Shareholders vs Stakeholders Next step in the “Business Decisions” Topic

Influences on business decisions Methodology – evidence-based or subjective Timescale for decision making Ethics and impact of pay, CSR DECISION MAKING Corporate culture Influence of stakeholders vs shareholders

Stakeholder Definition & Examples Stakeholder: A person, group or organisation who can affect or be affected by the firms actions, objectives and policies. Examples of stakeholders? Can we separate as external and internal? Internal: Bus Owners, (more likely in small businesses), in larger companies Board, senr mgrs who will also own shares (want all that employees do plus bonus) Power may be an objective.. Employees – rely for employment, (max finl rewards and welfare but also want non-material benefits – responsibility, fun, to be valued, personal devt, fair treatment, oppy for promotion. External – Shareholdrs, Customers, Creditors, Suppliers (fair treatment, prices, LT contracts, regular orders), Local Community (build links, provide emplymt oppunities), the Government (Fair treatment, profit and pay tax, treat wkrs well) , those affected by environmental damage/improvements associated with the company. (Envir groups will want minimal damage)

Example: Internal and External Stakeholders Internal Stakeholders Objectives External Stakeholders Business Owners (in sole trader/partnership firms) Power/Control of own working environment, profit, survival of firm Shareholders Growth of share price (potential capital gain), high dividends from share Board/CEO in Public Limited Companies Power, Advancement to other more senior roles, Significant potential income, avoidance of public issues/disgrace that would ruin their/firm’s reputation (These are large PLC’s) Customers High quality goods, reasonably priced, consistent quality/delivery, ethically produced goods and services Senior Managers Progression, good work/life balance Creditors Financially stable firm that will pay its bills, promptly and on time. Prefer firms engaging in uncontroversial business (ie not tobacco/military goods etc. where reputational damage may affect firm creditworthiness). Employees Secure job, responsibility/promotion, fun at work, to be valued, good work/life balance Suppliers Fair treatment, consistent orders, long term contracts, regular orders Contractors/Interns (Ie working for the company temporarily) Acquire position at firm or get paid well to offset less job security. Good work life/ balance Government Firms paying tax on time, supporting employee rights, minimal environmental damage, supportive of community (Note above Internal Stakeholders will be part of external stakeholder group ie Board/CEO will own shares, above groups will be part of local community). Local Community Employment, Support of charity/community causes Environmentalists No or low damage to the local environment, development of green production processes, support of environmental sustainability

Shareholder Definition & Goals Shareholder: a person who owns shares in a company and therefore receives part of the company's profits and the right to vote on how the company is controlled Goals of the Shareholder? Goal – max shdr value. TR = Capital Growth + Div – some owners will want 1 more than another but all interested in TR.

Ethical Shareholders? https://www.theguardian.com/money/2015/oct/17/ethical-funds- green-investments-coal-oil-gas Case Study – Coop Food Group http://businesscasestudies.co.uk/co-operative-food-group/ethically- serving-stakeholders/introduction.html General Summary http://www.tutor2u.net/business/reference/organisation-business- stakeholders-social-responsibility-ethics

Stakeholder Influence: Cost benefit analysis Goals of Stakeholders Cost/Benefit to the Firm of focus on Stakeholders vs Shareholders Benefits – incorporate wider group in decision making, maintain good comms with key groups = good PR, recognise and benefit from interdependence between stakeholders (ie supplier may be pro-envirmt etc. Minimise adverse business activity effecst

Conflicts! Employees Customers Directors/ Managers Shareholder Government Environment

What does a Stakeholder approach by Firms look like What does a Stakeholder approach by Firms look like? (think long-termism…) Employees…. Customers…. Suppliers….. Community…. Environment…. If a high profile/mass market firm (ie M&S), how could CSR be used to benefit the firm?

Are all Shareholders money hungry, short term grumps, with no thought for the future?

ESG = environmental, social, and governance Blue bars are the yearly sales of ethical funds Both in the US and UK, shareholders are accelerating the amount of money invested in ethical stockmarket funds. Orange line is the total funds under management