internal stakeholder groups: owners (sole traders, partnerships, shareholders), managers, employees

1.5.2 The Role of Stakeholder Groups

What is a stakeholder?

A stakeholder is any individual or group that has an interest in, or can affect, the activities and performance of a business. Stakeholders are classified as **internal** (part of the organisation) or **external** (outside the organisation).

Internal Stakeholder Groups

Owners

Owners provide the capital and bear the financial risk. Their legal rights and level of involvement depend on the business structure.

• Sole trader – one person owns 100 % of the business and is personally liable for all debts.
• Partnership – two or more people share ownership, profit and liability according to a partnership agreement.
• Shareholders (stockholders) – own shares in a limited company. Their liability is limited to any unpaid amount on the shares. Some shareholders may also sit on the board of directors, but ownership and day‑to‑day management are distinct.

Managers

Managers are appointed to plan, organise, direct and control the resources of the business. Their main responsibilities are:

1. Setting objectives and developing strategies.
2. Co‑ordinating activities across departments.
3. Motivating, supervising and developing employees.
4. Monitoring performance and taking corrective action.

Managers have a dual interest: they must achieve the owners’ objectives (e.g., profit, growth) while also maintaining a productive, safe and harmonious workplace for employees.

Employees

Employees contribute labour, skills and ideas. Their typical interests include:

• Job security
• Fair wages, benefits and performance‑related bonuses
• Safe and healthy working conditions
• Opportunities for training, career progression and work‑life balance
• Recognition and a positive organisational culture (e.g., participation in suggestion schemes or team meetings)

Public‑Sector Internal Stakeholders (for comparison)

In public‑sector organisations the internal stakeholder groups are the same (owners – represented by the state or local authority, managers and employees) but their objectives differ.

External Stakeholder Groups

• Customers – seek quality, value for money, good service and ethical products.
• Suppliers – want timely payment, long‑term contracts and a stable ordering pattern.
• Creditors (banks, lenders) – look for repayment of loans, interest and evidence of financial stability.
• Trade unions – represent employees’ interests (wages, conditions, collective bargaining). They are also a key element of the legal controls over employment (see Section 2.4 of the syllabus).
• Community & local residents – expect responsible environmental practices, local employment and contribution to community development.
• Government & regulatory bodies – enforce legal compliance, collect taxes and may provide licences, subsidies or contracts.
• Non‑governmental organisations (NGOs) – focus on issues such as the environment, human rights and consumer protection.

Public‑Sector External Stakeholders

Public‑sector bodies have additional external stakeholders:

• Taxpayers – want efficient use of public money and value for the taxes they pay.
• Elected officials / Ministers – seek delivery of government policy, accountability and good public image.
• Service‑user groups (e.g., patients, students, citizens) – expect high‑quality, accessible services.

Legal Controls & Ethical Considerations that Influence Stakeholder Relationships

• Health‑and‑Safety legislation – protects employees and, indirectly, the community.
• Consumer protection laws – safeguard customers from unsafe or misleading products.
• Employment law (including trade‑union rights) – governs the relationship between employers, employees and unions.
• Environmental regulations – affect community expectations and NGO pressure.
• Corporate Social Responsibility (CSR) – an ethical framework that helps businesses meet the expectations of shareholders, communities, NGOs and other stakeholders.

Stakeholder Objectives and Typical Conflicts

Linking Stakeholder Objectives to the Four Core Business Objectives

The core business objectives are **survival**, **growth**, **profit** and **market‑share**. The table below shows how each stakeholder group directly supports one or more of these objectives.

Application – AO2 Practice

Stakeholder Map (Illustrative Diagram)

Key Points to Remember

• Internal stakeholders are directly involved in daily operations; external stakeholders influence the business from outside.
• Ownership structures determine legal liability and the degree of control (sole trader → unlimited liability; partnership → shared liability; shareholders → limited liability).
• Managers have a dual interest – they must meet owners’ objectives while maintaining a productive, safe workplace for employees.
• Stakeholder objectives often clash; effective managers negotiate compromises (e.g., performance‑related pay, CSR initiatives, collective bargaining).
• Private‑sector firms focus on profit and shareholder wealth; public‑sector organisations prioritize service delivery, equity and accountability to taxpayers.
• Each stakeholder group supports one or more of the core business objectives (survival, growth, profit, market‑share); mapping these links helps students answer AO2 questions.
• Legal controls (health‑and‑safety, consumer protection, employment law, environmental regulation) and ethical frameworks (CSR) shape the relationship between businesses and their stakeholders.
• Understanding stakeholder interests and influence is essential for strategic decision‑making and for practising good corporate citizenship.