The strategic approach to improving organizational ethics is based on establishing, communicating and monitoring ethical values and legal requirements of organizational history, culture and environment. Under stakeholder theory, leaders control actual behavior and create mechanisms for policies that encourage people to make the world a better place. Managers who strive to create value within an organization must understand that the company is entirely in the realm of humanity. Freeman explains that ethics is the natural conversation we have about how we live and collaborate with stakeholders. He suggests that managers should be open to approaching ethics through the lens of a more complex psychology that recognizes that work affects different types of people. The two sets of knowledge – ethics and stakeholder theory – work together and complement each other. A stakeholder is a party who has an interest in a business and can influence or be influenced by the business. The main stakeholders of a typical company are its investors, employees, customers and suppliers. Your responsibility to the community as a whole may be more nuanced, but that community remains a relevant and important stakeholder. Sure, you`ll abide by your city`s regulations, but being a good member of the community as a business can take more than not polluting waterways or spewing toxic gases into the air. You may want to give back by donating to charity or sponsoring events. The benefit of being a good corporate citizen isn`t just ethical; This can strengthen your brand and have a positive impact on your bottom line. Conversely, external stakeholders can sometimes have a direct impact without a clear link to a company.
The government, for example, is an external stakeholder. When the government makes policy changes regarding carbon emissions, the decision affects the operations of a high-carbon company. A common problem for companies with many stakeholders is that the different interests of stakeholders may not match. In fact, interests may be in direct conflict. For example, from the perspective of its shareholders, the main objective of a company is to maximize profits and increase shareholder value. Since labor costs are inevitable for most businesses, a company may try to keep these costs tightly under control. This may upset another group of stakeholders, their employees. The most effective companies successfully manage the interests and expectations of all their stakeholders. Each of these groups plays a crucial role in the company`s success. This business environment is too diverse and complex to be managed in tight silos, hence the need to manage stakeholders. Managing relationships with these different target groups is the essence of strategic stakeholder management.
The turbulence of the business world requires managers to be attentive to current conditions and to continually adapt to changes in the environment. A stakeholder is a person or group whose interests influence or are influenced by the activities of a business. Having a stake simply means that your interests overlap with those of the company. Stakeholders are critical to your business. But who are they? We often hear from stakeholders, but there is some confusion. We have seen that stakeholders include the people and companies that have invested in an organization and are impacting the success of an organization. It is also true that stakeholders can have multiple and simultaneous roles. For example, an employee can also be a customer and shareholder. Stakeholders are groups of people who have a common interest, e.g. “consulting firm”, “project management”, “villagers”, “local authorities”, etc. But in all these areas, there are subcategories of interest groups with different interests, which they may or may not be willing to encompass in the general collective interest.
The analysis could conclude that the concept of the “villager” as a collective stakeholder is utterly meaningless because the different groups of people living in a village have so little in common; Some villagers might think they are more interested in local government officials than their neighbours. Similar problems arise in formal institutions such as ministries. Competition between departments or individuals may be greater than obligations to institutions as a whole. There may also be cross-cutting interests, for example on an ethnic basis, both within the institution and outside the relationship. Assessing stakeholder influence and “importance” Key external stakeholders tend to be those outside the organization who most directly influence a company`s bottom line and have power over the business. In addition to customers and customers, suppliers also have great influence and receive great attention from companies of all sizes. Governments have power through regulatory bodies, from federal agencies like the Environmental Protection Agency to local planning and zoning agencies in communities where businesses exist. The latter groups often exert influence on the physical spaces in which firms operate and attempt to grow ((figure)). If for any reason a product does not meet its manufacturer`s claims, the manufacturer must resolve the problem in order to maintain or regain customer trust. Without this trust, the interdependence between the company and its stakeholders can fail. In deciding to recognize and refund its potential customers, Samsung acted on the ethical maximum and took the strongest steps to behave ethically in a given situation. A minimum ethical, or the least a company can do to comply with the law, would have been to offer the warning and nothing more.
It may have been a defensible position in court, but the warning might not have reached all buyers of the faulty machine and many children could have been injured. Examples of key stakeholders for a company are its shareholders, customers, suppliers and employees. Some of these stakeholders, such as shareholders and employees, are internal to the company. Others, such as the Company`s customers and suppliers, are located outside the Company but are still affected by the Company`s actions. Nowadays, it has become more common to talk about a wider range of external stakeholders, such as the government of the countries in which the company operates, or even the general public. Companies are accountable to their stakeholders. Every purchase of a product or service comes with some kind of promise. Buyers promise that their money or credit is good, and companies promise a level of quality that delivers what is advertised. However, the relationship can quickly become more complex.
Stakeholders may also require the companies they support to give back to the local community or protect the global environment when developing their products or providing services. Employees may require some compensation for their work. Governments require companies to comply with laws, and buyers in business-to-business (B2B) trade demand not only high-quality products and services, but also on-time delivery and responsive maintenance and service in the event of a problem. Meeting core commitments to stakeholders is primarily about providing good products and services, but also about communicating and preparing for potential problems, whether within the company or due to external circumstances such as a natural disaster. External stakeholders, unlike internal stakeholders, do not have a direct relationship with the company. Instead, an external stakeholder is usually a person or organization affected by business operations. For example, if a business exceeds the allowable carbon limit, the city where the company is located is considered an external stakeholder because it is affected by increased pollution.
