Stakeholders are individuals or groups that an organization owes or is dependent upon for its success. Stakeholder theory identifies who benefits and who sacrifices to give that benefit. Companies must provide benefits to all the stakeholders within a company to be considered ethical. Unfortunately, company managers must choose between stakeholders, whose interests do no always coincide.
Stockholders are owners of the company. Stockholders invest money into a company and expect the highest return possible. Stockholders want managers to do everything possible to maximize returns, and that means cutting costs and raising revenue. Stockholders are generally averse to any measure that raises costs, unless it also increases the profit margin. Stockholders want all profits to be passed on to them, but the company itself may want to save those profits for any downturns.
Suppliers and Customers
Holding on to supplier payments as long as possible damages relationships with those suppliers, but it may add interest to the money in the bank, therefore increasing company profits and stockholder returns. Suppliers expect loyalty. Companies may choose cheaper products or parts from suppliers that may not be the same quality, but will be lower cost. Customers do not want inferior products, but they are price sensitive and want savings passed on to them.
Employees and Society
Giving pay raises or paying severance pay reduces the profits of the firm, therefore reducing the stockholders' returns on their investment. Employees expect raises and bonuses when the company is profitable. Outsourcing labor to other countries affects both employees and society negatively, especially if the other country encourages child labor or poor wages. Outsourcing also causes distrust, decreased movation and low morale in employees.
Corporations must analyze any areas of ethical conflict and build a compromise by listening to each group express its concerns and ideas. Companies should strive to consistently improve communication between themselves and their individual stakeholder groups. Managers need to create a sales management control strategy for all dealings with other companies. Executives must institute policies that promote transparency among all the company's stakeholders. Company managers should develop and maintain an ethical corporate culture through setting ethical corporate policies and procedures.
- California State Polytechnic University, Pomona: Ethics, Social Responsibility, and Diversity
- "Resolving Ethical Dilemas"; Bernard Lo; 2009
- "Public Relations Journal"; An Examination of Applied Ethics and Stakeholder Management on Top Corporate Websites; Sharon Arrowood Bowen, Ph.D.; 2010
- The Open University: Creating an Ethical Organisation
- "Journal of Strategic Marketing"; An Enterprise-Wide Strategic Stakeholder Approach to Sales Ethics; Linda Ferrell and O.C. Ferrell; August 2009
- Photo Credit Ryan McVay/Photodisc/Getty Images
Issues in Biomedical Ethics
Biomedical ethics is an umbrella term describing the value-laden decisions related to all aspects of health and medicine. The subject includes hospital...
Ethical Issues in Project Management
Professional training curricula in business, medicine and engineering have added ethics training to prepare professionals for workplace challenges (see Resources ...
A shareholder is a common example of a company stakeholder, but many other people and groups have interests in businesses. The interests...
How to Improve Stakeholder Communication
An executive cannot afford to stutter in front of the press, fail to answer sensitive questions and create a perception of a...
Global Business Ethics Issues
Large multinational companies affect a variety of stakeholders such as customers, creditors, investors, employees and the communities in which they operate ...
What are the Sources of an Organization's Code of Ethics?
What are the Sources of an Organization's Code of Ethics?. Watching as major corporations encounter major legal and ethical problems has unfortunately...
Social, Ethical & Legal Issues of the Internet
You probably use the Internet every day without thinking of the potential social, ethical and legal issues. Addiction, theft and the exposure...
Difference Between a Shareholder & a Stakeholder
Corporations have potential for creation as well as destruction. A corporation can generate wealth and employment, develop life-saving medicines or distribute ...
Five Important Issues of Ethics & Social Responsibility in the Strategic Planning Process
Ethics refer to the fundamental principles of an individual or a group. Social responsibility is how a business performs its activities to...
How to Improve Corporate Ethics
When company executives behave unethically, that behavior often ends up in the news. While most companies have ethics policies, they don't necessarily...