In light of recent actions of executives the direction of the firm must be reassessed through the prism of re-prioritizing stakeholders over stockholders. Focusing solely on the idea of the bottom line is insufficient and all parties must be accounted for moving forward. Throughout this paper the definition of the stakeholder will be paramount. By better understanding the history of the term stakeholder, from the mid 20th century to the present, a clearer interpretation will be reached both in whom the firm will prioritize as well as create a broad grand perspective beyond that of the board room. The firm must consider the employees and their role. It must examine the social and ethical policies of the market and consumer as well as the legalities of the environment in which it conducts business. In addition, it must take into account the impact and imprint the business itself leaves on society as a whole.
To better understand these objectives this paper will not only pursue an understanding of history and the role of the stakeholder, it will also present an argument as to why they are important over time. Measuring the impact over history will aid in better understanding the importance of the stakeholder today. Once this importance is established, this paper will relate them to the current needs of the firm. Whether the issues are internal structure, addressing the press or outside perspective, the community in which the firm conducts business, or the market of partners and consumers, all will require in depth analysis, evaluation, and in turn a solution. Lastly, by presenting a solution, it will be easier to ascertain the benefits, weigh the costs, and in turn establish the means to the long term sustainability of the firm.
Identifying the Stakeholder
To understand the idea of a stakeholder, we must first define and identify who it is. In its most simplistic definition, a stakeholder is a party of interest. To draw that out a little bit more, businessdictionary.com defines a stakeholder as follows:
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization’s actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from the business draws its resources. (http://www.businessdictionary.com/definition/stakeholder.html)
(Image from Department of Finance and Personnel, UK - http://www.dfpni.gov.uk/)
Over history this concept has grown as the idea of corporate responsibility has grown. The two parallel as people have become more aware to the power and reach of corporations, in turn having more influence on more parties, or stakeholders.
A couple of generations ago, the concept of being responsible to parties outside of the ‘businessmen’ was quite foreign and incorporating them in any decision, even more so. The infancy of the idea dates back to the late 1930’s including Chester Bernard’s The Functions of the Executive and J.M. Clark’s Social Control of Business (Carroll, 1999, 267). But the concept does not really take flight until the fifties. It was at that time that corporations were establishing themselves as vital centers of power and decision making. In 1953 Howard Bowen asked, “What responsibilities to society may businessmen reasonably expect to assume?” He would continue to argue for the obligations of policy toward values of society. It is interesting to note that in a survey ran in Fortune, 93.5% of respondents agreed with him. (Caroll, 1999, 270)
Of course, right as these ideas began to flourish, one of economics greatest minds was re-introducing the world to the idea of capitalism. In 1962 Friedman published Capitalism and Freedom, attacking the very ideas of social welfare in society. With the