Who decides what a company should do? – revisited

september 13th, 2012 · by John · Weblog EN

On September 6th , I published a blog on the stakeholders of an organization. My conclusion was that a company exists to create benefits or, in other words “value”. Not only for its shareholders, but also for its customers, to keep selling its products and services, for its employees, to ensure that products and services sold are produced and delivered, and for its suppliers, to keep on having the resources needed for the production and delivery of products and services.

One of my readers (thanks Edwin!) posted a remark, stating that I had forgotten a stakeholder. And indeed, I did not mention that society is also affected by, and can affect the actions of, an organization. This makes society an important stakeholder on three levels: society at large, the local community and future generations.

Society at large

Having had elections in the Netherlands yesterday, the thing what immediately comes to mind is government. In a democratic environment at least, society chooses its government and government represents society. Government can affect the company in many ways. Taxation and interest rates, will have a direct influence on the costs. Legislation regulates the actions of an organization in areas such as the environment and occupational safety and health. On the other hand, successful firms are good for governments as they create wealth and employment, thereby enlarging the tax base.

But society at large can also directly influence the actions of a company. After worldwide protests and a consumer boycott in 1976, Shell had to come back for example, from its decision to sink-of the Brent Spar.

Local community

The local community will often “provide” the employees for a firm. On the other hand the organization will supply goods and services to the local area. At times the community may feel aggrieved by some aspects of what a firm does. Examples are pollution, because of expansion plans, or forced lay-off, because of plans to downsize or even close the operations.

Future generations

Both with society at large and with the community, I referred to environmental aspects. Sustainable development indeed, is at the center of the stakeholder debate. This suggests a responsibility to future generations. These generations will one day be reliant upon the physical environment, as a stakeholder group.

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