Investors and Other Stakeholders

Who has a claim on a company and what each party wants: how debt and equity differ in priority, risk and return, why leverage magnifies shareholder results and creates conflicts with lenders, how the shareholder and stakeholder theories of governance differ, what each stakeholder group (investors, board, managers, employees, customers, suppliers, governments) expects, and how investors analyse environmental, social and governance (ESG) factors.

1. 1. Debt and equity: two different claimsLenders hold a fixed, finite, priority claim backed by a contract, while shareholders hold a permanent, residual claim with votes but no promised payments.Free12 min
2. 2. Leverage: higher return, higher riskBorrowing at a rate below the return on assets lifts return on equity, but it also makes shareholder returns swing much more, so debt is cheap for the issuer yet risky.Video · 6 min14 min
3. 3. Payoffs and conflicts between lenders and shareholdersLenders' upside is capped at what they are owed while shareholders keep everything above it, so shareholders like risk and payouts that lenders dislike, and lenders respond with contract restrictions.Video · 6 min13 min
4. 4. Shareholder versus stakeholder theoryShareholder theory runs the company for its owners and weighs others only through their effect on share value; stakeholder theory makes all stakeholders' interests (including ESG) explicit objectives, at the cost of complexity.12 min
5. 5. The stakeholder groups in detailEach stakeholder group has its own claim, power and goals: private lenders and boards can exert strong influence, while employees, customers, suppliers and governments shape the firm through labour, revenue, credit and regulation.15 min
6. 6. ESG factors: environmental, social and governanceESG factors have moved from ignored externalities to quantifiable, material drivers of risk and value: environmental (climate, pollution, resources), social (people and communities) and governance (how the firm is run).14 min
7. 7. Evaluating ESG risks and opportunitiesDebt and equity analysts use the same process to quantify material ESG effects on cash flows and discount rates, but equity usually reacts first and hardest, while debt suffers mainly when repayment is threatened, and more so at long maturities.11 min