This week’s materials focused on the topic of stakeholder relationships in business. The stakeholder term in business includes many external and internal individuals and groups; therefore, learning more about their role is essential for understanding how businesses operate in the modern world. While the role of external stakeholders in business can often be left unnoticed, external stakeholders in the face of customers, suppliers, and government can influence businesses in a significant way. Thus, in addition to responsibilities for internal stakeholders who invest their time and resources in the company, businesses must consider ethical responsibilities to external stakeholders.
Ethical responsibilities are closely related to legal requirements since they present an extension or reduction of the company’s efforts in adherence to legal basis. Thus, ethical maximum represents the strongest of the possible actions and therefore is less connected to the legal requirements. On the other hand, the ethical minimum is based on the legal requirements and reduces the role of the ethical component in the decision-making. The simple example of ethical responsibilities for external stakeholders is the business’s desire to meet the buyer in case of a product’s malfunctioning or breakdown and offer guaranteed quick exchange. While the example presents an ethical maximum in exceeding legal requirements, it also demonstrates the legal requirements-centered dynamic in stakeholder relationships.
Furthermore, the materials explained the methods for defining different levels of stakeholder claims based on their importance. The descriptive approach, which defines various stakeholder groups, allows comparing their interests and favors creating a balanced decision that would satisfy all groups’ interests. The instrumental approach prioritizes the financial impact of stakeholders’ interests. Thus, the instrumental approach defines the importance of stakeholders based on their influence on financial outcomes. Lastly, the normative approach eliminates the financial component and considers all stakeholders’ interests. I find that the theme of the significance of stakeholders’ claims is especially relevant in modern conditions of informed society and conscious consumerism. When businesses and their representatives make ill-informed decisions, a decline in the company’s image in the eyes of consumers can often result in a significant drop in demand for the products, layoffs, and business closure. Therefore, I think that the knowledge of a clear division of stakeholder categories is essential for modern businesses.
Next, this week’s materials focused on the topic of stakeholder prioritization. While I understand that this approach is effective in cases where companies have responsibilities to several different stakeholders with opposing interests, I find that stakeholder prioritization should be administered with great attention. In corporate organizations, which prioritize the interests of shareholders, the decision-making centered on increasing shareholders’ revenue leads to destructive business practices and environmental issues. Thus, I think that stakeholder prioritization should primarily focus on consumers’ interests and favor the development of more positive relationships with stakeholders. Furthermore, it is crucial to inform stakeholders with correct data about the company’s activities to acquire feedback because trustful relationships favor mutual development and long-term cooperation.
In conclusion, over the course of the week, I have acquired valuable knowledge about the role of different stakeholders in business and the responsibilities of business. While I knew that external stakeholders influence a business’s financial stability, it was interesting to learn about the difficulties businesses face in meeting stakeholders’ ethical requirements. Lastly, the information about corporate responsibility in this week’s materials made me consider the potential positive and negative effects corporations can have on the environment and society.