Stakeholders: Large Firms
It could be said that “large corporations abuse their power against stakeholders e.g. customers, employees, suppliers, public, communities”. Do you agree or disagree? Explain what you answer is and why have you reached that conclusion. You are to include a clear rational argument for your case that has strong examples to support your thinking.
Unlike shareholders who are solely interested in return dividends and share price growth, stakeholders have wide variety of interests in how companies operate. Freeman (1984) stated that stakeholders are, “any group or individual who can affect or is affected by the achievement of the organization’s objectives”. The main objective for firms is profit maximization and for this reason I agree to a certain extent that large corporations abuse their power against stakeholders.
Firstly, Customers, “provide the lifeblood for the firm in the form of revenue.” (Freeman 1984). Firms are reliant on customers as they indirectly fund the development and growth of firms. However, customers want value for money and “cheap” prices. There are many companies that exploit the customer and as a result gain supernormal/abnormal profits. For example, the company British gas, who reported an 11% increase in profit to £606m despite the energy cost increases. As a result many questions were asked over the fairness of energy bill increases especially in this economic climate. Therefore this highlights that the large corporation has abused the stakeholder in this instance.
Employees expect security, benefits and wages in return for their work. Their economic well being is fully reliant on the firm, making them important stakeholders. However, many firms exploit workers in order to generate high profit or simply replace workers with machines and technology. For example, the Taiwan iPhone manufacturer was accused of ill treatment and low wages (5p per hour) to its employees after a spate of suicides among its employees. Now the company have
Unlike shareholders who are solely interested in return dividends and share price growth, stakeholders have wide variety of interests in how companies operate. Freeman (1984) stated that stakeholders are, “any group or individual who can affect or is affected by the achievement of the organization’s objectives”. The main objective for firms is profit maximization and for this reason I agree to a certain extent that large corporations abuse their power against stakeholders.
Firstly, Customers, “provide the lifeblood for the firm in the form of revenue.” (Freeman 1984). Firms are reliant on customers as they indirectly fund the development and growth of firms. However, customers want value for money and “cheap” prices. There are many companies that exploit the customer and as a result gain supernormal/abnormal profits. For example, the company British gas, who reported an 11% increase in profit to £606m despite the energy cost increases. As a result many questions were asked over the fairness of energy bill increases especially in this economic climate. Therefore this highlights that the large corporation has abused the stakeholder in this instance.
Employees expect security, benefits and wages in return for their work. Their economic well being is fully reliant on the firm, making them important stakeholders. However, many firms exploit workers in order to generate high profit or simply replace workers with machines and technology. For example, the Taiwan iPhone manufacturer was accused of ill treatment and low wages (5p per hour) to its employees after a spate of suicides among its employees. Now the company have
References: BBC, 8 December 2012, “UK Uncut protests over Starbucks “tax avoidance”, http://www.bbc.co.uk/news/uk-20650945, Bunn. D, Grant T. Savage, Betsy B. Holloway, (2002),"Stakeholder analysis for multi-sector innovations", Journal of Business & Industrial Marketing, Vol. 17 Iss: 2 pp. 181 - 203 Cooper, L.G. (2000), “Strategic marketing planning for radically new products ' ', Journal of Marketing,Vol.64,pp.1-16. Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Pitman, Boston, MA. p.46,43,48 The Guardian, August 2011, “Taiwan iPhone manufacturer replaces Chinese workers with robots”http://www.guardian.co.uk/world/2011/aug/01/foxconn-robots-replace-chinese-workers. Sky News, 27 February 2013, “British Gas Sees Profit up to 11% to £606m”, http://uk.finance.yahoo.com/news/british-gas-sees-profit-11-070722683.html Yvon Pesqueux, Salma Damak-Ayadi, (2005),"Stakeholder theory in perspective", Corporate Governance, Vol. 5 Iss: 2 pp. 5 - 21