Business Stakeholders: Roles, Interests, and Conflict Management

Posted on Oct 18, 2025 in Economy

What Are Stakeholders?

Individuals who have a direct interest in a business because the actions of the business will affect them directly. Note: Stakeholders are not necessarily owners. They are usually interested in the business’s success. This interest can be directly financial (e.g., shareholders, lenders, suppliers, or employees) or less direct (e.g., the community in which the business operates).

Shareholders vs. Stakeholders: Key Differences

Shareholders are always stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a company, while a stakeholder has an interest in the performance of a company for reasons other than just stock performance or appreciation.

Internal and External Stakeholders

  • Internal: Work within the business.
  • External: Are outside the business.

Grey Areas Between Stakeholder Types

In practice, there are grey areas between internal and external stakeholders:

  • Employees: Live in the community where the business is located (making them both internal and external).
  • Consultants: Are part of the community, but once hired, they are considered internal for the duration of the contract.
  • Small Shareholders: They are technically internal because they own a fraction of the company, but their stake is often so small that they have zero decision-making power or influence, often leading them to be considered external in most aspects.

Interests of Internal Stakeholders

Each internal member has different interests in a business:

  • Shareholders: Focus on returns on investment (ROI).
  • CEO or Managing Director: Focuses on coordinating the business strategy and delivering profit that satisfies the shareholders.
  • Senior Managers: Focus on strategic objectives for their functional areas.
  • Middle Managers: Focus on tactical implementation.
  • Foremen and Supervisors: Focus on operational efficiency and staff performance.
  • Employees and Unions: Protecting rights and working conditions.

Interests of External Stakeholders

  • Government: How the business operates, especially regarding regulation and the environment.
  • Suppliers: Maintaining a stable, profitable relationship.
  • Consumers: Receiving the best product or service that meets their needs.
  • Local Community: The overall impact of the business in the area (jobs, pollution, infrastructure).
  • Financiers (Lenders): Return on Investment (ROI) and repayment stability.
  • Pressure Groups: How the business impacts their specific area of concern (e.g., environmental protection, labor rights).
  • Media: The impact of the business in terms of news and stories.
  • Competitors: Even though they may not want to see your business succeed, they still have an interest/stake in its actions (e.g., market share, pricing strategies).

Stakeholder Conflict and Mutual Benefit

Case Study: Employee Pay Rise

Consider the situation of a pay rise for employees:

  • Shareholders: Usually against, as increased wages mean less ROI.
  • CEO + Senior Managers: May support it because employees will be happier, but are also worried about ROI since they report directly to the owners.
  • Managers (Middle): Worried about a pay rise being the only motivator, especially when they strive to motivate employees in other ways.
  • Local Community: Favors the pay rise, as employees would have more money to spend and a better quality of life locally (restaurants, shops, etc.). However, they would not support it if it threatened the existence of the business.

Stakeholder Management in Different Business Sizes

One feature of successful businesses is that stakeholder interests are sufficiently satisfied most of the time. Managing these interests is not particularly complicated in common situations.

Small Businesses

Small businesses have fewer stakeholders. While all businesses theoretically have external stakeholders, in small businesses, the external parties usually have a minimal stake, and decisions are often inconsequential to them. The primary requirements are making a profit and complying with laws.

Large Businesses

Coordinating interests in large businesses is a significantly bigger challenge.

  • For instance, if a factory in a small town reduces its workforce by 20%, expenses are reduced, making CEOs and shareholders happy. However, the workers will be dissatisfied and angry, leading to broader community problems:
  • Many former employees would struggle to find new jobs, thus increasing government expenses.
  • People would move away from the town, depressing the real estate market.
  • The number of children decreases, potentially leading to layoffs of teachers in schools.
  • Local businesses suffer due to reduced spending.

Stakeholder Analysis and Prioritization

  • Large businesses, or those with complicated stakeholder interests, often perform a stakeholder analysis.
  • The first step is to prioritize or rank the interests of various stakeholders.
  • One conceptual approach to this step is to determine how close each stakeholder is to decision-making in the business.
  • Prioritization: Owners and managers are central, followed by employees and suppliers. Next are the government and the community. Decision-makers typically try to satisfy stakeholders closer to the center first.