Stakeholder’s and their Expectations
By incorporating the participation of stakeholders in governing boards corporations are likely to respond to the interest of society as a whole. The stakeholder’s approach to the role of the governing board expects the board to negotiate and compromise with the stakeholders in the interest of the corporation. It recognizes that this involves setting overall direction and thus it supports a coordinating role of the governing board.
Moving along this line of thought , the theory can be used to account for the function of the corporation by identifying moral and philosophical guidelines for the management of the corporations.
The company has to consider varied interests of different stakeholders. In some countries it is advisable and even mandatory to have stakeholder participation in the Board of Directors- it may be in the form of employees representation , creditors representation etc. The two-tier system in Germany representation, creditor representation etc. The two-tier system in Germany and system prevalent in Japan are some good examples of such application.
Significance of major stakeholders
We shall now discuss significance of the major stakeholders:
Shareholders are regarded as the owners of a Company. There are mainly two types of shareholders viz. equity shareholders and preference shareholders. Equity shareholders provide risk capital and a return on this type of capital viz. dividend will depend on the profits of the Company. As regards preference capital, shareholder will receive fixed rate of dividend irrespective of the profits of the Company.
The funds available by the shareholders, as share capital are described in the balance sheet as subscribed and paid up capital. For a Company it is a source of raising permanent or long-term finanace. It is raised for the life of the Company from the Company’s point of view although the shareholder is free to sell his...