Insurance Journal (2nd Quarter 2019)

Guest Contribution
Dr. Safdar Ali Butt
Formerly, Professor Emeritus of Finance
and Corporate Governance
Capital University of Science and
Technology, Islamabad
Corporate
Governance:
Basic Concepts
Stakeholders in a Company
Corporate Governance is essentially
about balancing the interests of
s t a k e h o l d e r s i n a c o m p a n y.
Therefore, let us first acquaint
ourselves with the concept of
stakeholders in a company.
A stakeholder is a person (or a body)
who has an interest (or stake) in a
company. Shareholders are obviously
the main group who has a stake in the
wellbeing of the company, but they
are not the only ones. A number of
other people are also affected by the
operations, financial position and
performance of a company. All such
people need to be kept happy by those
who run the company. Such people
include creditors, lenders, customers,
suppliers, employees, general public,
government, and society at large, etc.
We can classify stakeholders in a
listed company in two different ways.
Classification of Stakeholders
The first is on the basis of their
respective roles in the company. On
this basis we can say the stakeholders
are owners, lenders, employees,
business associates and society at
large.
Ÿ
Owners include all sorts of
shareholders like those who do or
do not control the company,
individuals as well as institutional
Ÿ
investors, long term holders as
well short term players, those with
voting rights and those without
them, etc. Owners obviously have
greatest of interests in the
c o m p a n y. I f t h e c o m p a n y
performs well, they get a better
return on their investment. If the
company's financial position is
strong, their investment is safe.
Lenders essentially include only
those who extend financial
advances to the company, rather
than credit for services rendered or
trade goods supplied. These may
be formal financial institutions or
individuals (e.g. those who buy
bonds, or grant loans through asset
Ÿ
Ÿ
management firms). Again, their
interest in the company is obvious.
A well performing company can
continue to pay interest as well as
make all principal repayments in
good time, without any risk of bad
debts.
Employees include executive
directors, senior managers and all
others who are on the pay roll of
the company. If the company
continues to perform well, the
employees enjoy job security and
career progression.
B u s i n e s s A s s o c i a t e s a r e
company's suppliers and clients.
Suppliers benefit from the
Insurance Journal April, May, June 2019
18
Find us at: www.insurancejournal.com.pk — www.facebook.com/insurancejournalpakistan