Managing for Stakeholders - Essay Example

Managing for stakeholders: The stakeholders are often faced with the challenge to take decisions which are in their best self interest or the greater interest of the company as a whole. This dilemma is mainly on account of the separation principle which differentiates ownership from control. Moreover, stakeholders are faced with challenging ideologies especially in the context of the highly competitive external environment. As observed in the case of Wal-Mart, the retail giant’s policy to hire illegal migrants is ethically questionable and the fact that millions of customers who shop at Wal-Mart insinuated that their practices were socially acceptable. Figure: Ethical principles involved in stakeholder decisions Source: Freeman et al., 2007, Pp. 88 The management thus, need to ensure that their corporate social responsibilities are well charted out since such practices can have serious consequences on the brand name and credibility of the company, thus limiting its ability to create value for the stakeholders. 2. The term Corporate culture can be defined as “a set of values, beliefs, goals, norms and ways of solving problems shared by members (employees) of an organization” (Ferrell et al., 2009). It reflects the shared vision, values as well as expectations of the founder of the organization as well as that of the management. The manner in which the employees behave; the policies adopted by the management, and the decisions made reflect the corporate culture of the organization. It plays a crucial role in influencing ethical decision making, for instance, if the corporate culture of the firm vehemently supports unethical behavior the decision making is bound to support and encourage similar practices. The persistent application of such negative / unethical practices is hence, directly associated with the corporate culture of such organizations. If a company's sole objective is to maximize its profits by whatever means, its employees / stakeholders are bound to take unethical decisions or employ unethical means to achieve the company objective. The failure on the part of the management to manage, control or take corrective action with regard to its corporate culture may foster questionable work practices. Case in point is one of America’s leading retail chains – Wal Mart. The company came under a lot of flak for its unethical practices of hiring illegal immigrants and violation of human rights (Greenhouse, 2003). The corporate culture of the company entailed provision of low priced products for its customers, the pursuit of which lead to such unethical decision making by the management. The firm hired, illegal migrants working on meager remunerations, to lower the cost and hence maximize profits. Although the core values of the company did not endorse similar views, the corporate culture however, did encourage the implementation of unethical means to achieve their desired goals. While McDonalds on the other hand, reflected a corporate culture which endorsed ethically right practices, which is reflected in its decision making. This is mainly the reason why, the organization was acknowledged as one of the World's most ethical companies during the year 2008 (McDonalds, 2008). The accolades received by the food giant, reflects its corporate culture, which encourages provision of good quality products and services, cleanliness and good values; thus ultimately resulting in better decision making on the part of the management. 3. The availability of term papers and other research materials online is a fact, and can be regarded as a direct outcome of the rapidly rising use and reach of technology. Websites offering term papers in exchange for money has become a highly lucrative commercial activity in recent times. However, such a practice cannot be termed as unethical per se, reason being, it does not in any way, violate the laws of any nation or harm the society in general and hence does not fall under the category of “unethical business practice”. According to Painter-Morland & Werhane (2008) if a business practice is not illegal in nature, it can safely be considered as ‘ethical’ solely because, no individual is obligated to seek their own disadvantage. Furthermore, if that individual does not exploit such an opportunity, chances are that some other individual would do so, since the resources are limited in today’s highly competitive environment. The service might violate or overlook certain ethical considerations such as plagiarism, attracting legal consequences and action. However, such drawbacks can be dealt with in a legal manner if the work cited is duly credited, or permission is sought from the rightful owner, prior to using their work / research articles. The term papers available online, are no different than any other informative / academic resources, since the basic objective is to help the students in their tasks of understanding the subject / topic on hand. Internet is a medium which provides a safe haven for offenders. It has no geographical boundaries, hence the offenders, have the liberty to operate from unknown locations and continue to provide their services. Since no specific law exists which may bring the perpetrators to book, and which transcends beyond geographical boundaries, charging them with violation of intellectual property rights is a tricky issue. Thus, although the internet revolution has seemed to benefit many, it does come with a flip side, that of violation of intellectual property rights and plagiarism. 