THEORY OF STOCKHOLDER MANAGEMENT By Location Introduction In the context of a business, a stakeholder is any party that is interested in the direction that the organization is taking in terms of growth and profit making for whatever reason that may raise concern about the organization. The party may be a person, an entire organization or just a group made up of affiliated members. As opposed to shareholders, stakeholders of an organization may affect the policies and action of the organization or may be affected by the actions and policies. This is because they include the government, employees, directors, creditors, unions affiliated with the organization, suppliers, the owners, which includes the shareholders and the community in which the organization is located and from which the resources are fetched.
Nevertheless, because the different parties are stakeholders for different reasons, they are not treated as equals. In an organizational framework, the stakeholder theory is a concept that advocates for the addressing of the values of ethics and morals when dealing with management issues of the organization (Phillips 2011, p. 99).
This means that the necessary stakeholders need to be consulted when drafting of organizational policies. However, is not the case in many organization frameworks as they negate from the application of the theory in the development of policies. This paper seeks to talk about and show that the theory of Stakeholder management minutely helps a firm to manage its policies and plans successfully. This will be elaborated in three views that are developed as a result of the theory. First perspective The first view is that the organization’s interests are few and innate in comparison to those of the stakeholders (orgtheory. net 2006).
Application of the theory in management will create a scenario where the organization itself is like a forum where different parties freely interact and decide the direction which the corporation takes. This means that the interests that the organization holds are determined by the stakeholders of the organization and their relation with each other (Boatright 2006, p. 2). A change in the organization’s policies arises if these relations are shifted for any reason. This perspective means that the stakeholder interests need to be prioritized when drafting of the organization’s policies and development of goals.
This is illustrated in the Canadian oil sands project where the exploration company needs to plant trees and conserve the environment to compensate the effect its exploration. This perspective is unrealistic in the development of any organizational framework. This is because in any legal business setting, an organization is an entity that has been created legally with the aim of maximizing on the value of the market so as to make profits on the investment (orgtheory. net 2006).
This means that in the development of the organization’s policies has to focus on making of profit as the major organizational interest. As such, the application of the theory seems to create views that ignore and negate from the requirements of any institution that is viewed as a modern corporation. Incentives developed by the management of the organization are of little importance in comparison to the view that the stakeholders may share. As such, the stakeholders seem to be the one’s running the organization. In this case, the interests of the organization are shifted to prioritize those of the stakeholder with the most control and not the best direction of the company (Boatright 2006, p. 2).
This may lead to the downfall of the organization as a whole which will not benefit any of the stakeholders. As such the application of the theory in management does little to help the management of the plans of the organization. Second perspective The application of the theory also creates another perspective whereby both the stakeholders and the firm have economic interests which both parties want to see accomplished (Phillips 2011, p.
103). As discussed in the first perspective, the major agenda when starting and running an organization, is to maximize on the value of the market so as to make a profit. This contrasts with the interests of stakeholders which are mainly to see the redistribution of the wealth that the firm has created in terms of profit to other parties which includes them. This develops into a struggle consisting of negotiations that try to define which parties are deserving of what portion of the organization’s resources.
If extremists’ parties are involved, threats of government intervention are incorporated by the stakeholders in trying to get the voluntary redistribution of the resources of the organizations. This scenario does little to in helping the management of a firm’s plans and actions as it impedes the decision making of the management organ as the priorities of the organization are overcome by those of the stakeholders. A firm is a profit making machine weighs costs and deduces which value of the profit will be used in investing in growing the business.
This means it should have the right to decide which value of the profit will be redistributed to the society with the goal of promoting greater good (Boatright 2006, p. 1). As such, the Stakeholder Management Theory impedes management as the redistribution of wealth is done in a manner that is on a forced hand basis. Therefore the application of the theory in an organization’s framework does little to help the management of the firm. Conflicting interests Different stakeholders have different interests as illustrated above. According to the theory of management of stakeholders, all stakeholder views need to be incorporated into decision making about policies of the organization (Phillips 2011, p.
100). This means the incorporation of all their interests in policy making. However, not all interests are supportive of each other with some conflicting. For example, the decision to lay off some workers so as to increase profits may be approved by shareholders during the AGM but it will receive great resistance from the staff and union officials. This creates a scenario where the management has a hard time in making decisions concerned with different stakeholders.
This clearly shows that the theory does little in helping the management of the firm. Conclusion The Theory of Stakeholder Management is a good theory that needs to be applied in the policy making process of an organization. This will mean considering all stakeholder views in the making of the policies. Although this will go a long way in avoiding conflicts in the end, the theory does little to help the management framework of any organization in managing the plans and actions of the firm. Bibliography Boatright, J 2006, Whats Wrong and Whats Right with Stakeholder Management.
University of Chicago, Loyola. Available from: http: //www. google. com. ph/url? sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CDIQFjAB&url=http%3A%2F%2Fwww. apee. org%2Fpdf%2FBoatrightSpec. pdf&ei=JoRwU8zNFKaS7QaCrYG4Ag&usg=AFQjCNEYqCZUzDVSiwfVH2qcmszHUTNAWA&bvm=bv. 66330100,d. ZGU [12 May 2014]. Orgtheory. net, 2006, whats wrong with stakeholder theory? . Available from: http: //orgtheory. wordpress. com/2006/08/03/whats-wrong-with-stakeholder-theory/ [12 May 2014]. Phillips, R 2011, Stakeholder theory, Edward Elgar, Cheltenham, UK.