Stakeholder Comparative - Case Study Example

Stakeholder Comparative Study The following paper presents, discusses, and reviews the main stakeholders of British Land Company in comparison to the Shell Petroleum Development Company of Nigeria. Both companies are publicly traded companies on the London Stock Exchange. Each focuses on a different industry and therefore may have different types of stakeholder categories to account for. The British Land Company is a public company for which the primary business is real estate, while Shell Development Company of Nigeria is a subsidiary of the Royal Shell Company and is focused on the energy sector in Africa. The companies of interest in this analysis do belong to industries which are very different in nature and which therefore carry different potential and impacts on the regarded interest of the stakeholder they represent. The environment in which they operate in, their industry, the state of their local economy, the overall sizes of their respective industries, their global impacts, their related risks, their economic values are all aspects that are determined in part by the composition of their respective stakeholders and the type of value they are able to offer those from a social, political, and economical perspective. British Land Company Plc British Land Company plc is the largest property investment company in Britain, with a current portfolio of £14.6 billion. The Company’s portfolio focuses on areas where the principles of supply and demand have shown to remain strong in the long term. About 41% is invested in large town retail properties, such as Meadowhall Shopping Centre in Sheffield, 88 supermarkets and 66 retail warehouses (BL 2007). Another main area of focus of the company is on office properties in central London, with a comparable rate attaining 33% of the company’s overall property portfolio, with notable offices such as the Broadgate Estate, Liverpool Street Station, and Regent’s Place. The Group employs 186 staff members at its headquarters in the London office. Their activities are focused on the integrated core disciplines of strategic property investment, management, development and financing. About 550 staff members are employed on-site at the Group’s properties, principally Meadowhall Shopping Centre, Sheffield and Broadgate Estates. The Group outsources the day-to-day operational management of its portfolio, and other non-core disciplines to third party members. The British Land Company’s primary objective is to produce superior, sustained and secured long-term shareholder returns via the development, management and financing of chosen real estate activities. The company recognizes that environmental and social considerations should be integrated with everyday working practices and they are embedded into its corporate values. The structure of British Land’s corporate responsibility (CR) committee ensures that CR is integrated at every level. The committee consists of the head of each department. Each member has responsibility for a different aspect of CR ( for example, employee volunteering) and reports back to the COO on that area. Shell Petroleum Development Company of Nigeria (SPDC) (SPDC) of Nigeria is a subsidiary of the Royal Dutch/Shell group of companies. SPDC is 100% Shell owned, but it operates a joint venture on behalf of the Nigerian government, to explore and produce crude oil and natural gas. In this joint venture, the Nigerian National Petroleum Corporation (NNPC), a state-owned company, has a 55% stake and SPDC has a 30% stake (10% belongs to France’s Total and 5% to Italy’s Agip). The joint venture is the largest producer of crude oil in Nigeria, with around 1 million barrels of oil per day, accounting for about 40% of the country’s oil production (SPDC 2007). SPDC employees almost 5000 staff directly (95% Nigerians). However, another 20.000 people are employed indirectly, because there are many day-to-day activities carried out by sub-contractors (e.g. exploration surveys, drilling for oil, construction of facilities etc.). The mission of SPDC is to be “the operator of first choice in Nigeria through its commitment to strong economic performance and to every aspect of sustainable development” . Following criticism of its activities in the mid 1990s, the company embarked on a major program of environmental improvements ( including replacing old pipelines and adopting the principle of sustainable development) and support for local communities where the company operates (including funding of infrastructure such as schools and roads). The previous corporate descriptions give a general outlook of the companies under review, their respective industries, and their marking differences. Although each company belongs to a separate industry, they do share similarities which are directly and indirectly related to the fact that both entities are publicly traded companies on the London Stock Exchange. The SPDC as a subsidiary to the Royal Dutch Shell Company is openly influenced by the current state of the British market which has direct repercussions on the company’s stakeholders and shareholders. This paper discusses the relevance of the major stakeholders in each of the presented companies. In a relative simplistic approach the stakeholders of a company have a direct stake in that organization. The groups may include investors, company owners and management, employees, staff, customers, and suppliers. The stakeholders thereby play a particularly important role to the growth, prosperity, and longevity of a company; both in an indirect and direct manner. From a wider perspective, stakeholders of a public company are likely to include: - owners - shareholders - investors - partners - suppliers - buyers - customer prospects - management - employees - labor unions - competitors, government and regulators - Professional associations - media - communities In the particular case of the British Land stakeholders, there are several groups in the previous enumeration that have a relevant influence on the state of the company. As an investment and development company focused on the commercial real estate market, the British Land Company comprises important stakeholders in the form of tenants, analysts, employees, CSR organizations, local authorities, suppliers and community groups (BL 2007). Those combined to executive directorship, and shareholders can be considered the main stakeholders for the company. As the largest commercial real estate company in the UK with a 2006 before tax profit of £230 million , the British land Company offers several advantages to its investors, shareholders and customers. With a company-wide compounded average growth rate of over 18% in the past five years, the British land Company provides investments that are safe for securing cash flows, appropriate for long term contracts, and adequate for shareholders seeking a reliable level of growth and stability for their investments as compared to the high risks brought on by the latest trends in the energy sector. In this regard, the company’s steady growth in the past five years has provided shareholders with a return rate in excess of 23% (BL 2007). As publicly traded companies, they both are highly in tuned to their shareholders which determine in part the state of their stock ratings in