Exam 11: Corporate Performance, Governance, and Business Ethics

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Internal stakeholders of a national chain of fast-food restaurants would include the managers and employees of the firm and the firm's stockholders. External stakeholders would include customers, who are probably young adults and young families; suppliers, such as wholesalers of food and paper products; and banks and other creditors. Local governments regulate issues about food safety and handling at food service establishments, and the federal, state, and local governments regulate a wide variety of issues, from hiring practices to tax collection, to accessible restaurant design. Unions may be a stakeholder if the restaurant workers are unionized. Local communities and society are also external stakeholders.
Each of these groups can have a positive or a negative impact on profitability. Here is just one example. If customers are satisfied that they are receiving value for their money, they will purchase the firm's products, increasing the firm's profitability. But if the customers are not satisfied, they will refrain from purchasing and may even give the firm bad word-of-mouth advertising, which will reduce sales and profitability.