Corporate & Social ResponsibilityA stakeholder is an individual or organisation that has an interest in a company and can either affect or be affected by the business. Primary stakeholders are investors, employees, customers and suppliers. Secondary stakeholders include the community, government or trade association.
Internal External
Primary (A1)
The Board
The management team
Line managers
Regional managers / CEOs
Primary (B1)
Customers / Buyers
Government agencies – HSE
Government / Industry Bodies
Pressure groups and representative bodies Local government
Professionals and academics with relevant expertise
EU / EC – policies, harmonisation and funding
Secondary (A2)
The workers
Recognised trade unions
Secondary (B2)
Sector Skills Councils
Lobby groups Other industry organisations
Trade unions
Ad hoc pressure groups and advocacy groups

Understanding the stakeholder

Stakeholders can be internal or external. Internal stakeholders are people whose interest in a company comes through a direct relationship, such as employment, ownership or investment. External stakeholders are those people who do not directly work with a company but are affected in some way by the actions and outcomes of said business. Suppliers, creditors and public groups are all considered external stakeholders.

An example of an Internal Stakeholder

Investors are a common type of internal stakeholder and are greatly impacted by the outcome of a business. If, for example, a venture capital firm decides to invest £5 million into a technology startup in return for 10% equity and significant influence, the firm becomes an internal stakeholder of the startup. The return of the company’s investment hinges on the success, or failure, of the startup, meaning it has a vested interest.

External stakeholders may also sometimes have a direct effect on a company but are not directly tied to it. The government, for example, is an external stakeholder. When it makes policy changes the decision could affect the operations of a business. The decision to have no diesel or petrol cars on the roads from 2050 in the UK has profoundly changed the car manufacturing industry.

Problems With Stakeholders

A common problem that arises with having numerous stakeholders in an enterprise is their various self interests may not all be aligned. In fact, they may be in direct conflict. The primary goal of a corporation, for example, from the viewpoint of its shareholders, is to maximise profits and enhance shareholder value. Labour costs are a critical input cost for most companies, a company may seek to keep these costs under tight control. This might have the effect of making another important group of stakeholders, its employees, unhappy. The most efficient companies successfully manage the self-interests and expectations of their stakeholders.

Stakeholders vs. Shareholders

Stakeholders are bound to a company with some type of vested interest, usually for a longer term and for reasons of greater need. A shareholder, meanwhile, has a financial interest, but a shareholder can sell their interest and buy different stock or keep the proceeds in cash; they do not have a long-term need for the company and can get out at any time.

If a company is performing poorly financially, the vendors in that company’s supply chain might suffer if the company no longer uses their services. Similarly, employees of the company, who are stakeholders and rely on it for income, might lose their jobs. However, shareholders of the company can sell their shares and cut their losses.