Stakeholder theory - Business Environment

As indicated in Chapter, stakeholders are all the groups affected by a corporation’s decisions, policies and operations. The number of stakeholders and the variety of interests that a company’s management must consider when setting its aims and objectives can make decision making a complex process. The amount of influence would depend upon the amount of power each group of stakeholders could wield and this will tend to vary over time.Stakeholder theory suggests that there is a number of groups to which a business is answerable when pursuing stated aims and objectives. Traditionally it has been held that these will be the shareholders, customers and employees of the business a very narrow definition that concentrates on those groups involved directly with the organisation. This assumption is being called increasingly into question and the incidents at Shell (Brent Spar, or its activities in Nigeria), or Perrier, or more recently with Monsanto (with the introduction of GM foods) have shown the influence that the wider society can bring to business practice. It is often argued that businesses and organisations should be seen as tools for providing goods and services to satisfy the wants and needs of society. Such a view deals with the purpose of business as a servant to society rather than simply a servant to a narrow set of groups involved directly with the business. This represents an important distinction.Organisations pervade all our lives to an ever-increasing extent; if they are to accept responsibility for the environment, then there is a need to integrate an ‘environmental perspective’ into the formulation and implementation of corporate policies.

This is a necessary step in converting concern into actual behaviour. Accordingly, it could be suggested that the extension of stakeholders to include groups that are not directly involved in the business induces a more corporately responsible business culture. To illustrate this point the Co-operative Bank, in 1998, published along side its annual results what it called a partnership report essentially an audit of the impact of its activities on society, the environment and its ‘partners’ or stakeholders. The partnership report was based on the bank’s acknowledgement that it has relationships with such groups as customers, staff and their families, suppliers and the wider community as well as its only shareholder, the Co-operative Wholesale Society. Ingeneral, businesses have become increasingly aware of the need to manage organizational reputation and many business leaders take the view that reputation is best achieved via a more inclusive approach which pays due recognition to all stakeholders. This standpoint has enabled the more indirect stakeholders to generate greater levels of power and therefore control over the actions of organisations.It would appear that the growing unease that society has displayed over the degree to which business will operate from an ethical standpoint has led to a greater democratization of organisational decisions and a codification of desired standards and attitudes. In 1987 only 18 per cent of large UK companies were known to have codes of business ethics, but by 1997 that figure had trebled to 57per cent. The Institute of Business Ethics’ 1998 report shows that 271 of the UK’s500 largest companies now have a code. As indicated previously, the IoD has devised its own code of professional ethics to which all its members are expected to subscribe.


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