Why is the owner of a business the most important stakeholder? I am doing coursework on Cadbury's. Thank you very much as this is very helpful for me. Thank you!
According to the Stanford Research Institute, a stakeholder of a business is a member of the "groups without whose support the organization would cease to exist." Clearly, then, the relationship between a stakeholder and the business that they support is mutually affecting. It is in the stakeholder's best interest that the business do well, and it is in the interest of the business to reward stakeholders in order to secure future support. Generally, stakeholders are split into three categories: a) Primary b) Secondary and c) Excluded. Primary stakeholders are usually members of the business itself, this being customers, employees, stockholders, and so on. Business owners would fall under this category. Next, there is secondary stakeholders. Secondary stakeholders are individuals who are external to the business. These are members who do not directly engage with the business but who are nonetheless affected by the business' actions. This includes indigenous communities, media groups, and the general public. Finally, there are excluded stakeholders, which refers to children and/or members of the public who are not affected or interested in the business' actions. A business owner would contrast greatly with an excluded stakeholder in relation to any given business since the relationship between a business and its stakeholders is mutually rewarding and mutually damaging. A business owner is the most important member of a business because a business owner is the individual who is most involved in their business, and since stakeholders are defined by their degree of involvement, a business owner is the most important member.
In most cases, a business owner holds the majority of the stocks, which means she or he has the ability to overrule minority stockholders. As the majority stockholder, it is assumed the business owner incorporated the business mostly as a limited liability institution and invited other stockholders to invest.
The direction of the business will therefore be driven by the business owner, including the day-to-day running of the business, chairing of board meetings, developing and managing the strategic plan, the marketing plan, the budget, and steering the business to achieve the overall goals and objectives.
All these plans will have been formulated at the incorporation of the business. As the business expands and becomes successful, the business owner could give up some stocks. For example, if at business incorporation the business owner held 75% stocks, she or he can give up 24% stocks and offer them to potential investors but still retain 51% and remain the majority stockholder.
Eventually, the business owner could choose to hand over management of the company to a neutral person, thereby stepping down as the Chief Executive Officer. This allows the company now to grow well beyond the initial vision and of the business owner, which is often the best strategy in business growth.
When this happens, the business now acquires a life of its own with strong systems and structures that are not dependent on the business owner.
Before we discuss this question in detail, it will be useful to develop some clarity on nature of ownership of a business. A business may be owned solely by an individuals, or by several partners, or by a large number of shareholders. When a business is owned jointly by several people either as partners or as shareholders extent of ownership has considerable influence on the importance of the business to the individual. Also the extent to which a person is involved in management of the business affect his or her interest in the business. A small shareholder in a big company who holds just a few shares in the company for short term gains, is not likely to have the same kind of interest as another shareholder who is also the managing director of the company. Also importance of a company to the owner is also dependent on other businesses owned by the same person. Thus if a businessman running a big business also owns another small company, both these companies are not likely to be equally important for him or her.
Having thus clarified the nature of ownership, we can now state that an owner of a business is an important stakeholder in a business as the business affects his earnings and wealth. When an owner manages a business, the performance and conduct of the business also affects the reputation of the owner. In this way the importance of the business increases further. The importance of a business for the owner is also related to the ease with which owner can close one business and start another. A customer can easily switch his or her loyalty from product of one company to another, but a businessman cannot close down one business and start another. Thus the owner is stuck with a business for a long time.