Role of Stakeholders in Multinational Company - Case Study Example

Introduction: If you ask a person on the street as to what he thinks a stakeholder is, he will invariably reply that a stakeholder is some one who holds stocks or shares in a company. This is the general view of who a stake holder is by the common man. It is definitely a fact that a person who holds stock in a company is a stake holder and he is affected financially be the performance of his company. But the question is whether to limit the meaning of that word to such a narrow definition. A company like any other entity exists in the society and is related in some way to its customers, suppliers, the society and the citizens, other organizations and the government. This paper primarily deals with the responsibility of the multi national giant Unilever's responsibility to its stakeholders. It also identifies who the stake holders are and the ethical issues involved in relation to the benchmarks and models set up by the CSR. The Stakeholder: The Merriam Webster online dictionary defines a stake holder as "a person entrusted with the stakes of bettors" and "one that has a stake in an enterprise ". This definition takes the traditional view of the term stake holder. Another definition form the site Encarta defines stakeholder as "a person or group with a direct interest, involvement, or investment in something, e.g. the employees, stockholders, and customers of a business concern". From a legal standpoint too, stakeholder is considered to be a person holding shares or stocks in a company. All these definitions agree on one point, but disagree on others, making the issue confusing. Since this paper deals with Unilever, an analysis as to what the company thinks of the definition will be worth looking into. Unilever categorises stake holders into two groups, the first one to include all those who have direct contact with the company. They include investors, employees, customers and suppliers. The other group comprise of those who have an indirect relationship with Unilever and include the government and its various regulatory departments, non profit organisations, academics and citizens. "Our success as a company depends on good relationships with a broad range of people and organisations who have a stake in our business. With some, such as our customers, employees, suppliers and investors, the relationship is based on direct contact or financial involvement with the business. Others, such as governments and regulators, local communities, civil society organisations, academics and individual concerned citizens, have a wider interest in what we do and in our impacts on society as a whole." (Our approach, 2008). The Stakeholders of Unilever: Customers: Unilever considers its customers to be stakeholders of the company. How customers can be considered a stakeholder can be illustrated by the following point. Unilever uses chemicals in the manufacture of its detergent brands like surf and sunlight. The company cannot use cheaper, but harmful chemicals with the aim of increasing its bottom-line. The company has a social responsibility to see that none of its customers who use the detergent have problems for their skins or clothes. Employees: The livelihood of its employees depends on the ability of the company to pay them their salaries. The company has to remain profitable to sustain this practice. So Unilever has a responsibility to see that its operations remain profitable. Suppliers: For a company like Unilever, there would be a large number of suppliers responsible for the supply of the variety of raw materials, services and other products required for manufacturing and administration. They have to be paid according to the conditions stipulated and it's the company's responsibility to see that it is done. Investors: this category, as a stakeholder does not need clarification since it falls into the traditional and legal view of the term stakeholder. Any company has to ensure that their stakeholders, which include individuals and institutions, are kept happy by ensuring a favorable return on their investment. All the above categories are considered to be direct stakeholders of Unilever. Government and other regulatory bodies: This term includes the central government, regional and local governing bodies. Regulatory authorities, and other government departments of tax and other levies also form a pert of stakeholders. Unilever should see to it that it operates within the legal framework of each country, region and locality and that all its financial obligations are met. It should also comply with the environmental regulations formulated by each country. Civil society organizations: This category can include non-governmental organizations that are not commercial in nature. Some of these would be service organizations like Rotary or Lions international. The company could involve in charity work by contributing to fund raising activities of such originations for the needy. It should also respect the views of organizations like Greenpeace, who is actively involved in environmental and human rights issues. (Theories Used in IS Research, 2006). The factors that characterize a stake holder are, the survival and success of a company is dependant on its stakeholders, they should be benefited by the actions of the company and that the company is in a position to harm or violate their rights. "Many groups have a moral claim on the corporation that derives from the corporation's potential to harm or benefit them." (Friedman and Freeman). Corporate Social Responsibility: Most people are adamant about their rights, but do not take their responsibilities very seriously. All living things have responsibilities. In the animal kingdom, it is genetically programmed. In the world of people, responsibilities have evolved through social norms, experience, by statute, benchmarks and models. Since organizations are governed by people, they too have certain responsibilities to be follow. The responsibility of the corporate world towards its stakeholders is commonly referred to as Corporate Social Responsibility or CSR. According the UK Government's official site on this subject, CSR is the 'voluntary actions' by corporate houses that should have a fine balance between profitability and obligations to the society at large, with minimum of legal interference. "Specifically, we see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society." (What is CSR 2004). The Governments intention is to see that CSR is more voluntary than legally binding. The key thrust is given to two areas, namely sustainable development and accountability. With demand for resources growing worldwide, it is imperative