Austin TX Business Law Blog

Thursday, March 25, 2021

What Role Do Stakeholders Play in a Company?

A stakeholder is considered to be any person who has an interest in a company. This means that the term “stakeholder” is actually quite general. Think about who could have an interest in a company. An employee, a supplier, a partner, and others could be considered stakeholders. Furthermore, a stakeholder could be an investor in a company. These are all people or organizations which have a stake in the company being successful. What exactly is, however, the role of a stakeholder in a company? We will discuss more on this here.

What Role Do Stakeholders Play in a Company?

The role of a stakeholder can vary as widely as the type of stakeholder, as discussed above. It can also greatly vary depending upon the type of company. The role of a stakeholder can also depend on the type of stakeholder. Generally speaking, there are two central categories of stakeholders: internal and external. Internal stakeholders work within the company. They are employees and managers of the company. Often, internal stakeholders have voting rights. External stakeholders, on the other hand, have the central role of investing in the company.

While they do not have control over the company’s direction or how the company is run, per se, external stakeholders still have a vested interest in the success of the company. For instance, an investor is an external stakeholder who wants to see a solid return on that investment. A supplier is an external stakeholder who wants to see continued and even increased demand for the product or service they provide. The government is actually another example of an external stakeholder. The government wants to not only see a company comply with the laws and sound financial practices but also wants to see a company that can continue to employ more and more people.

The precise role of a stakeholder can greatly vary. A stakeholder may be on the company’s board of directors and, therefore, have direct management powers within the company. These stakeholders may be tasked with overseeing certain departments within a company and be responsible for ensuring things run smoothly within that particular department.

Stakeholders can also play a critical role in infusing funds into a company. While large investors in a company may not have any direct management authority within the company, money, as they say, talks. These stakeholder investors can choose to bring in more money to a company or take out their money from a company depending on things such as the company’s performance. The fact that they can bring in a significant amount of funds to a company means that they can assert pressure on management if they do not like the direction a company is going towards.

Business Law Attorney

As you can see, stakeholders play a significant role in a company. Be sure to take care in bringing in new stakeholders into your company. They can have unforeseen, yet substantial impacts on the future of your company if you do not exercise due care. For counsel on stakeholder issues and other business-related matters, The Kumar Law Firm is here for you. Contact us today.

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