Partial preview of the text
Download Corporate Governance Chapters. and more Lecture notes Corporate Governence in PDF only on Docsity!
Shareholders and stakeholders Learning objectives ‘To understand the cifference between shareholders and stakeholders Tobe aware of the various different stakehclder groups “To have an overview of the way that shareholders and stakeholters are provided for in various corporate governance coces and guidelines “Tounde-stand the roles that sharcholders and stakeholders can piay in companiesand the developmentof corporate governance Shareholders and stakeholders fer can encompass a wide range of interests: refers to any individual or activities of the company have an impact. Shareholders can be viewed is discussion, we will view shareholders as 1y? First, shareholders invest their money, gal jurisdictions, sharehold- The term ‘stakeholdi group an which the asa stakeholder group but, for the purposes of thi being distinct from other stakcholder groups. Wh) to provide risk capital for the company and, secondly, in many le tre rights ate enshrined in law whereas those ofthe wider group of stakeholders ae not Of course: this varies from jurisdiction to jurisdiction, with creditors’ rights strongly protected in some countries, and employees’ rights strongly protected in others. ‘As highlighted in Chapter 7 in the discussion of stakeholder theory, one rationale for effec- tively privileging shareholders over other ‘stakeholders is that they are the recipients of the ioral free cashflow (being the profits remaining once other stakeholders, such 25 loan escitors, have been paid). Tis means thatthe shareholders have a vested intrest in Vite rer reare that resources are used to maximum effect, which in turn should be to the benefit of society as a whole. The simplest definition of a sharel institution, firm, or other entity that owns shares the situation can be much more complicated with beneficial owners and cross-holdings making the chain of ownership complex. Shareholders’ rights are generally protected by law although the extent and effectiveness ofthis protection varies from country to courtly However the definition ofa stakeholder is much les clear and along with thislack of arty comes an opaqueness regarding the role of stakeholders and the protection of thee ahs ‘There are various stakeholder groups that may have an interest in 3 company’ Pe formance and activities. Stakeholders include: employees, suppliers customers, banks: holder seems straightforward enough: an individual * in a company. OF course, the reality of SHAREHOLDERS AND STAKEHOLDERS 6 Shareholoers —_ a» Se fe NS q ) \ y ~~ 