that serious thought should be given to sustainability. The main problems the world is facing is depletion of natural resources and deforestation. The following definition of sustainable development will make it clear. "A widely-used and accepted international definition of sustainable development is: 'development which meets the needs of the present without compromising the ability of future generations to meet their own needs'." (What is Sustainable Development 2008). The Importance of CSR: The main argument in favour of responsible behaviour is that, corporations have the capability to do good things for the society, investments done by a company should not be for its own benefits and it should give due importance to its rights as well as responsibilities. The opposite view is that companies are formed for profit making and not social work and that its managers are not trained in such matters. Social responsibility can be 'obstructive', which means a policy that is opposed to this concept. Defensive strategy is doing just what is expected of a company by statute. Adaptive strategy is being forced into CSR due to external pressure. The best strategy is proactive where the company takes on responsibility on its own. (Glossary, 1995-2004). Gains from being socially responsive to corporations include better environmental protection, non-violation of human rights, safe working environments, consumer protection, environmental protection, low employee turnover, sustainable development and good public image. "There are many advantages: proactive risk prevention, investment in the future, and a good reputation with employees, customers, investors, policy-makers and the public". (Corporate Social Responsibility). Ethics: Apart from CSR, corporations are expected to behave ethically. Ethics cannot be dictated by law, but has to come from what is expected by the community. Behaviour based on principles rather than for self satisfaction or profits is considered to ethical (Kantian). So also is behaviour based on practical wisdom which is acquired through experience, reflection and judgement (Aristotle and Virtue Ethics). Utilitarian theory of ethics just classifies good actions as ethical behaviour and bad actions as unethical behaviour. "The word character, when applied to persons, has two sources, distinguished lexically in ancient Greek by the terms thos and charaktr." (Character - Aristotle And Virtue Ethics, Kantian Ethics, Utilitarianism, Challenges, Bibliography, 2008). Benchmarks for CSR with reference to the UK: The Ministry for CSR in the UK have prioritised the following benchmarks. Awareness of CSR among the business community regarding social and environmental issues Encourage corporations to treat 'responsible behaviour' a part of their core business. Expand CSR scope by including not just large corporations, but small and medium sized companies as well. Companies should report its CSR activities and it should be transparent Encourage 'good practices' regarding CSR, within the country and internationally. "Across many activities, including support for research, initiatives and partnerships, the Government has made a significant contribution to awareness and understanding of CSR and what it means for companies of different sizes, in different sectors and operating in different places." (CSR Recent Trends, 2004, p.6). Summary and evaluation: Unilever is a huge multinational company and is one of the largest companies in the world for consumer products. Unilever takes its CSR very seriously. Unilever makes large contributions to non profit organizations fro social betterment. In the aftermath of an earthquake in Turkey in 1999, this company contributed free, more than USD 2 million in the form of its own products, 300 tents and cash donations. To reduce the psychological impact on orphaned children, it conducted a painting competition in 2000. hundreds of suppliers are benefited directly and indirectly through its investment on raw materials for production. A large number of farmers are benefited due to agricultural products required for its foods division. Unilever has created huge job opportunities directly and indirectly because of its global operations. This company takes efforts in catering to consumer preferences, which vary vastly due to its international presence. During high inflation in Ghana, Unilever strictly contained its own prices to lessen the strain on consumes. It spends up to 2.3% of its revenues on research and development in 2001. Unilever classifies its community services under three categories. Charity is done for those requiting for help. It uses commercial investments for profits and at the same time for benefits to the community. Its social investments are aimed at long term sustainability. Unilever has provided for safety devices in all its vehicles worldwide to reduce the number of accidents and casualties. It cooperates with farmers to implement best farming practices in certain crops like palm oil, pea, spinach and tea. It is helping to dig around 30,000 wells in Morocco. The company has helped transform the endangered Uluahat lake in turkey into one of the best wetlands in that region. This shows the company's commitment towards sustainable development. It is working closely with many governments, non-profit organisations and industry for increased environmental protection. It appears that in spite of its size, Unilever is actively committed to Corporate Social Responsibility. "Unilever's 'multi-local multi-national' outlook is key to our understanding of meeting 'everyday needs of people everywhere'." (Introduction, Corporate Social Responsibility, 2002). Works Cited Our Approach. Engaging With Stakeholders. Unilever. 2008. 06 Mar. 2008. . Theories Used in IS Research. Stake Holder Theory. Appalachian State University. 27 Oct. 2006. 06 Mar. 2008. . Friedman, Milton., and Freeman, Edward. A Stakeholder Theory of the Modern Corporation. 06 Mar. 2008. . What is CSR csr.gov.uk. 2004. 06 Mar. 2008. . What is Sustainable Development sustainable-development.gov.uk, Providing Guidance on how to Peruse a More Sustainable Future. 1 Feb. 2008. 06 Mar. 2008. . Glossary. Pearson Education. 1995-2004. 06 Mar. 2008. . Corporate Social Responsibility. GTZ, Partner for the Future - Worldwide. 06 Mar. 2008. . Character - Aristotle And Virtue Ethics, Kantian Ethics, Utilitarianism, Challenges, Bibliography. Net Industries. 2008. 06 Mar. 2008. . CSR Recent Trends, Corporate social Responsibility, A Government Update. Department of Trade and Industry. P.6. May. 2004. 06 Mar. 2008. . Introduction, Corporate Social Responsibility. Mediterranean Development Forum, Amman. 07-10 Apr. 2002. 06 Mar. 2008. . Read More