Shareholders and stakeholders are usually perceived in the
same light and is often forgotten that they don’t necessarily provide the same
role for a business. Stakeholders can be a person, group or organization that
has interest or concern in an organization. They can affect or be affected by
the organization’s actions, objectives and policies. Whereas shareholders who owns shares of stock in
a corporation or mutual fund. For corporations, along with
the ownership comes a right to declared
dividends and the right to vote on certain company matters,
including the board of directors. This effectively means that they will
have different effects on the company but could also have the same as if you
are a shareholder in a business you will also be a stakeholder. However, the
argument to say that stakeholders that don’t have shares in a business aren’t
important to that business isn’t necessarily true as they provide different
stakes to a business’s success.

 

Shareholders are perceived as the most important
stakeholders in many businesses views due to their outward financial
contribution to the company for their percentage of the business. The mass
number of shareholders a business may be able to obtain will allow the business
to grow and expand whether that be in the production process or in the
marketing side of the business. One of the primary reasons for going public is
to raise funds from investors. As mentioned, the company’s founders give up
part ownership to these new investors. Private companies and start-ups may also
raise funds through private placements, which are share issues to a select
group of individuals and institutions. The founders of a start-up company,
including venture capital backers, may also provide additional capital in
exchange for a higher percentage of the ownership. Shareholders
also have direct influence on a business because they have voting rights on
major corporate decisions. Shareholders vote, for instance, on elections of
company board members. If company leaders want to split the company’s stock,
shareholders usually have a right to vote on the move.

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Additionally, companies hold annual,
and sometimes quarterly, meetings where shareholders can voice concerns and
feedback. Activist shareholders who own large amounts of stock may also voice
concerns publicly in an effort to sway company decisions. Shareholders impact the approach companies take to other
stakeholders, including employees, customers, business partners and
environmental groups. In some cases, company leaders neglect philanthropic
pursuits to appease shareholder financial goals. Other times, shareholders
purchase stock because of both the financial benefits and the company’s social
and environmental responsibility. Some companies may overly emphasize cost
control with labour to minimize business costs as well.

 

Alternatively, it would be perceived that employees,
customers, suppliers, creditors and the local community are the most important stakeholder.
Shareholders are likely to cause a business to set increasingly short-term
views on growing their business. Closely related to
profit objectives is the short-term orientation prevalent in shareholder-owned
businesses. Shareholders typically have short memories and a desire for
immediate gratification. Leaders of public companies usually feel greater
pressure to generate revenue and create profit quickly. This is a key deterrent
for entrepreneurs who have long-term visions and don’t want to feel pressured
to sacrifice long-term development to create immediate cash.  

One way in which business can demonstrate their commitment
to meeting their social responsibilities (and not just the needs of their
shareholders) is by producing ‘Corporate Social Reports’ (CSR), CSR are
documents that set out a business’s targets for meeting its social obligations
and document the extent to which previous social targets have been achieved.
Corporate social reports are increasingly important as businesses are held responsible
for the consequences of their actions. Over 8,000 businesses around the world
have signed the UN Global Compact pledging to demonstrate good global
citizenship in the areas of human rights, labour standard and environmental
protection. We have already seen that consumers in the UK and elsewhere are
better informed about the activities of businesses with respect to the
environment and their stakeholders. Developments in technology and notability
the rising use of social media to report behaviour by firms that is deemed
unacceptable has a significant has had significant impact on corporate decision
making. Bad news about a company can be tweeted and retweeted thousands of
times reaching many potential consumers. Companies have to be aware of this and
aim to avoid being the subject of bad news.

 

I think that Shareholders can be a large part to a
business’s growth and success however do not believe that that alone makes them
the most important stakeholders, if this was the case the other stakeholders in
a business are likely to be neglected because of the shareholders sole pursuit
in short term profit growth and would therefore create a business that operates
in its own bubble an does not take into account the social or environmental
impacts of what short term profit growth can have which could potentially lead
to the company making a bad name for itself and therefore have the opposite
effect of growth within a business.