Internal stakeholders are members of the organization who have a direct interest in the decisions and activities of a business on daily basis. Internal stakeholders include owners (shareholders), directors and managers, and employees.
1. Owners (shareholders)
Limited liability companies such as private limited companies (Ltd.) and public limited companies (plc) are owned by shareholders.
Roles of owners (shareholders)
Shareholders are the owners of a limited company who own shares in the business. They invest in companies to earn money in two ways.
First, as the owners of the company, shareholders are entitled to a share of its profits. The higher the profits earned, the higher the share of its Net Profit After Interest and TAX the owners will get in the form of a dividend. Dividend is a proportion of the company’s profits distributed to shareholders.
Second, shareholders will receive capital gain from selling their shares for a higher price than they paid for earlier. The market value of shares is mainly affected by the profitability of company – when the company generates more profits, then the market value of the shares will rise.
Shareholders will also set the vision for the business.
Objectives of owners (shareholders)
Shareholders wish to maximize dividends in order to receive higher returns as a reward for taking risks to invest their money into the business.
Shareholders also want to see an increase in share value in order to achieve higher capital gain after a rise in the share price, e.g. resulting from business growth or higher profitability.
Rights of owners (shareholders)
All the profit that the company generates belongs to the owners. Shareholders are entitled to profits. Profit is reward for investors for risking their money in the business.
Shareholders also have voting rights and a say in how the company is run, e.g. they choose the directors who will then form The Board of Directors to manage the business on behalf of shareholders.
Responsibilities of the business to owners (shareholders)
The company should honestly inform the owners in a timely manner how much profit it has earned last year, if any.
Keep the owners updated on the proportion of the dividend that is going to be paid to them (the payout ratio), how often it is going to be paid out (either monthly, quarterly, biannually / semiannually or annually), and whether there is any increase of decrease in dividends.
Benefits to the business of accepting these responsibilities
If shareholders are satisfied with the level of profit that that company has made, and the amount of dividend and the payout ratio, they may be willing to invest more of their own money into the business.
Responsibilities of owners (shareholders) to the company
Invest money in a company by purchasing its shares.
Keep track of the performance of the business.
2. Directors and managers
Directors and managers are responsible for the performance of a business in the short-term, medium-term and long-term.
Roles of directors and managers
Directors are senior executives, who are the members of The Board of Directors. They have been chosen by the company’s shareholders (owners) to direct business operations and set objectives on behalf of them.
Managers are at the lower level than directors. They oversee the daily operations of a business and are responsible for implementing the objectives set by the directors.
Objectives of directors and managers
Directors and managers aim to maintain decision-making power.
They wish to maximize their own benefits, such as receive salary increase, annual bonuses and additional perks. Their financial payments are often linked with the company’s performance so they aim for profit maximization.
They also want to have decent non-financial motivators such as power and status, friendly and comfortable work environment, and job satisfaction.
Rights of directors and managers
Directors and managers make all important business decisions acting on behalf of the owners.
They have the right to hire, dismiss and lay off workforce.
They also decide what happens with Net Profit After Interest and TAX – whether it will be paid out to shareholders in the form of a dividend, or retained in the business for future growth.
Responsibilities of the business to directors and managers
Directors and managers shall receive salary increase and bonuses, if the business achieves its objectives, grows and remains profitable.
Those lower-level managers who perform exceptionally well shall gain promotion.
Benefits to the business of accepting these responsibilities
Loyalty of the managers and directors.
Long-term growth, increase profitability and sustainability.
Responsibilities of directors and managers to the company
Do their best to maintain short-term financial health, long-term business growth and aim for profit maximization.
Maintain healthy levels of retain profits for further investment in the business.
3. Employees
Employees are the staff who produce goods and provide services for sale, execute orders from the managers to achieve business objectives, and communicate with the customers to keep them happy.
Roles of employees
Employees provide both manual and mental labor services to the business in order to allow products to be provided to customers on time and with satisfying quality.
Employees must also act in accordance with employment contracts.
Objectives of employees
Employees are also interested in the performance of the business they work for because better-performing businesses mean the chance of pay rises, better job security and more opportunities for promotion.
Workers strive to improve their payment and other financial benefits, as well as working conditions such as better working environment and less hours of work.
They also want plenty of opportunities for career progression and promotion.
Many employees expect to receive a fair salaries and wages that reflect their contribution to their business organization’s success.
Rights of employees
Employees have rights to be treated according to their labor contracts that should be established based on national laws and regulations.
They must be paid on time and in full as stipulated in the employment contract.
In some countries, workers also have rights and obligations to join a trade union.
Responsibilities of the business to employees
Do not break labor laws.
Act ethically and with dignity towards its workforce.
Provide training and career progression opportunities, job security, and safe and comfortable work environment.
When making decisions, business responsibilities to workers should be considered.
The company should also encourage their workers to be involved in decision-making in order to motivate its staff.
Treat employees like business partners.
Benefits to the business of accepting these responsibilities
Improved motivation.
Higher levels of employee loyalty.
Low labor turnover.
Easier to recruit high-quality workforce.
Improved efficiency and customer service.
More effective communication.
Improved quality of products and better customer service.
All in all, it is important for managers to meet the needs of their employees. Satisfied employees will not have any interest in taking industrial actions against the business or going on strike.
Responsibilities of employees to the company
Employees must follow the conditions and requirements of the employment contract, cooperate with managers regarding the execution of business objectives, refrain from damaging company’s reputation, be honest and act in accordance with The Ethical Code of Conduct.
