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Stakeholders

As a general rule we regard business decisions as being motivated by the need to increase profits. This is called the profit motive.

However, increased profits benefit those who receive them — in a limited liability company those are the shareholders.

But it is not only the shareholders that have a vested interest in the success of the business, and recognizing that there are other groups or parties that have a “stake” in the business is important.

In addition to shareholders, these include

1		Customers
2		Employees
3		Managers and directors
4		The government
5		The local community
6		The national community
7		Environmental pressure groups

In other words, anyone who is directly or remotely connected with the business.

The interests of these different stakeholders can conflict. For example, employees are interested in job security, higher wages and job satisfaction; all and any of these might conflict with the interests of the shareholders, who are primarily concerned with profits.

Because businesses have an impact on the community, through providing jobs and through their effect on the environment, it is argued that businesses should adopt a more conscious and deliberate policy towards social involvement.

Arguments for and against social involvement of business

Arguments for

Arguments against

•		The creation of a better social environment benefits both society and business.
•		Power should be used responsibly
•		Social involvement creates a favourable image for the company
•		Business has the resources to help solve social problems
•		Business and society are interdependent
•		Social involvement discourages additional government intervention

•		The primary task of business is to maximise profits by concentrating on commercial activities
•		Social involvement results in higher prices to customers
•		Social involvement reduces economic efficiency
•		Social activities reduce the international competitiveness of British business
•		Company directors have a duty to shareholders
•		Business people lack the social skills to deal with the problems of society.

Business and Pressure Groups

Pressure groups seek to exert influence upon government or upon other organisations (including business organisations). Unlike political parties they do not seek to form a government and are usually centred around a single issue, such as a campaign to save the whale). The groups can be classified as

(a)		interest groups established to further the interests of its members (eg. trade unions, consumer groups, local residents` groups, as well as groups representing the interests of business organisations).
(b)		cause groups established to further a particular cause (eg. animal welfare, protection of the environment).

The basic distinction between the two is that interest groups are motivated by self interest whereas cause groups are more altruistic. Another way to distinguish between groups is in terms of scale and range of activities. Some groups are local while others are national or even international (eg. Greenpeace). Pressure groups will seek to exert influence in a number of ways. Boycotts, adverse publicity, rows at shareholders meetings and direct action are visible signs of pressure group activity.

Another way in which pressure groups exert influence is via the political process. Pressure groups will seek the support, or even sponsor, Members of Parliament. The lobbying of politicians has developed into a major tactic of pressure groups, although the greater financial resources of business organisations mean that they are better able to exert influence. In addition to lobbying MPs the larger pressure groups will seek direct contact with ministers — especially to consult over a change in the law. If pressure groups exert sufficient influence to achieve a change in government policy or in the law they can have a substantial impact upon business.