Reasons why the stakeholder theory is considered a bold proposal
Freeman defines a stakeholder as anyone who has an interest in the decisions that are reached by a firm. In a narrower sense, it is any party which is extremely significant to the success, as well as, survival of an entity. Their examples include customers, the community and also the owners of the corporation. Essentially, the stakeholder theory would thus refer to the appropriate business procedures that advocate for morals and also values in the management of business entities. This is very significant for the promotion of the ethically desired behaviors in the operations of the business. In relation to the above, the following article will discuss the reasons for the stakeholder theory being referred to as bold. Besides, it will mention if any grounds whatsoever exist to think that the theory is an entirely incorrect approach.
The theory is a bold proposal because of the stake that is occupied by the various quarters. Both have a lot more to gain and also lose because of their inputs in the business. For instance, employees receive their benefits on a continual basis, the resources of a community are the once consumed by the corporation, and also, the suppliers significantly gain from the exchanges between it and the firm. This brings out a vital element that must be practiced by the enterprise i.e. its management must come up with proper decisions that only have a positive impact on the interests of the business associates. It is something that would ensure that both the interests of the business owners, as well as, those of its stakeholders are protected in equal measures. Just as stipulated by the broad definition of a stakeholder, the outcomes of the decisions of a firm have the propensity of massively impacting on parties close to the corporation. Therefore, as a bold proposal, the theory would uphold values and ethics in its operations to avoid the likelihood of causing any adverse impact.
The fact that the argument does not make any group within the stakeholders’ count more another is in itself a bold proposal. Freeman points out that the theory should not give any form of primacy to any party at the expense of another since all of them are significant for the positive achievement of the organization’s goals. The theory promotes fairness and justness in dealing with the stakeholder interests. As a result, it provides a redesigned idea that ensures a primary equality amongst the stakeholders. Besides, in the case that the grievances of the stakeholders are addressed in courts, they should not be handled as third party cases as this would generally be a depression of the equality that is, in essence, being promoted by the theory. Notably, this is imperative during the formation of contracts, as well as, agreements. The boldness as proclaimed in the theory, therefore, outlines the principles that can be used during the prioritization of the stakeholder affairs.
The boldness is, however, enumerated through the justification of the inequalities among the stakeholders. This can be justified in the event that the status of the stakeholder who is not well off is raised to an optimum level. Essentially, raising the standards of those stakeholders who are not comparatively doing well comes out as an essential element making the theory bold and viable. For instance, Freeman postulates that this aspect of the theory through the managerial decisions arrived at assists in raising the level of the relatively unskilled workers such as the janitors who in most cases are found at the bottom of a company. In the absence of the stakeholder theory, all activities within the company would progress without considering the affairs of such stakeholders.
The theory is also largely considered as bold because, in as much as it encourages carrying out business activities in relation to the wishes and desires of the owners which are generally inclined towards making more money in terms of profits, it encourages the corporations to conform with the primary regulations set by the community. These have their embodiment both in the laws of the land, as well as, in the customs regarding practicable ethical considerations. This is an important element because it does not only look at the profit maximization aim of the company. An entity that adheres to the laws of the country and the society that it operates would most significantly make high earnings. As such, the stakeholder theory calls for a balance between the two aspects which are all seemingly very fundamental for continuous existence of the firm in the market. This might be interpreted as being sensitive to the needs of the environment of operation.
Besides, the paradox of the stakeholder can adequately be resolved by applying the conditions of normative ethics. These are basically the principles of moral reasoning that advocate for the required foundations of moral actions. Generally, the stakeholder theory which is associated with the moral principles of an entity trumps the obligations toward the profit making activity of the organization. Mostly, through the application of the normative ethics, a perceived general equality amongst the stakeholders can be achieved without any much struggle. Even though the stakeholder theory also considers profits above anything else in an organization, it maintains that it should only be achieved by keeping the laws, as well as, the prevailing ethical customs. This is essential because it maintains that the profits of an entity should only be got within a particularly acceptable framework.
Also, the stakeholder theory has been known to alleviate the problems that are mostly faced by the clients of business in their society. The customers have been depicted as an important lot of the company since they buy their commodities and as such, largely contribute towards the profit-earning venture of the entity. Through the theory, organizations can donate some profits so as to counter some of their perceived challenges regarding shelter, provision of medical clinics and even schools for the customers’ children. Provision of such facilities, in itself, makes it a bold proposal since it assists in improving the lives of people in their communities. Such impacts are highly significant and are, as a result, promotes the ethical cultures of the corporations. It shows that in the face of an entities' desire to make massive amounts of profits and even expand more, it must resolve the social challenges that might be facing those that it serves and buys its commodities.
Also, as a bold proposal, suppliers being an important stakeholder assists the organization in achieving its success. This is because the raw materials will be a great aspect determining the quality, as well as, the price of the final product. The stakeholder theory asserts that the supplier should be treated with the required decorum and valuation of the entire stakeholder network. This ethical treatment of the suppliers would make them adequately and also appropriately respond when the company is in need. The ethical treatment of suppliers would fundamentally help in promoting the relationships of the suppliers and the firm. It also prevents the occurrence of illegal payments that may be conducted in the course of doing business. This calls for an ethical handling of the suppliers in every dealing of the entity.
The local community can also maximally benefit from the stakeholder theory thereby enhancing its perception as a bold proposal. By granting a firm the rights towards building its facilities, the community can profit from the social, as well as, economic contributions together with the tax base offered by the firm. In turn, the firm would as well act as a good natural citizen by providing local services that are vital to the community. Through this, it would be hard for the firm to expose its community in which it operates to hazards that would significantly endanger the lives of the stakeholders. Managing the relationships with the members of the society by upholding high ethical values is highly important for the avoidance of possible repercussions that would notably negatively impact on their market.
Is this a reason to think stakeholder theory is a wrong approach to resolving moral questions in business?
The reasons as postulated above entirely present the right approaches towards addressing the ethical issues that are faced by businesses. Business entities have in most cases been confronted with broad issues on their ethical conduct. As a result, the stakeholder theory offers a proper way for the resolution of the challenges so encountered by the companies. With the new perception on the theory that somebody besides the owner of an entity matters, calls for upholding the practice of the stakeholder theory have been on the rise. In conclusion, the above article has conclusively discussed the stakeholder theory with a primary emphasis on its reference as a bold proposal. Also, it has enumerated whether this is a reason to think if a stakeholder theory is an incorrect approach towards the resolution of the moral questions in business. Basically, as a bold proposal, the theory of the stakeholder assists in the promotion of ethical values within the spheres of conducting the business activities.
