Stakeholder Management Theory

Stakeholder Management Theory

Stakeholder management theory is one of the most important theories in the world of business. In accordance with this assumption, for a business to succeed, it is important for a company’s executives to consider the interests of the other stakeholders in decision-making process, such as employees, suppliers, customers, communities within which the business operates, and shareholders whose interests are realigned with the interests of the business (Freeman, Wicks & Parmar, 2004). It is therefore prudent for the business to consider the interests of the other people who are affected by the operations of the business and who also affects the business in one way or the other by ensuring successful and self-sustaining organizational performance (Jawahar and Mclaughlin, 2001). This theory is very useful in reminding the business of the stakeholders who hold the keys to either the success or failure of the business. It is the responsibility of the business management to ensure that there is a good relationship between a company and the abovementioned stakeholders for the continuity of the business. All the stakeholders are equally important, and they ought to be treated without discrimination and in a way that meets their needs and this factor is a cornerstone of the stakeholder management theory (Jawahar & Mclaughlin, 2001).

This brief essay looks into the consequences that stakeholders will encounter if the company relocates its operating capacities to the Third World countries in order to enjoy cheap labor, including employees, unions, communities, and stockholders.

Employees and Unions

Employees and the trade unions are essential stakeholders. Unionized employees are controlled by the union and as such the union intervenes in organizational operations on their behalf through the established collective bargain agreements (CBAs). Employees’ welfare is fundamental to their general performance and productivity as well. In the analyzed cae study, we see a company that has numerous employees located within the communities where the firm operates. The corporation wants to relocate its operating capacities for the purpose of lowering its cost of production as it targets the cheap labor in the poor nations (Freeman et al., 2004). This circumstance will negatively impact on the existing employees who will have to be rendered as unemployed as soon as the company makes its intentions clear and implements this strategy. As stakeholders, staff members will be affected by losing their jobs. The union will also be negatively impacted upon since the employees that will be laid off will not continue to be part of the union. Furthermore, the trade union will encounter difficulties because the company’ relocation will cease to be a member of the union, namely, no more monthly contribution in terms of membership fees, hence, a financial loss to the union (Hill, Jones & Schilling, 2014).

Communities

The presence of a company in a given community means sufficient contributions to development of that community. This situation means that the company exercises its corporate social responsibility to boost the general welfare of the lives of the residents of those communities. Some of the advantages that the communities stand to benefit include improved infrastructure in terms of roads and communication networks, the availability of the water and other resources to the locals, to name a few (Jawahar & Mclaughlin, 2001). The business also offers communities the employment opportunities since a company hires the locals for maintenance of its performance. In case the firm relocates to the poor nations to increase its revenue and furthermore reduce the production costs by enjoying the cheap labor in these regions, the communities within which this company currently operates will suffer substantial losses. This is due to the fact that people in such communities will lose their jobs that will result in increasing unemployment levels and lowered household iincome of the residents. On the other hand, the communities that will be positively impacted upon by the possible shift in locating the operating capacities will be the ones that the company intends to relocate to (Freeman et al., 2004).

Stockholders

The relocation will negatively affect on the stockholders and they can lose much revenue. The assumption is based on the fact that the company will have to change in the process and as a result, its cult of “made in the USA” will be irrelevant. The remaining stocks will likely suffer the effects of the lack of the market, hence translating to losses. The stockholders will have to make sure that they sell all their stocks before the company relocates in order to avoid the losses (Freeman et al., 2004).

What the Employer Should Do

It is obvious that this company has a huge capital base and it also enjoys good relationship with the trade unions and the communities within which it conducts its commercial operations. As much as the relocation option is good for the purposes of benefiting from the cheap labor, it may not be the right decision at the moment due to the tremendous negative impacts that such relocation is likely to cause to the above-mentioned stakeholders. The best option for this employer is to establish the branches in the poor nations and use available cheap labor as opposed to relocating wholly (Freeman et al., 2004).

The ethical issue I encountered within the working environment was the threat to the sustainability of ethics and the business code of conduct at the workplace. It drove the feelings of insecurity and furthermore pointed towards the facts that there was evident lack of the open and friendly interpersonal relationship among the employees. It is therefore necessary for the management to put in place stringent measures in order to curb this ethical anomaly since it is damaging for both the image and reputation of the business.

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