It is the responsibility of directors to ensure the rights of the shareholders and stakeholders. If stakeholders are satisfied from the business and they are, getting all the right then there will be profitability for the company. Any company or business can make the good name in the market through satisfying the customer or other stakeholders. The types of stakeholders and their roles are as follow:
What are Stakeholders?
A stakeholder could be an individual or a group of people who are interested in the business; however, the people who are stakeholders can be affected by the business activities. There are internal and external stakeholders.
Types of stakeholders and their roles:
Owners are the people who are interested in the business and focused or interested in making the profit from the stakeholders.
Employees or workers are the people who are working for the business and are interested in earning the high wages.
Managers are the people, who are there in business to manage and look after at the business process, they are also concerned about their salaries.
Customers are the people who are ready to buy the business products, customers expect to buy the best quality from that business but at reasonable prices.
Suppliers are the people who are willing to give their products to the business and want the business to buy their products.
Lender is the people who want to repay by the business on time.
Stakeholders are the people who support the organization and accept all the business practices regarding the action that business takes, which can include corporate governance, strategic management, corporate social responsibility etc. The stakeholders include government, employees, customers etc. Stakeholders can be affected if the organization does not take the effective steps example, there could be mismanagement or strategies could not be effective. Stakeholders have the power as they can negotiate for the rights and can ask company or business to change the strategies in future, from which they are not happy or think that they are not getting benefits.
Stakeholders can be affected as if they are not getting the quality products from the company they paid off for, or if the product is not satisfying the customers. This could be an unethical act to the customers, and business can suffer due to such behavior in the market and cannot survive, as there could be a loss of customers and other stakeholders trust because the company fails to satisfy the stakeholders.
In this case, internal stakeholders include the owners, directors or the employees, however, external stakeholders includes the community, on which there are customers, suppliers etc. Business activities can also affect the local environment, as all the stakeholder is from the community, communities and societies are underlined ad can get harm if the business does any unethical consideration.
Business has different objectives from the stakeholders, as directors are focused on to earn maximum profit, in this case, if business wants to reduce cost of employees because business thinks that other stakeholder can be served in a better way and maximum profit can be attained or money could be saved if employees are not given higher wages. Stay focused on the situation the business may take a decision to outsource its employees so that low wages can be given. From outsourcing, the company can suffer because it is unethical that employees have to leave the job, and customers may not get the quality services.
Importance of Profit Reducing Activities:
Directors should focus on the ethical considerations, there could be various techniques or strategies, which are needed to follow in order to satisfy all the stakeholders. In order to gain the trust of the customers, the company should engage in the activities, which can be helpful for the socio-economic success, example corporate social responsibility. The business can get the success in the market like earn profitability is stakeholders know business to care for them. There could be positive effect of the ethical or CSR on the business or organizational performance.
Directors can support the charitable activities for the good name in the society. Every business needs to satisfy the society or community, there should be the focus on economic and social development.
Through the ethical activities and CSR, profitability may be affected because business has to take money out of the business activities, in my point of view, every business needs to prefer and satisfy stakeholders first, there is the need to value and stakeholders because they are the backbone of any business. The activities which can reduce the profitability and effect the consumers good or salaries of the worker should not be carried out, as to give importance to stakeholders is much important than other things.