the London Stock exchange and therefore impact directly the valuation of the company within the industry of interest. However, because the SPDC company is a subsidiary, its geographical location and its particularities do not affect the state of the company value in the same fashion that the British Land company tenants or shareholders would. In fact, for a subsidiary located in a region of the world where the standard of leaving for the average inhabitant is averaged at about $1 per day, the weight they carry is virtually not significant to stock market fluctuations; it matters at a local and regional area. The SPDC is one of four companies comprised in the Shell Nigeria entity, and it is a joint venture with the Nigerian government which benefits from royalties and taxes applied by the barrel sold in accordance to an MoU established between the joint-venture partners in 2000 (SPDC 2007). However, as the SPDC company mostly exports its merchandise it has associated levels of risks and costs that are inexistent in the commercial real estate market. Some of those are in relation with the equipment and tools used for extracting the oil, and the methods put in vigor for transporting the oil which carry a high amount of financial risk granted it also relies on economic and political factors on a national and international level. From an employee perspective, each of the companies of interest has a diverse set of employees and staff that insure the operational activities of each company. The different categories of employees are comparable has they range from the average worker, to highly paid management and executives. There is a considerable difference in the wages as they pertain to each company as one is allowed to give low wages in a country where the standard of leaving makes it feasible to have low paid workers, while for the British Land Company employee wages have to meet the considerably higher standard of leaving of the British modern lifestyle. Competitors are also identified as being stakeholders and thereby demand that we give it consideration in the present analysis. The British Land Company, although it is recognized as being the largest commercial real estate company in Britain has three major competitors in Capital Shopping Centres, Land Securities, and Liberty International. In comparison the SPDC of Nigeria has five major competitors including Exxon Mobil, BP, Total, Chevron, and Conoco Phillips. The Nigerian subsidiary of shell also has a major share of the oil industry in Nigeria, but it has a market share of over 40% of the market making it better suitable for influencing local markets changes and local oil prices as the international stock market prices for oil vary. There is a flagrant difference however between the way government regulations intervene in the two businesses of consideration here, and in their own territories. For instance, the British Land company is bound to follow and meet several regulations established by the British government to meet the rules and specifications for commercial for the development and management of real estate in order to insure that their buildings meet the required agreed upon standards. The government may also introduce regulations that are defined to support investment into properties through tax exemption. In fact, the UK government introduced a legislation in the Finance Act of 2006 for facilitating the establishments of real estate investment trusts which may be exempt from tax on corporate profits. The outcome is divided and distributed to the shareholders of the company. In this regard there are several similar tax related regulations to benefit investors in the real estate markets and those may depend on the type, the size, the location, and on the effective legislations in place at the time of investment. In contrast the SPDC of Nigeria operates in regards to basic governmental regulations regarding the safety and coordination of the retrieval of oil in the country. As a main exploiter of oil in Nigeria, the company has to face regulations that either support the extraction of oil or act as to prevent the effects it may have on the local environment on a safety aspect and on a social aspect as well. The regulations thereby applying to the SPDC vary in kind, although as the Nigerian National Petroleum Company is a major stakeholder in NPDC, the regulations are mostly enforced to support the company operations as it plays an instrumental role in the economy of the country, and its impact on sustainable socio-economic development in Nigeria. In fact the, NNPC has revenues amounting to 65% of the government budgetary revenues and therefore present an important activity for the economic and social development in a third world country which happens to participate in a considerable fashion in the global production of oil and gas products. For the afore mentioned reason, the regulations that the SPDC have to abide by are not made to facilitate operations, rather they are made, put in place, and enforced to insure prosperous, environmentally safe, and sustainable growth of the local area. Consequently, the SPDC of Nigeria is actively involved in the local community development by providing basic services, by facilitating regional partnerships, and by pursuing other efforts aimed at the sustainable growth of human capital and economy in Nigeria. The presented paper reviewed some of the major stakeholders relating to the British Land Company and to the SPDC of Nigeria company. Although operated in a third world country, the SPDC of Nigeria has the equivalent of a multi billion pound revenue stream due to its activities of oil extraction and distribution. In comparison, the British land Company which operates in the commercial real estate has annual revenues which amount to millions of pounds. The level of risk in the operation of each company under this analysis comes as a primary factor in the consideration of their respective stakeholders and how those are influenced by external factors of social, economic and governmental nature. We are showed a qualitative comparison of both companies with regards to stakeholders which appear as major influencers in the state of the market of the respective companies. Both the British Land Company and the SPDC of Nigeria belong to the London Stock exchange and their activities are mainly tailored to increase company value for shareholders and in that respect they share several similarities, despite the differences in location, risk assessment, corporate governance that they can be associated with. Overall, it can be noted that there is a flagrant influence on each of the company’s stock market performances and their consequent impact on shareholders, stakeholders, and company valuation. References BL, 2007, British Land Company, Main Company Website, available at available at http://www.britishland.com/ BL, 2007, British Land Company, Stakeholder Matrix, pdf document available at http://www.britishland.com/ BL, 2007, British Land Company, Financials retrieved online at http://www.britishland.com/financials.htm SPDC, 2007, Shell Petroleum Company of Nigeria, Economic Performance, retrieved at http://www.shell.com/home/content/nigeria/news_and_library/publications/2007/economic_performance/report2006_economic_performance_pg_1.html Read More