Business Organizations and

Their Stakeholders
1. Purpose of Business Organizations
2. Types of Business Organizations
3. Stakeholders Goals and Objectives
• Stakeholders are those individuals or groups that, potentially, have an interest in what
the organization does. These stakeholders can be within the organization, connected to
the organization or external to the organization.
• Managers are not completely free to set objectives: they have different groups of
stakeholders to consider. The managers act as agents for the stakeholders, whose
influence varies from organization to organization.
• The agency relationship in business therefore refers to the separation between an
organization's owners (the shareholders) as the 'principal', and those managing the
organization on their behalf (the company directors) as their 'agents’.
• Those running the company should do so in a way that best serves the interests of
shareholders (rather than pursuing their own interests). It is important that management
interests are aligned with the organization's goals, so that they act in a way that benefits
shareholders and other stakeholders.
End of the Chapter – Quick Quiz