Stakeholders Of A Competitive Company

Running head: STAKEHOLDER COMPETITION
Stakeholder Competition
Name of the Student:
Name of the University:
Author Note:

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Introduction:
Wheelen et al. (2017) defines strategic management is the formation of strategies and
plans to achieve the mission and vision of business organisations. Business organisations form
strategies to earn profits and business growth to benefit the stakeholders. It appears from their
work that the aim of strategic management is to bring about benefits of all the stakeholders and
that it is neutral. However, Bridoux, F., Stofberg, N. and Den Hartog, D., 2016 points out that in
reality strategic management is not ethically neutral and that fact has become more prominent
with emergence of neoliberal context. Labonté and Stuckler (2016) neoliberalism as the situation
where governments reduce investments in various sectors to give ways to private investments.
One can point out that in contrast to the public welfare aim of the governments, the aims of the
commercial organisations is to earn profits. Clements, Baum and Cumming (2016) mention that
these commercial organisations in order to fuel their own profit earning motives, often indulge in
unethical practices, thus benefiting one of the stakeholders less compared to other group of
stakeholders like investors. The paper would reinstate that in the age of present
neoliberalism, strategic management is not ethically neutral and companies benefit some
stakeholders more at the expense of the others. It would take into account theories like
stakeholders’ theory and shareholder theory to bring into light the topic being studied.
Analysis:
Hopkins (2017) mentions that business organisations should faction in order to bring
welfare and value addition to their stakeholders. The stakeholders of business organisations can
be divided into external stakeholders and internal stakeholders. The internal stakeholders consist
of the management of the business organisations which form the strategies and the employees
who execute these strategies. The external stakeholders consists of governments, investors,

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customers, suppliers and the society as a whole. Arora et al. (2017) mention that business
organisations, especially the multinational public limited companies are dependent on
shareholders for the capital bases. They are as a result ethically and legally obliged to give high
returns to these shareholders in order to attract higher investments. This puts them under
continuous pressure to earn higher profits to give more returns to these shareholders. This intense
pressure from the shareholders often forces them to apply unethical methods like compromising
on the quality of goods, thus harming the consumers. Thus, in neoliberal era of today, the
strategic management is not neutral and business organisations have to benefit one set of
stakeholders less to benefit one group of stakeholders more.
Chari and Acikgoz (2016) points out that in the present neo-liberal age, government
allow private organisations function in most of the sector except the critical sectors like defence
whose control they reserve to themselves. The governments makes laws and regulations to
regulate the functions of these business organisations. These business organisations have to
incorporate these laws and policies while forming their business strategies. The governments
impose taxes on these business organisations which in turn increases their expenditure. As
pointed out by Arora et al. (2017), business organisations are obliged to bring about capital
maximisation for their shareholders. This means they are compelled to earn high profits and
reduce their expenses to give higher returns on their investments. The high rates of taxes which
governments impose thus are a bearing on these business organisations. The present corporate
tax rate in the United States of America is 21 percent which has been reduced from 35 percent
(hbr.org 2018). The tax rate which multinational companies pay in the United Kingdom is also
similar (gov.uk 2018). One can point out that these two countries are home to several
multinational companies. These multinational companies in order to reduce their tax spending

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establish their businesses in tax havens where the tax rates are comparatively lower, usually in
other countries. These companies thus able to function from these tax havens by paying lower
tax rates to their host countries and earning high profits (theguardian.com 2018). An analysis of
this discussion clearly points out that in this case, business organisations in order to profit the
investors and the management, benefit the host country governments by paying them less taxes.
Thus once again, it can be proved that strategic management is not ethically neutral and business
organisations often benefit one stakeholder group at the expense of the other (globalnews.ca
2018).
The next example where one group stakeholders benefits at the expense of the other in
the present neoliberal era is environmental pollution. According to the United Nations the top
business organisations involved in manufacturing goods cause immense amount of
environmental pollution. The companies operating in the manufacturing sectors like automobile
and energy earn immense revenue by serving their customers. They in the process of the
manufacturing finished goods exploit natural resources and harm the environment and the local
community as a whole (independent.co.uk 2018). The governments of the host countries often
allow the multinational companies to exploit their natural resources including the water resources
like rivers (financialexpress.com 2018). The government bodies bodies earn immense revenue
from these companies in return. The customers get diverse ranges of products from them and in
turn contribute to their immense revenue generation. The investors get immense return on their
investments and attribute the companies with investments in return. The four stakeholder groups
here, the government, the company, the customers and the investors benefit from the strategies of
the company and do not put any limitations on its exploitation of natural resources. These
reckless exploitation of natural resources affect the local community which often suffer from

