Stakeholder

While shareholders own the company, many other groups have an interest in how it is run. Employees depend on it for jobs and wages. Customers rely on its products. Suppliers depend on its orders and payments. Lenders want to be repaid. Local communities are affected by its operations, and governments collect its taxes and regulate it.

For example, a company deciding whether to close a factory must consider the effects on shareholders, through costs and profits, on employees who would lose their jobs, on the local community and on customers and suppliers.

Managing relationships with stakeholders is important for a company’s long-term success and reputation. Poor treatment of employees, customers or communities can lead to strikes, boycotts, regulation or damage to the brand.

The term contrasts with shareholder, although the two are often confused. Debate continues about how far companies should prioritise stakeholders other than shareholders, a question at the heart of stakeholder capitalism and ESG investing. Some laws, such as UK company law, require directors to consider wider stakeholders while promoting the company’s success.