Shareholders vs. Stakeholders
You may have heard of the common term shareholder. It refers to someone who has bought stock in a company and is entitled to a share of the company's profits. However, shareholders are not the only ones affected by business decisions. Stakeholders simply are those who would be affected by a business' decisions.
Farmers in the Dell
Consider the farm pictured above. Who are the stakeholders if the farm is owned by a company? The main stakeholders for any business are:
- Customers: Grocery stores will be hurt if the farm raises prices on groceries (like milk or eggs).
- Suppliers: If the farm business shuts down, the people who sell seeds and tractors to the farm will be hurt.
- Employees: If the farm moves, employees will be relocated as well.
- Communities: If the farm is polluting or smelly, property values in the surrounding community will decrease. Who wants to live next to a stinky farm?
- Lenders/Bondholders: Because they agreed to loan the business money, it is in their financial interest
- Government: The government's tax revenues are based on the profits of the farm. In effect, the government acts as a shareholder because they are entitled to a part of the company's profit or losses.
- Shareholders: Of course, shareholders are affected by the farm's decisions. Good or bad news will affect the stock price and therefore the shareholders.
The Stakeholder Concept
The stakeholder concept and social responsibility are closely related: they both embody all that are directly affected by business decisions. Corporate social responsibility requires that managers pay attention to all stakeholders, regardless of whether their agenda conflicts with that of achieving the highest profit.