The Value of Stakeholders in Organizations: Some Stakeholders Are More Important Than Others
Every organization works in a social framework with a definite purpose, and thus, it has to relate to a number of stakeholders. These stakeholders have various interests in the organization, and similarly the organization also has varying degree of interest in the different stakeholders. Ordinarily, the purpose of the organization defines its relationship with a stakeholder and such relationships are the reflections of its interests. Most organizations attach importance to its stakeholders based on the amount of gain the organization derives from the respective stakeholder or the liability the organization has to a particular stakeholder. Thus, business organizations attach utmost importance to stockholders, or the owners since these people are the investors in the firm and the company bears a liability of returning the profits to these people. On the other hand, customers also form an important stakeholder for business firms since they bring in revenue for the firm that helps it in fulfilling its liabilities and objectives. In reality, non-profit organizations have a different type of objective. They work for a cause; the stakeholders who are directly related to the cause form the most important stakeholders. For example, any organization, which works for education of poor children, defines all poor children it serves as its important stakeholder. The patrons who donate to such organization are also referred to as important since they provide the means for achieving the objectives of the organization. Therefore, this persuasive essay will provide a comprehensive discussion about the assertion that some stakeholders are more important than others.
From an ethical approach, it is true that some stakeholders are more important than others in every practical situation. The reason for this is clearly the motive of the organization. However, the motives of any organization must be defined properly and ethically to determine the relative importance to various stakeholders. While there can be more importance of one stakeholder, others should not be neglected. This principle is followed by very few organizations that care to bear responsibility of their impact on many stakeholders and attach importance to the relationship with the same to abide by ethical guidelines. Thus, responsible organizations invest heavily in corporate social responsibility to cater for their ethical liability to the society and environment within which they operate (Colle & Gonella 2003). They attach much importance to these stakeholders who do not provide them with profits or bind them with liabilities directly, but the maintenance of interest of these stakeholders develops the potential to provide benefits to everyone in the long-run. Therefore, the importance of the stakeholders lays in the attitude of the organization and not in the stakeholder himself or herself.
In most cases, the attitude of an organization towards its stakeholders is based on the immediate benefits they receive. For instance, business organizations are concerned purely with profits, and thus, they provide greatest importance to shareholders, owners and customers. In the process of meeting business goals, most companies overlook the harm they cause to less important stakeholders. For example, mining companies focus on the extraction of the greatest amount of ores possible by ensuring they incur the minimum costs. This is because more production will bring more revenue and better shareholder value. Surprisingly, many of these companies neglect health damages that they bring to their mine workers. They also do not care about the well-being of the people living in the area, especially their health and risks in the event of ground collapse. This is because these people do not bring any immediate benefit to the companies.
Such companies can be evaluated along the situations they create from the viewpoint of virtue ethics. This is primarily the concept that explains how ethical activities are a product of ethical character (Swanton 2003). From the perspective of virtue ethics, a virtuous person would deliver the right act as compared to others under the same circumstances. In this case, an organization is considered as a corporate individual or citizen who is just like any other citizen and has certain responsibilities to the society. The act of attaching importance to the stakeholders depends on the character of those who govern the company (Kamtekar 2004). These people determine the moral character of the company’s governance and its subsequent relation with the different stakeholders. The virtue ethics theory suggests that because of the absence of moral character in the people who run businesses, there is the presence of neglect to those stakeholders who are apparently non-productive (Whetstone 2001).
The essential virtues are justice, fidelity, self-care and prudence (Dolcich-Ashley, 2012). Justice requires the treatment of all human beings equally and impartially (Xian-zhong 2006). This is fully violated by companies that neglect some stakeholders. When it is required that companies treat all stakeholders equally at least from the ethical point of view, they engage in carrying out activities that benefit themselves at the cost of harming others. Therefore, a person of good character cannot identify this as any form of justice. On the other hand, fidelity requires that people who are closer to us be treated with special care (Markstrom et al. 1998). Again in this case, such companies who neglect stakeholders follow an unethical direction. Taking the example of a mining company, the workers are the prime resource that enables the company to have a production for deriving profits. Thus, they are the closest to the company. Also, the people in the region who are neighbors to the mining sites are also close to the company. However, when their interests are totally neglected by the company, it is nothing but an unethical step. Some people might argue that stockholders are closer to the company, but it all depends on the way the situation is observed. These companies bother about self-care only, but that is too materialistic which again serves to be unethical. In theory, the approach by such companies is capitalistic in nature. Shaw, Barry and Sansbury (2009, p. 129) state that capitalist companies “have an existence separate from the human beings who work for and within them.” As a result, capitalism is believed to have unhappy consequences to communities (Parker & Pearson 2005). Another significant element of the ethical theory is prudence. Prudence consists of all the three virtues and drives to acquire more virtues (Carretero, Szopa & English 2010). The behavior that the company presents to the stakeholders is expected to come back in return from them. Such cases lead to protests, strikes and other forms of resistance that bring the production to a halt (Banerjee 2008). Therefore, building a good society requires building good people; thus, organizations should ethically decide on the importance they are ought to put to the various stakeholders.
If we consider the same case of the mining companies, there are numerous events when such companies bring in damages to the environment and ecology of the place where they are situated. Huge open pit mines often eradicate large patches of forests and critically disturb the ecology of the area. These activities can be judged by the principles of environmental ethics. Environmental ethics refers to the moral relationships that human beings have with the environment and its non-human content (Boylan 2001). Thus, this stream of ethical thought provides equal importance to the non-human components of the environment as human beings. In this sense, such companies also have to consider the ecology and environment as important. This aspect is reaffirmed by Banerjee (2008, p. 59) by stating that “managers do have some discretion in determining the best way to enhance shareholder value.” In reality, the operations of the company impact the environment and the ecology of the area, and are solely responsible for the devastation of the flora and fauna of the area where it is located. As such, it becomes the moral responsibility of such a company to restore the environment around its operation site for the reconstruction of the local ecosystem.