Distinguish Between Shareholder and Stakeholder in a Business Context. Comment on the Influence of Shareholders on the Management of a Company and Its Allocation of Rewards.

Topics: Stock, Stakeholder, Management Pages: 7 (2201 words) Published: September 28, 2008
This paper specifically tries to distinguish between shareholder and stakeholder in business context. Firstly, there will be analysed main ideas of stakeholder theory, main principles of it. Secondly, the importance and characteristics of stakeholder interdependence will be shown. Thirdly, clear identification of main stakeholder groups and relationship between those groups will be outlined. In order, to distinguish shareholders from other stakeholders there will be paragraph analysing identity of this group. This analysis is followed by exceptionally important rights of shareholders which are giving them power to influence both company’s direction and through this other stakeholders.

Stakeholder theory and concept
According to Freeman stakeholder (1984) can be defined as any individual or group which is affected by or can affect achievement of the organization’s objectives (Freedman and Miles 2006). In this context organization is seen as a grouping of stakeholders and its purpose should be to manage their interests, needs and viewpoints. The fundamental role of stakeholder management is lying on top- level managers. Freeman in whose seminal work (1984) emerged new conception of stakeholder theory has elaborated two principles of this model as follows:

1. The stakeholder - enabling principle. Corporations shall be managed in the interests of stakeholders. 2. The principle of director responsibility. Directors of the corporation shall have a duty of care to use reasonable judgment to define and direct the affairs of the corporation in accordance with the stakeholder – enabling principle. Freidman and Miles (2006)

So stakeholders are those individuals or groups who depend on the organization to fulfil their own goals and on whom, in turn, the organization depends. In other words, any actors in the environment that is affected by an organization’s decisions and policies or/ and can influence the organization traditionally can be defined as stakeholders of an organisation. Individuals may belong to more than one stakeholder group and stakeholder groups can interact with each other in different ways, it depends on issue and situation at particular moment. Specific strategies usually trigger off the formation of stakeholder groups.

Identifying the stakeholders
Having in mind stakeholder theory organisation should account interests of two main stakeholder groups: 1. Internal stakeholders; who have to run business, for example, the managers and employees. 2. External stakeholders; who have stake in the outcome, for example, the shareholders, government, customers, suppliers and other interested parties. Together these groups form the stakeholders – the individuals and groups who have an interest in the organization and may therefore wish to influence its purpose, mission and objectives. In simple words, internal stakeholder group can be perceived as those who ‘runs’ or owns business, this includes executive officers, Board of Directors, employees and external stakeholders as those who invest, supply or use its product/ service, typical example of external stakeholders of the organization would be financial institutions, customers, suppliers, shareholders and unions. They can seek to influence company’s strategy through their links with internal stakeholders. Concept of stake holding can be defined as those working in the organization or those who have different interest in organisation. Here are few examples of how some groups have stake in a company: shareholders in public or private company has bought some shares, in other words invested money to the business in return expects good future dividends or selling share at a better price in the future; banks which have lent the organization money and expects to be paid back with interest; governmental institutions concerned about employment, taxes and other economic or legislative issues which can be affected by organisations policies or...
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