Business
Financial Performance and Stakeholders
Financial performance refers to a company's ability to generate profits and manage its financial resources effectively. Stakeholders, including shareholders, employees, customers, and the community, are impacted by a company's financial performance. It is important for businesses to consider the interests of all stakeholders when making financial decisions to ensure long-term success and sustainability.
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9 Key excerpts on "Financial Performance and Stakeholders"
- Stuart Cooper(Author)
- 2017(Publication Date)
- Taylor & Francis(Publisher)
Chakravarthy (1986) argues that traditional financial measures are inadequate to assess an organization’s strategic performance and that in addition stakeholder satisfaction and the quality of an organization’s transformation 1 are important. In terms of specific stakeholders, Chakravarthy considers shareholders, customers, employees and the community and the performance of these organizations is measured in terms of the organization’s perceived reputation as reflected in the Fortune survey of corporate reputations within an industry. As such no objective stakeholder measures are developed. A somewhat similar approach to measuring stakeholder performance was adopted by Bendheim, Waddock and Graves (1998). In this paper the authors consider five primary stakeholder groups (community relations, employee relations, environment, customers and shareholders) where performance to the first four stakeholder groups is measured in terms of an organization’s specific rating in that category by Kinder, Lydenberg, Domini (KLD). 2 Performance to the fifth group (shareholders) is measured by a ‘moving average of 10-year financial return to shareholders’. In a similar but earlier paper Waddock and Graves (1997a) measure financial performance to shareholders through the use of three different measures, ‘10-year compounded total return to shareholders (a market measure), ROA (return on assets), and ROE (return on equity).’ From within the Business and Society field, Clarkson (1995) considered ‘stakeholder management’ as the most appropriate framework for considering corporate social responsibility. Over a period of ten years Clarkson developed a ‘reasonably comprehensive, but not exhaustive’ list of some fifty corporate and stakeholder issues. The stakeholder groups identified in this work are: employees, shareholders, customers, suppliers and public stakeholders
eBook - PDFOperations Management NQF4 SB
TVET FIRST
- S Paarman M Bosman(Author)
- 2013(Publication Date)
- Macmillan(Publisher)
These can be classified as financial stakeholders, customers, employees, government and the community. Look at the diagram that follows. It shows the different stakeholders and explains the role that each one plays within an organisation. Module 6 Applying techniques to establish positive stakeholder relationships conduct: behaviour. Words & Terms 101 Module 6: Applying techniques to establish positive stakeholder relationships STAkEHOLDERS employees customers community financial stakeholders government Fig.6.1 The various stakeholders in an organisation. It is essential to the success of any business to ensure that stakeholders are satisfied. A business will only succeed in an environment where its relationships with the different stakeholders is maintained and constantly improved. In this section, we will look at how to improve relationships with the different stakeholders. Improving relationships with financial stakeholders Financial stakeholders are people who are interested in the financial welfare of an organisation. They include lenders, shareholders and insurers. These stakeholders are concerned with the financial side of an organisation and their priority is to ensure that the organisation is managed well financially. This means that the organisation makes a good return on its assets , and maintains a positive cash flow . To improve relationships with financial stakeholders an organisation needs to manage the finances of a business well. It is important to a financial stakeholder that the organisation ensures that: • the risk of bankruptcy is limited • there is an increase in sales and a reduction in operating costs. Organisations publish regular financial and company reports. This helps financial stakeholders to track the financial progress of the organisation. shareholders: people or companies who own shares in a particular organisation – together they own that organisation. return on assets: profits made from a business investing in assets.
eBook - PDFThe Stakeholder Balance Sheet
Profiting from Really Understanding Your Market
- Farrokh Suntook, John A. Murphy(Authors)
- 2010(Publication Date)
- Wiley(Publisher)
Conversely, if the stakeholder balance sheet shows that your customer satisfaction rating has declined from, say, 8 to 7.5, you should have a reasonable idea from the same set of results as to which were the critical drivers on which your performance fell and, therefore, what action you need to take to improve performance in the future. It is the diagnostic power of the stakeholder balance sheet which, therefore, makes it particularly amenable to ongoing monitoring activity. A N O N G O I N G P R O C E S S 267 • Your stakeholder balance sheet affects your financial performance: While your market performance is ultimately liable to influ- ence your financial performance, the reverse is not true: improved customer satisfaction, for example, should as a general rule result in increased customer purchases and improved financial performance, all else being equal; improved financial performance does not, however, result in improved customer satisfaction. This may seem like a platitude, but the point is relevant when we are talking about why it is important to monitor your performance in the marketplace: because it is your market performance which has a major impact in driving your financial performance, it would seem logical that you should be paying at least as much attention to monitoring the former as to the latter. Yet whereas every organisation will, as a matter of course, review its financial statements periodically, the same importance is not normally attached to the monitor- ing of market performance. Clearly, performance in your marketplace is by no means the only determinant of financial performance – how you control your costs would have an obvious impact on your bottom line. It is interesting, though, that the tracking of market performance is, again, not as common a practice as the tracking of costs.
