Who the stakeholders of companies are
The Corporate Accountability Network thinks that every company, wherever it is incorporated, and whatever its size has six groups of stakeholders, all of whom are at risk as a result of its existence. These six groups are:
1. All those who provide capital to the company
This group does include the company’s shareholders. It also includes those who provide it with loan capital as well as banks, hire purchase, factoring and leasing companies and those who provide credit card facilities.
2. Those who trade with the company.
Most obviously this group includes those who sell to the company who are at risk that they may not be paid if, as is commonplace, those goods or services are supplied on trade credit terms with payment required after delivery. The group does, however, also include customers. They too can be creditors of the company, either because of deposits paid or because of guarantees offered which the company has an obligation to fulfil. All those who trade with a company have a right to know the risk that they face from doing so.
3. Employees of the company.
Very obviously employees are at risk for unpaid wages as very few employees are paid in advance. As a result this risk affects almost every employee of every company except on the day that they are paid. But there are also other risks. Some pay is deferred, for example. Bonuses fall into this category. And there are also pension obligations to consider. All companies have a duty to account to their employees as a result.
Regulators can lose as a result of the existence of limited companies. Some companies may be formed so that those setting them up can avoid their obligations to society as imposed by regulators, knowing that they will have either no or very limited personal risk arising as a result. And regulators are also at risk because when they find fault the chance exists that any penalty can be evaded by a limited company simply ceasing to trade. In this way regulators suffer an even greater loss, which is to their overall credibility as enforcers of the law.
5. Tax authorities
Tax authorities are at risk from the existence of all companies. Some of this might be mitigated if the tax rates due by companies were the same as those owing by individuals undertaking similar transactions. This, however, is rarely the case, with the bias being in favour of companies. That means that many companies are specifically created to avoid tax. That gives a tax authority a very good reason to be interested in them.
In addition, the ability of companies to cease trading leaving tax liabilities owing without any possibility of recourse to the owners of the company, who may have gained from this outcome, means that limited liability companies are always a threat to the revenues of tax authorities. And that is before the ability of some to manipulate limited companies to mitigate their tax liabilities e.g. by relocating profit to locations where little or no profit is payable, is taken into account.
All these factors make tax authorities stakeholders who face a high degree of risk from the activities of limited companies.
6. Civil society
Civil society in all its many forms, may suffer a loss from the existence of a company. That company may pollute the atmosphere. It may corrupt the political environment. It could disrupt communities by its divisive activities. It may discriminate. It could promote activities that undermine communities. It may sell harmful products. And it might not disclose any of these activities when they occur, leaving a legacy that persists long after it has ceased to exist, with its owners taking their profits long before the consequences of the actions that gave rise to them were appreciated. These are very real, and to the company, unaccountable costs which civil society needs information to appraise.
The six rings that surround the circle that represents the company on the Corporate Accountability Network’s logo illustrate the way that these stakeholders interact with a company.