Types of Stakeholders in a Business

The types of stakeholders that businesses must recognize and satisfy.

Businesspeople practice the art of management, planning, leading, organizing, and controlling the activities of an enterprise according to certain policies to achieve certain objectives.

Managers and entrepreneurs operate in an organizational environment composed of various stakeholders, those who have any sort of stake or interest in the business.

Key Stakeholders in a Business

Owners: Hoping for Profit but Risking Loss

The owners of an organization are those who can claim it as their legal property. In the for-profit world, there are several forms of ownership. One familiar class of owners are investors or stockholders or shareholders, who own stock (shares of ownership) in a company. The owners’ goal is to make a profit, but they are risking loss—perhaps the loss of everything they’ve invested.

Customers: The Focus of Business

Customers are the people or companies that pay to use an organization’s goods or services. For-profit companies and nonprofit organizations both focus on customers. For example, the customers of a nonprofit university are its students.

Employees: The Need for Performance

Employees are typically key stakeholders in a business as they provide the labor, create the culture, and provide the service that ultimately makes a business succeed or fail.

Have you ever worked for a “toxic organization”? This is the name that Stanford University business professor Jeffrey Pfeffer gives to firms with high turnover and low productivity, companies that drive employees away. “Companies that manage people right will outperform those that don’t by 30% to 40%,” he says.

Suppliers: Providing Parts and Products

A supplier, or vendor, is a person or an organization that supplies raw materials, services, equipment, labor, energy, and other products to other organizations.

Distributors: Directing Products to Customers

A distributor is a person or an organization, such as a dealer or retailer, that helps sell goods and services to customers. Distributors can be quite important in terms of ensuring that customers have a place to purchase a product. For example, many small publishers have distributors to sell their books to libraries and bookstores.

Lenders: Carrying the Company When Money Is Short

Businesses often rely on lenders such as banks to give them loans to start a business, to keep the business afloat when revenues are low, or to expand their operations. Some entrepreneurs finance their new enterprises by using their personal credit cards for cash advances or expenses.

Nearby Communities: The Local Environment

Nearby communities are important stakeholders because schools and municipal governments rely on businesses for a portion of their tax base. In addition, families and merchants depend on the employee payroll for their livelihoods, and nonprofit organizations such as sports leagues may depend on them for donations.

Government Regulators: Local, State, Federal, and World

Government regulators are government agencies that establish rules and regulations under which organizations must operate; in turn, regulators are often affected by organizations. Regulatory bodies may range from local planning departments to state commissions to federal agencies and international agencies (such as the World Trade Organization, which oversees international trade).

Interest Groups: People with Specific Issues

The Sierra Club, the United Auto Workers, and the Chamber of Commerce are examples of interest groups or special-interest groups—groups whose members try to influence businesses and governments on specific issues. Interest groups may try to exert political influence, as in contributing funds to lawmakers’ election campaigns or in launching letter-writing efforts to businesses and politicians.

Media: From Print to Internet

No businessperson can afford to ignore the power of news and entertainment media, which include not only newspapers, magazines, radio, and TV but also Internet social media, such as Snapchat, Twitter, Instagram, Facebook, and YouTube. Because the media can rapidly and widely disseminate, both bad news and good news, most mid-sized and larger businesses have a public-relations person or media department to communicate effectively with the press. In addition, top-level executives often receive special instruction on how to best deal with the media.