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drought due to excess usage of water by the multinational companies. Thus, this analysis shows
that business strategies of business organisations often benefit one group of stakeholders at the
expense of the other groups.
The strategic management is not ethically neutral and often leads to benefits of one group
of stakeholders at the expense of the others. The above discussion clearly shows that business
organisations often form strategies to primarily benefit four stakeholder groups namely, the
management, the investors, customers and the governments. The by-product of business
operations like wastes cause pollution and harm the society as whole which is an important
stakeholder as well. The harm to the society due to society cannot be measured financially but
has significant business implications (financialexpress.com 2018). This is perfectly exemplified
through the downfall of Enron which was a leading American company operating in the energy
sector. The management of the company which was also one of its stakeholders used unethical
methods of misrepresenting financial figures before the shareholders. The company had a
transparent accounting method which accounted for its transparent image before the
stakeholders. However when Skilling joined the company in 1997 as its new CEO, the
accounting methods adopted by the company become increasing complex which vexed the
analysts. The company presented false statements about its stock position and indulged in
extravagant spending for the high level executives which in turn resulted in its high expenditure
(theguardian.com 2018). This benefitting of one stakeholder group at the expense of the other
resulted in loss of stakeholder support and ultimately bankruptcy of Enron.
Somsuk and Laosirihongthong (2014) stress on the fact that strategic management is not
neutral and business organisations often benefit one group stakeholders at the expense of the
others. However, at downfall of Enron clearly points out that the failure of companies to benefit

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one group of stakeholders ultimately leads to loss of support of all the other group of
stakeholders, ultimately culminating into their downfall. As the management of Enron started
misrepresenting the financial results to the shareholders and started spending exorbitant amounts
towards benefiting the top level executives at their expense, the company lost the support of the
former. The accounting process became complex to cover these unethical practices which
ultimately led to the loss of control of the company over its finances which catapulted it towards
bankruptcy (theguardian.com 2018). One can also point from the example of Enron bankruptcy
that endangering the benefit of one stakeholder group ultimately affects the other groups as well.
For example, when the investors withdrew their support, the company met with its bankruptcy,
the top executives who had benefitted earlier lost their jobs. The customers also withdrew their
support due to loss of shareholder support. This inter-relatedness of stakeholder support and
benefits has led to the necessity of corporate governance as an important component of the
strategic management of the business organisations.
Mason and Simmons (2014) defines corporate governance as the strategic management
of the operations of business organisations under the guidance of management, creditors,
regulators and the stakeholders. The business organisations in the present neoliberal age
incorporate the expectations of all the stakeholders which forming their business strategies. They
today function as corporate citizens rather than mere agents of the investors. As per ArAs (2016)
corporate social responsibility of the business organisations form an important part of their
strategies and is directly taken care of by the apex management. The business organisations in
the neoliberal age today involve the stakeholder groups like customers in forming their
strategies. They obtain information about the views and expectations of the customers using the
social media. The in turn give the customers information about their future strategies, products

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and offers. They take into consideration the suggestions of the customers in their product
strategies. As a result, their products find ready acceptance in the market which earn the firms
more revenue. They as a result are able to give more returns to the investors and in turn obtain
more investments from them. Ali and Ahmad (2016) further points out that today customers are
concerned about their environment and emphasis on purchasing environment friendly product.
The business companies as a result are compelled to restructure their manufacturing strategies
and opt for more environment friendly modes of manufacturing. These companies as a result are
able to attract more customers and generate higher revenue. They as a result can give more return
to their investors. The governments are able to gain more taxes from them and provide them with
more facilities in return. This discussion shows that corporate governance can pave way for more
ethical strategic management and higher degree of stakeholder benefit. However, it must also be
pointed out that it is not feasible to nullify environmental population or exploitation of natural
resources. Corporate governance can direct companies to form policies to benefit more number
of stakeholders than they would have benefit by only operating towards profit generation
(theguardian.com 2018). The business organisations today participate in the social development
initiatives of the governments like providing basic medical facilities to the local communities.
Multinational companies help in development of the local communities and in the way help in
minimising the loss they do them by exploiting the natural resources. This once again points out
to the non-neutral nature of the strategic management. It is not feasible for business organisations
to benefit all the stakeholders to the same extent. However, they can take actions to make up the
loss they do to the stakeholder group they benefit less like the local communities.

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Conclusion:
It can be concluded that strategic management is not ethically neutral and business
organisations benefit certain stakeholder groups at the expense of others. The business
organisations are ethically and legally bound to benefit the investors and customers. This is
because they get capital and revenue respectively from them. They are legally bound to pay taxes
to the government because it the latter form laws and offer them licenses to operate in the
market. One can conclude the companies can measure capital, revenue and taxes financially and
thus operate to benefit them. However, they must also operate to benefit the society as a whole
by reducing environmental pollution. The stakeholder groups must use corporate governance to
regulate the strategy formation among the companies. The companies must form strategies to
benefits their stakeholders to the extent possible to bring about their development and value
addition.

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