eBook - PDF- Carl Warren, Jeff Jones, Amanda Farmer, , Carl Warren, Carl Warren, Jeff Jones, Amanda Farmer(Authors)
- 2021(Publication Date)
- Cengage Learning EMEA(Publisher)
Snap Inc. Connection Business Stakeholders A business stakeholder is a person or entity with an interest in the economic performance and well-being of a company. For example, owners, suppliers, customers, and employees are all stakeholders in a company. Business stakeholders can be classified into one of the four categories illustrated in Exhibit 2. Business Stakeholder Interest in the Business Examples Capital market stakeholders Providers of major financing for the business Banks, owners, stockholders Product or service market stakeholders Buyers of products or services and vendors to the business Customers and suppliers Government stakeholders Collect taxes and fees from the business and its employees Federal, state, and city governments Internal stakeholders Individuals employed by the business Employees and managers Exhibit 2 Business Stakeholders Capital market stakeholders provide the financing for a company to begin and continue its operations. Banks and other long-term creditors have an economic interest in receiving the amount loaned plus interest. Owners want to maximize the economic value of their investments. Product or service market stakeholders purchase the company’s products or services or sell their products or services to the company. Customers have an economic interest in the 5 Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 1 The Role of Accounting in Business continued success of the company. For example, customers who purchase advance tickets on Delta Air Lines (DAL) are depending on Delta continuing in business.
eBook - PDFGovernance and Social Responsibility
International Perspectives
- Güler Aras, David Crowther(Authors)
- 2017(Publication Date)
- Red Globe Press(Publisher)
The evaluation of performance for a business therefore depends not just upon the identification of adequate means for measuring that performance but also upon the determination of what good performance actually consists of. Just as the determination of standards of performance depends upon the per-spective from which it is being evaluated, so too does the measurement of that performance, which needs suitably relevant measures to do so, not absolutely as this has no meaning, but within the context in which performance is being evaluated. From an external perspective, therefore, a very different evaluation of performance might arise, but, moreover, a very different measurement of perfor-mance, implying a very different use of accounting in that measurement process, also might arise. The measurement of stakeholder performance is perhaps even more prob-lematic than the measurement of financial performance. Objective measures of stakeholder performance are not given in the annual reports of companies and therefore we have chosen to consider the subjective measures included within the ‘Britain’s Most Admired Companies’ surveys annually published in Man-agement Today . These measures provide a reputation rating, as gathered from ‘rivals’ perceptions, in nine categories (see Figure 11.1) and these measures are also added to provide a total score. The nine categories are: (1) quality of management; (2) quality of goods and services; (3) capacity to innovate; (4) quality of marketing; (5) ability to retain top talent; (6) community and environmental responsibility; (7) financial soundness; (8) value as long-term investment; (9) use of corporate assets. Nike Nike has been criticised for contracting with factories in countries such as China, Vietnam, Indonesia and Mexico.
eBook - PDFBusiness & Society
Ethics, Sustainability & Stakeholder Management
- Archie Carroll, Jill Brown, Ann Buchholtz, , Archie Carroll, Jill Brown, Ann Buchholtz(Authors)
- 2017(Publication Date)
- Cengage Learning EMEA(Publisher)
97 Perspective 2. This view, which has not been studied as extensively, argues that a firm ’ s financial performance is a driver of its social performance. This perspective is built somewhat on the notion that social responsibility is a “ fair weather ” concept. That is, when times are good and companies are enjoying financial success, higher levels of social performance are observed. In one major study, it was found that financial perfor-mance either precedes or is contemporaneous with social performance. This evidence supports the view that social – financial performance correlations are best explained by positive synergies or by “ available funding. ” 98 Perspective 3. A third perspective argues that there is an interactive relationship between and among social performance, financial performance, and corporate reputa-tion. In this symbiotic view, the three major factors influence each other, and, because they are so interrelated, it is not easy to identify which factor is driving the process. In a recent, major study, researchers concluded that the relationships flow in each direction; that is, what is profitable performance is social performance and what is social is SPOTLIGHT on Sustainability Sustainability ’ s Stock Is Rising A comprehensive study conducted by Deloitte Touche Tohmastsu Ltd., a private financial services provider, interviewed 250 CFOs representing 14 countries and 15 different industries with annual revenues averaging US$12 billion, and found the following: • Sustainability is seen as a key driver of financial performance. • Organizations are transforming to meet the sustain-ability imperative. • Sustainability is becoming operationalized. • CFO involvement with sustainability is deepening. • Sustainability aspects of tax and financial reporting have gained significant mindshare among CFOs. • Energy management still tops the list of issues. • CFOs strongly believed employees are becoming increasingly concerned with sustainability.
