A stakeholder is a group or individual that assist with structuring a business, and can influence the decision making process. Stakeholders often focus on multiple levels of a business depending on their position within the firm and their knowledge of the business and market. Shareholders have a general goal of maximizing business profits and their wealth, and can also influence the decision making process.
In the U.S., organizations primarily focus on generating profit for the shareholders. Within other countries such as the continental Europeans and Asian systems, shareholders tend to focus more on the interest of those within the corporation. Examples of stakeholders can include employees, customers, and suppliers. Shareholders can also be stakeholders, which means they can be directly affected by the organizations performance. Shareholder value has often been considered a way to measure corporate value.
Shareholders can stimulate growth through offering rewards to managers, CEOs, and other senior executives. Shareholders also have the influence to elect board members with similar interest to represent their goals and help generate wealth. Business managers have a responsibility to keep shareholders happy. However, managers should first seek to satisfy the needs of the business. To effectively grow share prices, managers must exceed expectation or develop a new value proposition for the organization. As with most all businesses, the core offering will inevitably slow in generating growth. To maximize value, the organization should expand its development with new opportunities.
Wealth can be maximized by making strategic decisions and acquisitions that can maximize long-term earnings. While stakeholders view the organization as primarily serving the parties involved, shareholders value an organizations success based on societal wealth including share prices, dividends, and economic profits. Neither focusing all resources on profits or organization members is ideal and have their risks. At some point, both must matter in order to produce organizational value.
Finding a financial investor is paramount. However, it is not worth the money to have an investor that is not dedicated to the organizational goals or ethical in doing business and achieving success. Unfortunately, ethical problems stem from a lack of ethical standards and education. Additionally, moral reasoning is developed throughout adulthood and that leaders are often unethical because business graduate education fails to teach the subject. Nonetheless, as a business leader and decision-maker, it is my responsibility to have standards and remain committed to my personal ethics no matter who or how much money is involved.
Being able to satisfy and relay the company’s initiative to each group will generate and maintain a positive relationship. The objective in building the relationship is to find a common ground where both stakeholders and shareholders can agree. To find a common ground, it may be necessary to go beyond project task to find returns on investments for each party involved. Furthermore, by satisfying both stakeholders and shareholders, it builds trust between investors and decision-makers. If the needs of the stakeholders are not addresses, company performance and shareholder returns could be adversely affected. Having trust creates cooperation and advantages for everyone involved. By building trust and going beyond the needs of stakeholders and shareholders, firms can generate a commitment and organization bond.
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Dr. Elijah Clark (April 9, 2023). Corporate Governance [Web log post]. Retrieved from https://elijahclark.com/corporate-governance/