What is a company: shareholders and stakeholders (Deborah Agostino) - YouTube

This is our first class to introduce the course

“Fundamentals of financial and management accounting”.

The purpose of the course is to introduce the basic concepts which are

related to both financial and management accounting.

But, actually, before introducing the concepts

which are related to accounting, we need to start from the background.

From something which is the reference schema and the reference element of the entire course,

which is represented by the company.

So, actually, during this class, during this first class,

we will focus on what is a company, how we can represent a company and

what is the objective of a company and how we can measure the value that is generated by the company.

So, let’s start from how we can represent a company.

Actually, we can represent a company by using an input-output model.

So, starting from this model, we have our company

which can be represented as a black box. If we have a black box this means that

whatever activity is realized by the company this is just something we do not care.

The company, realizing its activity, delivers some outputs.

Basically the company aims at realizing some outputs which can be products but they can also be services.

So, we can say that if a company is aimed to realize this output which can be the delivering of

a service or the realization of a product, in order to do this, the company needs some inputs

and this input can be of three different types.

So, we can have human resources, which we can represent as HR that stands for Human Resources.

These are like people, like managers and employees that provide their activities inside the company.

Then, we have the technology.

Technology can be represented by something like, for example, software, instruments,

we can have something like lands instrumentations. So, all of the technical elements that support

the transformation of the raw material into final product or services.

Finally, we have one last element which is represented by financial resources.

This is really important because the company needs money in order to realize the output.

So, basically, if we want to synthesize a company, whatever kind of company,

can be represented by using this model.

So the company aims at realizing an output by using these three different categories of input

and the company is producing value if the value of the output is higher with respect to the value of the input.

Actually, whatever kind of company can be represented by using this model.

But during the course, we are focusing on a specific type of company, which are called

Profit Company.

So, we need to understand more in detail what is a Profit Company and

how we can represent this Profit Company. Actually, if we have a Profit Company,

the objective is to maximize the value that is delivered to the shareholders.

So we need to introduce a distinction between shareholders and stakeholders.

Let’s start from the shareholders and try to understand who they are.

Actually, if we have shareholders, they are those that

own the company and the reason why is because they have the shares of the company.

That is to say that, actually, they provide the capital to the company and we can represent

the capital as capital at a certain moment of time.

So they own the share which means that they own a portion of the company.

And, finally, if the company is performing well, what they will receive back

will be a dividend, again, a dividend at a certain moment of time.

In contraposition to the shareholders, we have also others categories of actors because

the company interacts also with several other actors.

We can identify, first of all, banks.

So, we have that the company has some relationship with banks and the reason why is because if

the capital provided by shareholders is not enough, the company can ask banks for some money.

So the company will receive loans and provide back the same loans plus the interests.

Moreover, we can have some relationship also with respect to governments and local authorities

and the reason why is because the company is contributing, let’s say, to the development

of the local area and at the same time, the company is paying taxes so, again, we have

another interaction between company and government.

Then we have some interaction, as you can imagine, with the clients

and the reason why is because the company needs to understand what they want,

what customers want and depending on the company will deliver the best product for the clients.

Then we have the employees.

Because of course employees interact also with the company and we have both managers

and we have also workers, because they provide their competences and their skills inside the company itself.

And, finally, we can have something like, we can call it as general environment, because depending

on the country in which the company is operating, we can have also like the culture and then the ethics

of a certain country that can influence the activities of the company itself.

And, let’s say that, all these categories of actors through which the company interacts with, can be defined

as stakeholders, so, this is another key word that we should keep in mind, it is stakeholder.

And, basically, to sum up, what is the difference between the shareholders and the stakeholders?

If we have the shareholder, he owns a portion of the company because he has the share, so,

he puts capital inside the company and he receives back the dividend, if the company is performing well.

While, stakeholders, do not own the company but they are just interested

in how the company is performing because they have some relationship with the company itself.

Now, we say, OK, we have our company, this is a Profit Company and the objective of a

Profit Company is to deliver value to the shareholders.

Now, we need to understand how we can measure the value that

the company can generate for the shareholders.