Every company, whether big or small, affects the lives of many people. In addition to shareholders, whose fortunes are tied to that of the firm, many other individuals stand to gain or lose depending on the strategic decisions and day-to-day operations of the business. Understanding the various relationships between a company and society is crucial for running a sustainable and responsible business.
Shareholder
For-profit companies belong to shareholders, also known as owners. In businesses such as a laundromat or a grocery store, a single individual may own the whole entity. In most medium and large firms, many people own varying quantities of stock. When a single individual owns more than 50 percent of all outstanding shares, she usually can exercise full control, as voting power is directly tied to the number of shares a person owns. In a large, multinational firm, usually nobody owns more than half of all shares, and shareholders have to reach a compromise when making critical decision about the future of the business.
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Stakeholders
A stakeholder is anyone who stands to gain or lose from the firm's actions. While the owner and other shareholders comprise a subset of stakeholders, there are various other individuals who make up the broader set of stakeholders.
Customers
Even if the firm has a single owner, it usually has a large number of customers. Generally, customers are better off if the firm is healthy and profitable. Such firms stay in business and back their products with warranties and after-sale service; invest in new product development, which enables them to update their product line; and employ well-paid and well-trained people who are a pleasure to deal with. Even the dry cleaner serving a local community can have a large stakeholder base in clients. Should the cleaner close, those in the community who frequented the business may have to go out of their way to drop off their dry cleaning.
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Creditors
Creditors are another key group of stakeholders who keep a close eye on the firm. Creditors can be suppliers who haven't been fully paid, the local bank that has extended a long-term loan or bondholders. In some instances, the government may be a creditor after granting the firm a loan or while waiting for the tax payment from the prior year. The healthier the firm, the better the chances that the creditors will be paid in full.
Workers
Workers often have a tremendous amount to gain or lose depending on how the company does. A successful employer means a steady paycheck, usually a raise at some point and benefits that help ensure a secure retirement. A struggling employer, on the other hand, can mean sleepless nights for fear of lay-offs.
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