Corporate Stakeholders - Essay Example

Lastly, when we say product market - it comprises of primary customers, suppliers etc. There is an additional group of stakeholders that indirectly influences the performance of the company, and company cannot operate independent of it - these are the secondary stakeholders such as host communities, government and other environmental groups in the society. The firm has its obligation to maintain its actions that balances the participation of the entire key stakeholder. Each group of stakeholders has their demands that are against the demand of other stakeholders.

Companies have to manage this trade-off in supporting one group over another in different decision making objectives. The primary expectations of shareholders and lenders are wealth enhancement and wealth preservation respectively; customers look for product reliability at as much lower price as possible, whereas, suppliers aim to receive the highest prices for the items supplied and that too sustainable in the long run. The group of stakeholder working there look for secure and sustainable work environment, that is rewarding and stimulating and provides opportunities for career growth.

Unions struggle for ideal working conditions and achieving job security for the members. The secondary stakeholders focus in on protecting the environment and fulfilling concerns that relate to social environment. As the description earlier indicates that product market stakeholders are basically the non investor stakeholders and their claims from the management are in the form of implicit promises that ensures continuous and timely supply of products, product enhancement, regular customers etc.

These claims are implicit because payouts on these claims are not quantified and stated out aloud. But these claims are impacted by the company's existing financial policy. Cornell and Shapiro (1987) pointed out that these claims affect stock prices similar to the investor stakeholders' claims; management therefore should alter its financial policy to achieve a balance between implicit claim stakeholders and the investor stakeholders. Taking into considerations these implicit claims it can be implied that contingent claim on an organization's financial resources might be amplified in case their rights are not properly addressed.

These implicit claims can be exemplified by the following: In January 984 when Apple came up with Machintosh computers, it promised (an implicit claim of competitive file servers) its customers that it will soon bring to the market the new file servers that are the hard disk that can manage data of multiple computer machines at a single time. But then the Apple had no clue of the exact characteristics, price etc. The field of corporate finance has long been recognizing how these implicit claims affect the factors earlier mentioned; this concept has been embedded in recognizing organizational capital equivalent to the current market value of all the firm's implicit claims that the firm expects to sell and organizational liabilities equaling the expected costs of honoring current and the potential implicit claims.

Almost all of the stakeholders have criticized that balancing of stakeholders' rights is not a fair mechanism with capital markets or investor stakehol