- Patria de Lancer Julnes, Frances Stokes Berry, Maria P. Aristigueta, Kaifeng Yang, Patria de Lancer Julnes, Frances Stokes Berry, Maria P. Aristigueta, Kaifeng Yang(Authors)
- 2007(Publication Date)
- SAGE Publications, Inc(Publisher)
It is worth noting that an emphasis on external stakeholder involvement does not exclude the fact that performance measures should be tied to what management is doing and help management do their work better. Are Stakeholders Informed and Involved? _______________ Informing and involving citizens is usually included in performance mea-surement projects, at least in principle or as an “espoused theory.” In the United States, the GPRA mandated federal agencies to develop strategic plans that include performance targets, requiring that “when developing a strategic plan, the agency shall consult with the Congress, and shall solicit and consider the views and suggestions of those entities potentially affected by or interested in such a plan” (p. 2). GASB, influential in state and local governments, specifies that performance reports should include a discussion of the involvement of citizens, elected officials, management, and employees in the process of establishing goals and objectives (Fountain, Campbell, Patton, Epstein, & Cohn, 2003). In the United Kingdom, stakeholding is the core concept for New Labour’s program in office (Prabhakar, 2004). For example, the United Kingdom Local 177 Making Performance Measurement Relevant Government Act of 1999 mandated the Best Value (BV) initiative to secure continuous improvement in economy, efficiency, and effectiveness. It requires local governments to consult the following parties: (a) representatives of persons liable to pay any tax, precept or levy to or in respect of the authority, (b) representatives of persons liable to pay non-domestic rates in respect of any area within which the author-ity carries out functions, (c) representatives of persons who use or are likely to use services provided by the authority, and (d) representatives of persons appearing to the authority to have an interest in any area within which the authority carries out functions.
eBook - PDFSustainable Financial Investments
Maximizing Corporate Profits and Long-Term Economic Value Creation
- Brian Bolton(Author)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
Investors provide the financial capital, designers pro- vide the product, customers provide the market, employees con- nect the product to the market, and society reaps the cumulative 28 Sustainable Financial Investments benefits—through salaries, social welfare, products, taxes, commu- nity development, and other means. In free markets, every stake- holder gets to vote on the actions of the firm. Customers can decide not to buy the products. Employees can choose to resign. Investors can choose to take their investments elsewhere. These votes ultim- ately determine the value of the firm and the impact the firm makes. Each stakeholder acts in his or her own rational self-interest; suc- cessful firms are able to manage the inherent conflicts between dif- ferent groups to maximize mutual benefit. As you read the various examples and case studies in this book, assuming you actually read them, ask one simple question: Who cares? Don’t ask this in a disparaging way; ask it in a curious way. Think about who cares about what a firm does. Who cares what a firm pays its employees? Who cares about the features or design of a product? Who cares what impact an investment or activity has on the environment? Who is going to contribute extra capital or resources to the firm as a result of any investment? Value is cre- ated by these stakeholders caring enough about that investment to exchange resources such that the benefits to all parties are greater than the costs to all parties. The purpose of any business entity is to maximize value. How a firm defines value is determined by the firm’s structure and mission, which are determined by the firm’s stakeholders. As a result, it is crit- ical for every firm to understand what its stakeholders value in order to decide what investments to make.
eBook - PDFStakeholder Theory
The State of the Art
- R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan L. Parmar, Simone de Colle(Authors)
- 2010(Publication Date)
- Cambridge University Press(Publisher)
Finance scholars have barely tapped the potential of the stakeholder per-spective in improving fi nancial decisions. Financial market participants clearly are not the only stakeholders that in fl uence fi nancial outcomes. A broadened perspective of stakeholder in fl uences could help fi nance researchers better explain such phenomena as why some initial public offer-ings are more successful than others, why two fi rms with a very similar fi nancial structure get a different interest rate from the same bank, or how 133 Stakeholder theory in fi nance, accounting, management, and marketing residual returns are in fl uenced by stakeholder bargaining power. While it seems unlikely that fi nance scholars will soon abandon their singular obses-sion with maximizing the fi nancial value of the fi rm in favor of a broader perspective on fi rm performance, the stakeholder dialogue is increasing and researchers are beginning to apply a stakeholder perspective to a fairly wide range of fi nance-related questions. Stakeholder theory in the accounting literature The accounting discipline has grown considerably in the past half century due to recognition of its importance and the increasing demand for its graduates (Fogarty and Markarian 2007 ). Research in the discipline has also grown in both volume and importance. Stakeholder theory has contributed to this literature, but until recently this contribution was fairly minimal. In 1984, Schreuder and Ramanathan argued that markets and monitoring systems leave corporate managers with little discretion to work in the interests of any other stakeholders except the shareholders. In fact, market failures and incomplete contracting are just as applicable to other stakeholders as they are to shareholders. Another relatively early contribution to the accounting lit-erature came from Dermer ( 1990 ), who described the organization as an ecosystem in order to demonstrate the signi fi cance of accounting to strategy.
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