13 Questions
What is the main distinction between a stakeholder and a shareholder?
A stakeholder has an interest in a business, while a shareholder owns shares in a business.
What do shareholders usually seek to earn from their investment in a large company?
Dividends and a higher share price
When might shareholders become more closely involved in the company's decisions?
When they feel that their interests are threatened
What might shareholders express concerns about?
Falling profits and a falling share price
In what situation might shareholders try to influence the decisions of the directors?
When a proposed takeover bid for another company is on the table
Who can major shareholders discuss their concerns with?
The company chairman and other senior directors
Who might have enough shares in a company to control the composition of the board and the decisions made by the directors?
Majority shareholder
In which industries might employees have a health and safety interest?
Transportation, mining, and oil and gas
What is one of the most important stakeholders of a business that can significantly affect its performance?
Employees
What do companies invest a great deal of time and commitment on in order to retain good quality human resources?
Offering competitive benefits
Who earns an income to support themselves and may have a health and safety interest depending on the nature of the business?
Employees
What do employees make decisions about after careful thought as they are directly affected by it?
The company they work for
What might differ between the majority shareholder and the minority shareholders?
The composition of the board
Study Notes
Stakeholders and Shareholders
- A key distinction between stakeholders and shareholders is that stakeholders have an interest in the company's performance, while shareholders have a financial investment in the company.
Shareholders
- Shareholders usually seek to earn a financial return on their investment in a large company.
- Shareholders may become more closely involved in the company's decisions when they are unhappy with its performance or direction.
- Shareholders may express concerns about the company's financial performance, leadership, or strategic direction.
- Shareholders may try to influence the decisions of the directors during the annual general meeting (AGM) or through private discussions with the board.
- Major shareholders can discuss their concerns with the board of directors or executive management.
- A major shareholder with a significant stake in the company may have enough influence to control the composition of the board and the decisions made by the directors.
Employees as Stakeholders
- Employees have a health and safety interest in industries such as construction, manufacturing, and healthcare.
- Employees are one of the most important stakeholders of a business, and their performance can significantly affect the company's overall success.
- Companies invest a great deal of time and commitment in recruiting, training, and retaining good quality human resources.
- Employees earn an income to support themselves and may have a health and safety interest depending on the nature of the business.
- Employees make decisions about their work and working conditions after careful thought, as they are directly affected by these factors.
Shareholder Differences
- There can be differences in interests and objectives between the majority shareholder and minority shareholders, which may lead to conflicts or differing opinions.
Test your understanding of the differences between stakeholders and shareholders in a business. Explore the various interests and equity ownership associated with these roles.
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