Balancing Roles

I feel that Freeman did a great job of breaking down the key roles and the importance of each stakeholder in his article “Stakeholder Theory of the Modern Corporation”.  Owners have so much of a stake in the corporation that often their financial livelihoods are on the line.  Employees have specialized skills in which they are performing to receive monetary benefits in return to support themselves and their dependants.  Both owners and employees are to constantly remain faithful to the corporation by always doing what is in the best interest of the corporation.  The local community also plays an important role in that the firm is to act as a good citizen to the community and not break its trust.  Customers obviously have a great importance to the corporation because they are the ones who make the firm generate revenue by buying the company’s products or services to keep the company in business.  I feel management holds the key role in a corporation in that it must keep the relationships among stakeholders in balance.

The last stakeholder that I haven’t mentioned yet is suppliers.  When I first saw that suppliers were a stakeholder, I thought that their importance would have to be very minute.  However, after reading the article, I realized that they have just as much importance as customers.  The supplier-company relationship is valued in that the supplier will be there for when the company may be in trouble.  In the article, there was the example of Chrysler, who was loyal to their supplier, and was close to a complete fall out.  Their supplier gave them price cuts and accepted late payments to help them get back on their feet.  It makes sense for the suppliers and companies to have such a good relationship because if one falls then the other suffers as well.  And this is why each stakeholder plays a key role in determining their company’s future.

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8 Responses to Balancing Roles

  1. mcardinute says:

    I feel like this idea of having stakeholders in a company can be controversial because giving others who are affected or can affect the firm; majority control over the business can be detrimental to the business. First, there is no guide or specific criteria for decision-making that would help the firm. Next, Each organization has a specific goal in mind; and having stakeholders taking that goal and twisting it in a way that will benefit their personal interests or desires will harm the firm. There is also an issue with accountability. Holding multiple groups that have no comparison or agreement at all accountable for decision-making is no accountability at all. This can mean that management can reference a decision from one stakeholder or another leading to major conflicts internally. And with that being said, an imbalance of relationships between stakeholders can also be potentially hazardous to a companies future.

    • Cander says:

      I don’t believe a firm is going to follow a strategy based on an external stakeholder if it is purely negative to the firm. I think it’s more that a company makes sure to consider their effect on external parties, without forgetting to ensure that they are accountable to shareholders and customers.

      On a side note, the story about Chrysler and its suppliers stuck out to me. I was hoping we would get a chance to discuss that in class.

  2. Jordi says:

    Edit: Owners have so much stake
    Owners have so much of a stake

  3. Jordi says:

    What changed your mind about suppliers?

    What kind of guidance does Freeman offer for how to balance these roles? Can you also be critical of his argument? What would he say in response to this critique?

  4. jte004 says:

    The idea behind the supplier-company relationship is a very familiar idea in business transactions. The idea that a company relies on it supplier to be able to keep customers happy, and the supplier relies on the company to be able to place its products. This type of relationships seems to be a very strong idea behind the relationship that Wal-mart has with it suppliers. The suppliers would not be able to function if Wal-mart did not buy from them, but Wal-mart would not be able to function if the suppliers didn’t supply them with their items. In this type of relationship, is it possible for one side of the relationship to gain control over the other? Is Wal-mart at fault for this?

  5. awhigbee says:

    I think something interesting to ask is what are the ethical and social responsibilities of having complete control over a supply chain. Can you control every aspect of it? Can it be completely in line with your company’s branding and values throughout the entire process of making a product? Walmart is interesting because they chose the brand of the all American store with conservative values and they need to carry out this image through every branch and aspect of their company.

  6. nrz002 says:

    What changed my mind about suppliers is when I looked at things from the supplier’s point of view. The company is also the supplier’s consumer. The Chrysler example really made me realize that their success is positively correlated to each other. Mike is right that an imbalance of relationships between stakeholders could be hazardous to the company’s future. This does fall under the management’s role. Freeman’s guidance in balancing these rules is mentioned when he states that managers have a duty to stockholders with the concept that managers bear a fiduciary relationship to stakeholders. So by having this trust between stakeholders and understanding that each has their own rule there should not be an imbalance.

  7. I agree with your explanation of stakeholders, Nate, and example of Chrysler, just as I agree with Freeman’s article. It is actually hard for me to understand how/why people would side with Friedman and the notion that all stakeholders are seperated in their roles within a business process. If a company did not coorporate with its consumers, suppliers, etc. (coorporation even in the form of responding to changes in demand) it is hard for me to believe it could remain in existence.

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