Business & Law. Company and Its Stakeholders


The company’s strong relationship with stakeholders is measured based on confidence, trust and cooperation. This means that the stakeholders’ interest to the company will be high if there is high trust, respect and good team work. This is majorly primary strategic management. For a company to maintain its competitive advantage and remain relevant, it should clearly identify its stakeholders and other external parties and strengthen its association with them. Stakeholders will include shareholders, employees, customers and suppliers.

Businesses can increase their profit margins by showing a true account of their activities in various ways (Okuto, p. 45). To start with, the making public its activities will become part of its Cooperate Social Responsibility, CSR, is vital for the sustainability of a profitable business environment as it creates the needed social capital as it improves a company’s reputation with its stakeholders who include the company’s customers, supplier and investors. Companies such as hotel chains and luxurious resorts can increase their consumer loyalty and bring in more consumers on board by revising how they do business involved with maintaining the environment for example green measures that the companies have put in place which include improvement of the vegetative cover for hotel chains in the desert areas, adoption of environmental friendly energy, training of the local community through promotion of educational institutions and encouraging their guests to take part.

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Employees

This are the most crucial people of the company, they receive salaries of the company they include the management of the company. The receive salary from the company and they are motivated if their working conditions in the company is good. The company communicates to the employees through holding meetings, letters of appointments, letters of dismissal, journals, e.t.c. The importance of the employees in the company is to ensure that the resources of the company are taken care of to achieve high results. This will increase sales and improve the reputation of the company. Also investors will be high and hence the value of the shares will increase.

They are interested in vast information ranging from letters of appointment, letters of dismissal, salary increment information and any other information that is available in the financial statements of the company they are working for. In the profit and loss account they need the profitability, the amount of salaries paid out, the amount of credit being held by the company, and how regular the company does business, they are interested in the amount of cash the company is holding. Therefore they need the financial statements including profit and loss account, cash flow statements, balance sheet and notes to the account.

The company should therefore pursue goals that are beneficial to employees since they are the core of any business. The company should come up with policies that are employees friendly by trying to minimize chances of discrimination and de-motivation. Workplace culture should be open to create a good relationship with the company.

To provide for a good employment environment companies have committed themselves to equal employment opportunities for all people, high standards of working environment like; freedom of expression with no harassment at work place, safety at workplace, no child labor and employee confidentiality.

Shareholders

These are the owners of the business, they are the people who promoted the company or who started the business and there aim it to make profit and share it. The company communicates to is shareholders through the Annual General Meeting, AGM which is convened yearly. These people are important to the company because if they have no confidence in the company, the value of shares will reduce in stock market, investors will withdraw their investments from the company and no new investors will invest, creditors will stop offering their services, employees will not receive their salaries, sales will go down and the hence the corporation will collapse.

Therefore, they are the people who appreciate the investments made by the company; they are interested in all information available in the financial statements. The use liquidity information to know the long term survival of the company in question, they also are interested in the profitability of the firm so that they can know how much dividends is available for them. The same group is also interested in the performance of the company through the management that is activities of the company. Therefore this is the most crucial members of the groups that need financial information. They get there information communicated through annual general meeting which is annually and it is through them that everybody including employees will have confidence in the company.

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Shareholders always want optimum return on their investments. However, there is a general acknowledgement that the goals of economic stability, environmental protection, and social justice are common across many stakeholder groups thus the shareholders goal this other goals is mixed to have optimal mix. Shareholders now days understand the importance of the other goals pursued by the firm that is, it is in the company’s own best economic interest to work in this direction of sustainable development because doing so will strengthen its relationship with stakeholders, which in turn will help the company meet its business objectives although reducing profits.

Customer

A customer is the one who receives and consumes the company’s goods and it is the customer who makes the company to continue business in its lifestyle. They consume goods and services from the company and they expect the company to give a good which is of good quality and user friendly. The good must have the utility value for the customer and at a good price. This will enable the customer to be loyal to the company and ensure the competitiveness of the company’s product. The product ensures that the customer has certain perceptions about the company’s product. It is through the perception of the company that the customers will continue through patronizing the business. The purpose and the type of information they need from financial statement include; pricing of the products, information about how much was spent for credit management, amount used in marketing, amount of cash discounts given, and amount used in giving out free samples.

Because of competition in the market, the corporation should be dynamic in its activities and the price for the product should be fair as different people have different perceptions to price hence should set fair prices to accommodate all customers. The company communicates through advertisements, trade exhibitions & promotions, giving free samples, cash discounts, offering credit facilities among others. This increases customer awareness of the product or service.

