The Importance of Considering Small Business and Regional Communities as Stakeholders

This article discusses the importance of considering small business and regional communities as stakeholders in the banking sector, using the stakeholder theory approach. It argues that the stakeholder approach is more beneficial than the traditional shareholder approach, as it takes into account the interests of all stakeholders, including customers, employees, suppliers, communities, and the government. The article also highlights the negative consequences of ignoring the interests of small business and regional communities, such as damaging relationships and reducing productivity. The bank should have consulted with its stakeholders before making decisions that affect them, such as centralizing operations and cutting costs.

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The bank ought to care about the concerns of the small business sector and the regional
business communities because they are part of stakeholders, which the bank needs to satisfy. In
the stakeholder theory, the goal of the organization should be to create value for all its
stakeholders, unlike the traditional approach that a profit-making entity should pursue only the
interest that maximizes the shareholder's wealth (Fontaine, et al., 2006). According to
stakeholders theory, a firm has obligation to maximize the value of other stakeholders besides
the company shareholders (Baumfield, 2016). A stakeholder is a firm or person including
communities that are affected by or affects the objectives of an organization. In this case, the
bank ignored the interest of its small business and regional clients in pursuit of profit
maximization. The stakeholder approach follows a wider perspective compared to the
shareholder approach as it looks beyond just the interest of the shareholders (Alia & Abdelfettah,
2016). This all rounded approach has the benefits since most of the stakeholder interest may be
directly or indirectly linked to the achievement of the shareholders’ interests (Nwanji & Howell,
n.d.). For example, minding the interest of other stakeholders such as customers, employees,
suppliers, communities, and the government may create a good relationship between them and
the company increase productivity and acceptance of the firm to the stakeholders (Harrison, et
al., 2015).
If the bank applied the stakeholders approach, it should have listened to other stakeholder
and consulted them about the idea of centralizing it operations and restricting with an aim of
cutting costs. The bank would have realized what their clients in the small business sector and
regional business communities feel about the idea of transferring managers to the capital offices
or laying them off and removing the element of face to face communication. The bank would

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have realized maybe their clients value personal relationships, which would be greatly affected
by this cost-cutting restructuring. Additional the bank also failed to consider the concerns of its
employees who were being laid off or transferred and even those who were retained as their
workload was set to increase significantly.
References
Alia, A. & Abdelfettah, B., 2016. An overview on stakeholder theory perspective: towards managing
stakeholder expectation. International Academic Journal of Accounting and Financial Management, 3(3),
pp. 40-53.

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Baumfield, V. S., 2016. Stakeholder theory from a management perspective: Bridging the
shareholder/stakeholder divide. Australian Journal of Corporate Law, 31(1), pp. 187-207.
Fontaine, C., Haarman, A. & Schmid, S., 2006. The Stakeholder Theory. s.l.:s.n.
Harrison, J. S., Freeman, R. E. & Abreu, M. C. S. d., 2015. Stakeholder Theory As an Ethical Approach to
Effective Management: applying the theory to multiple contexts. Review of Business Managemnt,
17(55), pp. 858-869.
Nwanji, T. I. & Howell, K. E., n.d. The Stakeholder Theory in the Modern Global Business Environment.
International Journal of Applied Institutional Governance, 1(1), pp. 1-9.