A stakeholder is anyone who can be affected by the success of a business or anyone who can be a contributor to that success. Stakeholder does not just refer to stockholders, the individuals who have an ownership interest in the venture -- although stockholders are among the various stakeholders. The objectives of stakeholders vary, and the top management of a corporation has the difficult task of simultaneously satisfying as many of these competing objectives as they can.
Stockholders' primary objective is for the company's earnings to increase each quarter, which usually means revenues are increasing as well. As companies grow and become more profitable, they become more valuable. This is true for both publicly traded companies and private companies. Stockholders often put pressure on company management to do everything they can to increase earnings per share.
Employees seek job security and high wages that increase each year. These objectives can clash with those of the stockholders, who might prefer staff reductions or wage freezes if it translates into higher profits. Management's dilemma is that they recognize well compensated employees are usually more productive, and those who believe their jobs are secure are more likely to put forth maximum effort.
Customers want products and services with superior performance -- at the lowest price possible. They also want excellent customer service, which means highly trained staff available 24/7 to answer their questions or solve their problems. Low prices means lower margins for the company and potentially lower profits. The higher staff level needed to meet customer service expectations means higher personnel costs, again crimping profits. It costs money to develop superior products, and these costs must be factored into the retail price in order for the company to make money.
The public wants to see corporations being good citizens. They want a company to do everything it can to take good care of the environment. The public also wants to see companies contributing to the community in which they operate. This could mean donating money to charity, but also having employees participate in charity events. The public also wants to see that companies have earned a reputation as a great place to work. Environmental stewardship and charitable contributions require expenditures, which at times stockholders may view as excessive. Companies must be mindful that members of the public may become more directly involved stakeholders in the future -- as stockholders, employees or customers. The company's commitment to society's overall goals affects whether it can attract individuals to each of these groups.
Competitors are both affected by a company's actions and can affect how well the company performs. Competitors' strategic actions can cause the company to lose customers. A competitor seeks to obtain information about the company -- competitive intelligence -- that can allow the competitor to gain advantage. The objectives of all the other stakeholders -- with the exception of the general public -- are aligned against those of the competitors.
Advisors seek to provide guidance that will help the company succeed. They include attorneys, accountants, marketing consultants and information technology consultants. The more successful the company is, the greater the chance they will be retained. Their objective is to gain greater access to top management or other key decision makers, so their contribution will be highly valued and they will be viewed as important, even indispensable, members of the team.
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