business stakeholders

in terms of understanding the objectives of a business or other organisation, there are two traditional views:

(1) The Shareholder Concept

(2) The Stakeholder Concept

Shareholder Concept - Maximising Shareholder Wealth

In the theory of accounting and finance, it is assumed that the objective of the business is to maximise the value of a company. Put simply, this means that the managers of a business should create as much wealth as possible for the shareholders. Given this objective, any financing or investment decision that is expected to improve the value of the shareholder's stake in the business is acceptable. In short, the objective for managers running a business should be profit maximisation. both in the short and long-term.

Stakeholder Concept - A Wider Range of Objectives

In recent years, a wider variety of goals have been suggested for a business. These include the traditional objective of profit maximisation (in other words - the shareholder concept has not been abandoned). However, they also include goals relating to earnings per share, total sales, numbers employed, measures of employee welfare, manager satisfaction, environmental protection and many others.

A major reason for increasing adoption of a Stakeholder Concept in setting business objectives is the recognition that businesses are affected by the "environment" in which they operate. Businesses come into regular contact with customers, suppliers, government agencies, families of employees, special interest groups. Decisions made by a business are likely to affect one or more of these "stakeholder groups". Some examples are given below

Business Decision

Stakeholders Affected

Relocation of Head Office from London to Wales

- Employees in London: potential redundancies; concerns about family; housing; change in "living standards" - New employees in Wales: job opportunities; training - Customers: impact on supply of product or service; - Suppliers: impact on supply costs; loss of trade for London-based suppliers - Government agencies: regional development agencies; agencies providing other grants; employment training agencies - Other groups: environmental impact in Wales (e.g. traffic)

The stakeholder concept suggests that the managers of a business should take into account their responsibilities to other groups - not just the shareholder group - when making decisions. The concept suggests that businesses can benefit significantly from cooperating with stakeholder groups, incorporating their needs in the decision-making process.

Examples of Stated Business Objectives that Incorporate the Stakeholder Concept

Company	Stakeholder Statement
British Telecom	We aim to be at the heart of the information society - a communications-rich world in which everyone, irrespective of nationality, culture, ethnicity, class, creed or education, has access to the benefits of information and communications technology (ICT). In practical terms, that means we are committed to doing business in a way that: - maximise's the benefits of ICT for individuals -contributes to the communities in which we operate - minimizes any adverse impact that we might have on the environment. -It means doing business in a way that will persuade customers to buy from us, investors to back us, the best people to work for us and communities to have us around. If we had to say what we believe in a single sentence, it would be this: better communications help create a better world.
Marks and Spencer	Our commitment to society is nothing new. We've always known that as well as providing the right products, a sustainable retail business needs the support of healthy communities and a high quality environment. Since the 1930s, Marks & Spencer has been actively involved in improving the quality of life for a wide range of communities. We've always tried to make an active contribution to the needs of our stakeholders, whether as customers, employees, investors, suppliers, partners or neighbours. Entering the 21st century our commitment remains as strong as ever, but the world is changing. Business is becoming global, society more diverse and our environment is under greater threat than at any time before. Companies are having to consider how their actions impact on an increasingly connected set of issues. We aim to be the most trusted retailer wherever we trade by demonstrating a clear sense of social responsibility and consistency in our decision making and behaviour.
GlaxoSmithKline	GlaxoSmithKline is one of the world's leading pharmaceutical companies. Its global quest is to improve the quality of human life by enabling people to do more, feel better and live longer. GSK's strategic intent is to become the indisputable leader in its industry - not simply in terms of size, but in how it uses that size to achieve its mission. Through its Global Community Partnerships function and Corporate Donations Committee, GSK partners with and supports organisations whose goals and objectives reflect its mission of improving the quality of human life.