Who are the External Stakeholders of a Company?

Suppliers are among a trade reseller's external stakeholders.

Stakeholders include any person, group or organization that has an interest in the
activities and affairs of a company. Shareholders and employees are internal
stakeholders, because they own or work for the business. External stakeholders include
customers, communities, suppliers and partners, creditors and the government.
Customers
Customers are one of the most immediate external stakeholders that a company must
consider. For retailers, consumers are customers. Attracting, retaining and generating
loyalty from core consumer markets its critical to long-term financial success. For
business-to-business companies, the customers are the businesses that buy goods for
business use. Trade resellers sell directly to wholesalers or retailers, but they must also
consider end customers as part of their stakeholders. If consumers don't buy
manufactured goods, for instance, nobody in the distribution channel succeeds.

Communities and Governments

Communities and governments are closely tied external stakeholders. Companies
operate within communities, and their activities affect more than just customers.
Businesses pay taxes, but they are also informally expected by residents to operate
ethically and with environmental responsibility. Communities also like to see businesses
get involved in events and local charitable giving. Government entities make decisions
that can significantly impact a company's operations. It is important, therefore, for
company managers to maintain good relationships with local officials to anticipate legal
or regulatory changes or community developments that may affect them.

Suppliers and Partners

Suppliers and business partners have become more critical stakeholders in the early
21st century. More often, companies build a number of small, loyal relationships with
suppliers and associates. This enables each business to develop shared goals, visions
and strategies. Trade buyers and sellers can effectively collaborate to deliver the best
value to end customers, which is beneficial to each partner. Additionally, your trade
partners expect that you operate ethically to avoid tarnishing the reputation of
companies with whom your business associates.

Creditors
Businesses commonly use lenders to finance business ventures, building and asset
purchases and supply purchases. Banks often provide loans for major purchases, such
as a new building. Suppliers may provide product inventory on account, which a
business than pays down the road. Current creditors basically expect that a business
meets its payment deadlines responsibly and consistently. Doing so helps your business
maintain good relationships with creditors and also makes you more likely to get quality
financing in the future.

Corporate governance
In an era when trust in business is at a premium, and scrutiny from stakeholders is ever
wider and more intense, it has never been more important
for organisations to behave in accordance with their core purpose and principles in order
to protect reputation and trust. Corporate governance is a vital mechanism through
which boards can ensure that the behaviours of their workforce are aligned to the
organisation’s purpose and principles – and that corporate goals and values are
translated into their people’s decisions and actions.
Corporate governance is one of the most frequently used – some might claim overused –
phrases in the business lexicon. But different people often have different perspectives on
what it actually means. For some, corporate governance is primarily about legal
structures. For others, it’s mainly
about business controls, and the check and balances on how people carry out their
work. For a third group, it’s a much wider concept encompassing the entire way a
business is led and managed.
The role of board
From setting the right ‘tone from the top’ to maintaining and monitoring business
controls – and from rewarding the right behaviours to communicating openly and
transparently with all Stakeholders – the board plays a pivotal role in all aspects of
corporate governance. These activities
can sometimes be disconnected, so it’s the board’s role to apply the right risk lens to
every decision and action. For this to be a success, organisations
need to have the right people on the board – challenging, experienced, inquisitive and
with the time to understand both the risk landscape and their legal and ethical
responsibilities.
Corporate social responsibility
Towards consumer
A business cannot work without consumer. The survival and growth of business
depends on consumer satisfaction, service and support. The commercial organization
should win the confidence of the customers. This is possible by following a positive
attitude towards customers and fulfilling following social responsibilities towards them:-

(1) Quality: The company should produce quality goods. The company should try to
improve its quality because at not time quality can be 100%. There is always room for
improvement of quality.

(2) Fair Prices: The customers should not be cheated by charging high prices. It is not
possible to fool the customer at all the time. Thus, fair price convert a customer into
permanent customer.

(3) Honest Advertising: The customers want to know the facts, features, advantages,
side-effects, etc, of the product. The advertisement conveys this information. Thus, the
company must see that the advertisement is not being misleading and it must be done
by providing the true and actual information.

