities laid out at the founding of your company or as your business evolved over the years. The most common definition of a stakeholder, however, is a large investor that has the clout to hold a viable "stake" in your company. 

the Suppliers, retailers, traders, wholesalers dealers etc are also your stakeholders though in some cases indirectly. They also promote, and or having an active say in how your company or business performs over a longer period. How you can meet the end to end services or product most often depends on them too...

The Decision Makers

The most common gathering of stakeholders in a publicly traded company is the board of directors, comprised of high-ranking executives and occasional outsiders who hold large amounts of equity in the company. Any one of these stakeholders has the power to disrupt decisions or introduce new ideas to the company. The board of directors has the power to appoint all levels of senior management - including the CEO - and remove them if necessary. Members of the board dictate the future of the company and are involved in all major business decisions.

The Direct Management or Senior Managers

While the board of directors is a more "hands off" approach to controlling a company, some stakeholders prefer the "hands-on" approach by directly assuming management positions. Stakeholders can take over certain departments - such as human resources or research and development - to micromanage the business and ensure success. In privately owned and publicly traded companies, large investors often directly participate in business decisions on the management level.

The Investors or share holders

Stakeholders are regarded as large investors, who will either increase or decrease their stakes in your company according to your financial performance. Ideally, they act as guardian angels for everyday investors, poring over financial reports and pressuring management to change tactics if necessary. Certain stakeholders, known as activist investors, will make wildly unpredictable investments and divestitures in order to move the share price and attract media attention to a certain issue. Carl Icahn is well known for this high-pressure tactic, which is used to mold companies more to his liking.

The Corporate world

Large stakeholders are generally high profile investors and would like to steer clear of companies that trample human rights and environmental laws. They monitor your company's outsourcing activities and globalization initiatives and may vote against your business decisions if they are deemed harmful to the company's long-term goals.

The Other Responsible's

Of course, this is only a broad description of stakeholder responsibilities. Suppliers, dealers, service providers, wholesalers, stockists, retailers, discount shops, other manufacturer's who make some products or service for your business, contractors, sub-contractors are some of the others that fall in this category Ideally, you'll have stakeholders who care about these four issues, but more often than not, short-term profits take precedence over long-term sustainability. While stakeholders may own your company, it's easier to control your investors when your company is privately held than publicly traded. Often times, the large influx of cash from a successful IPO turns out to be a deal with the devil when your company is suddenly taken over by a board of directors that ousts you. On the flip side, however, stakeholders can keep your company grounded and focused on its most profitable products and sustain your company's earnings growth. 

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