4. Sustainability concerns have led to the development and implementation of various laws and policies which tend to encourage the use of environmentally friendly practices within the marketing process of firms. The same is discussed below: Product: Firms can increase the use of sustainable materials while manufacturing and designing their products. Sustainable practices can be imbibed at various stages of product development such as product design, manufacturing, as well as packaging. Firms can increase their reliance on environmentally friendly products for packaging so as to enable better and convenient recycling of the same. For instance, the use of petroleum based plastics is known to cause environmental damage. The firms can replace such environmentally hazardous materials with eco friendly products such as cardboard or biodegradable plastics in order to increase sustainability of their products. The benefits of sustainable products to the company includes: improved brand power, increased sale and hence revenues, niche market, and customer loyalty. Price: The pricing of environmentally friendly products can be regulated through government legislations. Since the marketers are also required to take into consideration factors such as product promotion, cost of research and development while developing an environmentally friendly product etc., it adds to the total cost of the product, making it relatively more expensive than the usual products available in the market. Hence for a larger benefit of the society, the profit margin needs to be reduced and this can be achieved only in the presence of robust government intervention in the form of legislations to control the pricing of such products. The benefits accrued are mostly long term in nature. Promotion: Promotion of the product is extremely crucial since it helps in shaping and influencing consumer choice for sustainable products. Sustainable marketing can help in changing consumer perceptions towards such green products and educate them regarding their role and responsibilities towards nature, as a citizen. The benefits to the company include: rise in demand for their products; and greater brand image. Placement: The product placement which involves activities such as transportation, storage and inventory control can also implement sustainable practices, through use of fuel efficient transportation, use of electronic means as opposed to physical distribution etc. It also includes taking back the products for recycling purposes. 5. In terms of corporate governance, the ownership and control are distinctly separated whereby professional services are made available for individuals whose income is much higher than their consumption. In order to properly manage their assets, professional managers are hired, who take care of their investments and ensure maximum return on investments and increase productivity. However, this often gives rise to Agency Problems since both the owners as well as the managers tend to behave in a manner which is most beneficial for their own self interest. Such a problem which exists between the managers of a firm and the owners and investors is referred to as the Agency problem. For instance, the manager of a firm may want to set up a subsidiary in a particular geographical location, which may be personally beneficial to him /her as opposed to being beneficial to the shareholders. In order to avoid such conflict of interests, the responsibilities and scope of the agents must be clearly defined in the contract by the shareholders. It must include all the vital elements such as bonus entitled to be received by the agents, other remuneration and values etc., which may help the shareholders in aligning the interests of both the parties and hence reduce the agency problem. The owners must pay premium to the agents for their services rendered, which acts as a bond between the two; strengthens their relationship and encourages loyalty towards the shareholder (Hill & Jones, 2008). References: Ferrell, O. C., Fraedrich, J., Ferrell, L., (2009). Business ethics: ethical decision making and cases, CENGAGE Learning Publication, Pp. 174 Freeman, R. E., Harrison, J. S., Wicks, A. C., (2007). Managing for stakeholders: survival, reputation, and success. Yale University Press, Pp. 88 Greenhouse, S., (2003). Illegally in U.S., and never a day off at Wal-Mart: New York Times [Online] Available from: http://www.nytimes.com/2003/11/05/us/illegally-in-us-and-never-a-day-off-at-wal-mart.html [Accessed: 17th Feb, 2011] Hill, C., Jones, G., (2008). Essentials of strategic management, Cengage Learning, Pp. 32 - 35 McDonalds (2008). McDonald's named One of the world's most ethical companies [Online] Available from: http://www.aboutmcdonalds.com/mcd/csr/news/McDonalds_Named_One_of_Worlds_Most_Ethical_Companies.5.html [Accessed: 17th Feb, 2011] Painter-Morland, M., Werhane, P. H., (2008). Cutting-edge issues in business ethics: continental challenges to tradition and practices, Springer Publication, Pp. 111 - 115 Read More