(4) After Sales Service: The company is expected to provide after sale service for
maintenance of goods during the period of warranty. Efficient and effective after sale
service helps to establish good relation between the customers and the company.

(5) Research and Development:The consumers require that the business organization
must conduct research and development for the purpose of improving the quality and
reducing the cost of production. That is, it must provide ISI or AGMARK products to the
customers.

(6) Consumer's Safety: The business must ensure that the product supplied will not
adversely affect on the life and health of the customers. Unsafe product must not be
marketed by the company.

(7) Regular Supply: Consumer should be supplied with the goods regularly as and when
required by them. The commercial organization should not create artificial shortage of
goods.

(8) Attend Complaints: The consumer complaints must be attended immediately.

(9) Avoid Monopolistic Competition: The commercial organization should avoid

monopolistic competition in the interest of consumers.

(10) Training: The commercial organization should arrange to train the customers either
free or for a fee. It must be in case of computers, etc.

Toward stakeholders

Economic responsibilities:

The first criterion of social responsibility is economic responsibility. The business

institution is, above all, the basic economic unit of society. Its responsibility is to produce
goods and services that a society wants and to maximise profit for its owners and
shareholders. Economic responsibilities, carried to the extreme, is called profit-
maximizing view; it was advocated by Nobel economist Milton Friedman. This view
argued that a company should be operated on a profit-oriented basis, with its sole
mission to increase its profits so long as is stays withing the rule of the game.

The purely profit-maximizing view is no longer considered an adequate criterion of

performance in the world in general. Treating economic gain in the social as the only
social responsibility can lead companies into trouble.

Legal responsibilities

All modern societies lay down ground rules, laws and regulations that businesses are
expected to follow. Legal responsibility defines what society deems as important with
respect to appropriate corporate behavior. Businesses are expected to fulfil their
economic goals within the legal framework. Legal requirements are imposed by local
councils, state and federal governments and their regulating agencies. Organizations
that knowingly break the law are poor performers in this category. Intentionally
manufacturing defective goods or billing a client for work not done is illegal. Legal
sanctions may include embarrassing public apologies or corporate ‘confessions’.

Ethical responsibilities

Ethical responsibility include behavior that is not necessarily codified into law and may
not serve the organization’s direct economic interests. To be ethical, organization’s
decision makers should act with equity, fairness and impartiality, respect the rights of
individuals, and provide different treatments of individual only when differences between
them are relevant to the organization’s goals and tasks. Unethical behavior occurs when
decisions enable an individual or organization to gain expense of society.

Discretionary responsibilities

Discretionary responsibility is purely voluntary and guided by an organization’s desire to

make social contributions not mandated by economics, laws or ethics. Discretionary
activities include generous philanthropic contributions that offer no payback to the
organization and are not expected. Discretionary responsibility is the highest criterion of
social responsibility, because it goes beyond societal expectations to contribute to the
community’s welfare.

Towards environment
Business organization has certain responsibilities towards the society at a large. They
are as under.
(1) Protection of Environment: Pollution is a major problem of present times, which is
due to commercial organizations. Air pollution and water pollution are due to the
industries, chemical plants, cement plants, etc. The business organization should take
all possible measures to minimize pollution.

(2) Reasonable use of Resources: The business organization should make proper use of
available resources in the large interest of the society. The resources like fuel, water,
land, etc. must be used economically.
(3) Reservation for Weaker Section: The commercial organization are expected to
provide the jobs and employment opportunities for lifting up economically weaker section
of the society.

(4) No Participation in Anti-Social Activities: The organization should not participate in

such activities which will adversely affect the society in general. No financial help should
be provided to such anti-social activities.

(5) Development of Backward Regions: The society requires that the business
organization should be started in backward areas. This will create employment
opportunities and increase purchasing power among the rural population of India.

(6) Financial Assistance: The society expects donations and financial assistance for
various social causes, such as eradication of poverty, illiteracy, etc. They expect
company to take part in anti-drug campaigns, anti-noise campaigns, and so on.

(7) Prevent Congestion in Cities: The companies should also work to avoid congestion in
cities spreading their industries in different places or locations.

(8) Employment Generation: Business firms should make all possible efforts to generate
employment. Such effort will help to solve problems caused due to unemployment in the
society.