This information is available in financial statements of the company that is profit and loss account. They need this information to increase there awareness about the safety of the product they are consuming. The company communicates to them through the following means: – advertisement, trade and exhibitions, giving free samples, cash discounts, and offering credit facilities.

A company must identify and serve customer well by understanding their needs and wants. This is how that particular product will serve the needs. In essence the company should come up with a product that is fit for use so as to make the customers more comfortable. Proper studies should be done to the market before coming up with new ideas.

Take an example of Philip Morris that has accepted adverse effect/ risk associated with smoking and thereby incorporating on public advertisements the effect of smoking. It has also set aside a fund for treatment of any person who contracts diseases associated with cigarettes. The company has also changed its name from Marblo to Altaria so that the consumer will not confuse the product and introduced some brands which are mild and light and they describe them to be safe.

Question 2

The current financial crisis in some mortgage lenders and the collapse of Enron raises fundamental questions about business ethics. The questions are is this due lack of proper training in ethics? Or is it structural adjustment in corporations?

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To begin with Enron had a positive reputation but it was discovered that the management’s business was highly questionable. The investigations of the accounting frauds and corruptions by the top management have taken years to settle. The independent auditors, who should have acted as watchdogs on behalf of the interested public and the stakeholders, did not take the necessary action to save them the time and money lost in this company’s fall. The board members and the auditors did not demonstrate enough confidence to challenge the management of Enron on their actions. There was money laundering, wire fraud and mail fraud. The management conspired to overstate the profits of Enron and to enrich themselves at the expense of the company.

The issue about Enron Company is quite evident that it has a lot to do with poor corporate governance and not business ethics training. Corporate governance involves a set of policies, customs and processes as well as institutions and laws affecting the direction of a company by the administration. These ensure that the goals and the objective of the company are achieved at ease. The biggest stakeholders in the corporate governance are the shareholders and the management.

The themes that the management should follow to enhance the company’s achievement and the goals and objectives are transparency and accountability. Accountability is a term concerning ethics and in the context of the company it requires the company to let shareholders know their actions and decisions taken to keep them informed. It also synonymously related to the responsibility in general terms. Transparency on the other hand calls for the management to inform the shareholders about each and every of the actions in their company.

The company was lacking in terms of accountancy and transparency in the part of managers. A healthy financial position had been reported before but in accountancy fraud. The fraud is said to have been creatively systematically and institutionally planned and it thus translated into the better known Enron’s scandal. The main recommendation to other companies in a similar situation is to ensure that the management upholds the requirements of good corporate governance (Tedlow, pp. 441-442).

In conclusion the statement is true it is not the issue of training but the issues of corporate governance. There should be established and cultivated positive working culture is as part of dealings of companies. The culture is part and parcel of the way that critical decisions are arrived at, individual roles are clear, systems are well thought-out, resources and powers. Experts do argue that everything that influences how people think and narrate to one another in the work surroundings contributes to any organization’s culture. A company’s culture can be sensed almost immediately by seeing how people feel happy, excited, animated, open, supportive, safe, and friendly. This kind of environment makes anyone maintain a positive working culture and avoid the culture of blame.

References

  1. Fox, L. Enron: The Rise and Fall. John Wiley and Sons, (2003) p. 150.
  2. Msingabwadhi, Ako. Business Responsibility On Enviromental Safety. Lagos, Resincort Publishers, (2003), pp. 30-35
  3. Okuto, Daniel.Creating the culture of Social Accountability. Nairobi, Longman Publishers,(1992), pp. 20–50.
  4. Remer, Janes. Responsible business. New York, ACA Books, American Council for the Arts, 1996.
  5. Reighard, Bennett. Sustainable Business. Chicago, National Society for the Study of Education, (1992), pp. 123–150.
  6. Savimbi, Michael. “Consciou Business And Cooperate Social Responsibility,” The Journal of Marketing, Vol. 21, No. 2, 1987, pp. 95–128.
  7. Solomon, J. Corporate Governance and Accountability. John Wiley and Sons, (2007) p35.
  8. Tedlow, R.S. Andy Grove: The Life and Times of an American Business Icon. Portfolio, (2007) pp441-442.
  9. Zeneki, Brian. Social Policy And Business Accountability. Abu Dhabi, Shiredeen Publishers , 2007, pp. 49
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