Who are the STAKEHOLDERS ?

Who are stakeholders?

          They are various groups of people who need information about the activities of a business. They also effect or get affected by the organisations actions.

According to the International Accounting Standard, IAS 1 Presentation of Financial Statements states:

          “The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions”

The wide ranges of users mentioned in IAS 1 are these stakeholders.

Different types of stakeholders

There are mainly three types of stakeholders:

1.    Internal stakeholders: - they are groups or individuals from inside the organisation. For example, directors, managers, employees.

·       Managers are appointed by the organisation to supervise its functions. They need financial information for making decisions regarding the functioning of the business. They can obtain that information through cost and management accounting.

·       Employees will need information from the organisation for understanding their job security, salary etc.

·       Directors are people who will plan for the future of the organisation with the help of the information provided by managers.

 

2.    External stakeholders: - they are groups or individuals who do not have direct connections with the organisation but can influence or be influenced by its activities. For example, government, trade unions, communities.

·       Government need information to provide basis for national statistics.

·       Trade unions will want to know the stability of the workers working in the organisation, and also will want to know if the workers are been paid properly.

·       Communities, the general public need to know if the organisation is conducting their work by considering the environment (keeping it clean, safe from hazardous elements etc) surrounding the organisation, and also if it is providing job opportunities to the people.

 

3.    Connected stakeholders: - they are groups or individuals who either invest in or have dealings with the firm. For example, suppliers, customers, shareholders, finance providers like bank.

·       Suppliers will want to know the organisations ability to pay their debt.

·       Shareholders will want to know if they have invested in the right business, they will also want to know how the management is performing.

·       Finance providers will want to know if the organisation will be able to pay the interest for the loan taken and also if the organisation is capable of taking further loan.

·       Customers will want to know if the goods and services provided by the organisation is value for money products, not bad for health or products which do not take the privacy of the customers.

 

Stakeholders are also human beings who have different opinions on a particular decision taken by the organisation.

So in the event of conflict the organisation will need to decide which stakeholder is more important.

When the organisation finds it difficult to decide who the dominant stakeholder is, they can use the Mendelow’s power interest matrix.

 

 

		level of interest
		low	High
Level of power	low	minimal effort	keep informed
	High	keep satisfied	key players

 

The organisation has to decide which stake holder they have to listen to by recognizing their power over the organisation in that particular decision.

 

Conclusion

Stakeholders are people who are interested in the information about the organisation, which will help them make decisions on their respective topics.       

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