Question

Who are a company’s stakeholders? Discuss the interest each stakeholder has in the firm.

Answer 1

Answer:- Various company’s stakeholders and their interests in the firm:-

1) Shareholders

Shareholders have a stake in the firm through their share ownership. A company’s managers act as custodians of the firm on behalf of the shareholders. They either earn capital gains through the sale of shares or earn dividends declared by the firm. Their objectives therefore include but are not limited to share price growth, growth in dividends and growth in the value of the shares.

2) Employees

Employees are the workers employed by the firm. Employees include both management and subordinate staff. They directly influence the profits of the firm since they are involved in the day-to-day operations. Among their top priorities in return for their services include job satisfaction, remuneration, job security, motivation and self-actualization. They are also interested in the company’s survival and growth as their jobs depend on it.

3) Government

The government is a major player in any business environment as it plays a regulatory and supervisory role. The government aims to ensure that all companies abide by the existing legal provisions. Matters such as tax payment, licensing, standardization and protection of consumer welfare form part of the objectives of the government with regards to companies.

4) Customers

Customers keep companies in business by purchasing their products and subscribing to their services. They are important players, thus every business should ensure that it does not compromise their needs. Customers want to achieve value for their money through quality products, reliable services, good customer care and fair prices, among other factors.

5) Creditors/Bondholders

Creditors provide financing to the company by issuing loans and buying corporate bonds. They are important as they help to meet the firm’s capital budgeting needs. Their objectives include receiving repayment on loan amounts and interests earned. The firm’s credit rating is also of their primary concern, as they need a guarantee that their money is secure.