ACCA Applied Knowledge · Business and Technology · Stakeholders in business organisations
A listed company's shareholders want share price growth and rising dividends, while its employees want job security and higher pay. Which of the following best describes the relationship between these two stakeholder groups' objectives?
Shareholder and employee objectives may conflict. Shareholders want higher profit, dividends and share price, whereas employees want better pay and secure jobs, which are costs. Extra spending on pay or job protection can reduce the profit available to shareholders, so the two groups' interests are not always aligned.
- AThey are always identical, because both groups benefit when the company is profitable
- BThey may conflict, because higher pay and job protection can reduce profit available to shareholdersCorrect
- CThey cannot conflict, because employees are internal and shareholders are external stakeholders
Explanation
Shareholders look for returns, which come from profit, while employees want wages and security, which are costs. Spending more on wages can reduce profit and dividends, so conflict is possible. The claim that the objectives are always identical ignores this trade-off. Shareholders are also internal-connected stakeholders, so the internal/external split does not prevent conflict.
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