A stakeholder is any person or entity that is affected by the business practices of an organization. Stakeholders consist of a variety of people from shareholders, suppliers and employees to customers and the community at large. The ethical stakeholder analysis method takes a balanced approach to considering the needs of all stakeholders when making decisions about the management of a corporation.
According to The World Bank website, stakeholder analysis involves the evaluation of all stakeholders and their interests in the organization. For example, the local community may benefit from the increased tax revenue generated when a company operates at maximum capacity. However, by operating at maximum capacity, the factory might create high levels of noise or other pollution that may harm the community. Ethical stakeholder analysis consists of evaluating the often conflicting needs of all stakeholders and making business decisions that generate the greatest possibly profit while inflicting the least amount of harm.
Corporate managers and leaders often feel the pressure to choose between maximizing profitability and practicing corporate social responsibility. On one hand, the company has a responsibility to produce a profit for its shareholders, or owners. On the other hand, the company has a perceived responsibility to operate in a manner that is socially responsible. Most corporations hold either a shareholder focused value perspective or a stakeholder focused value perspective. The shareholder value perspective values economic profitability over responsibility, while the stakeholder value perspective values corporate social responsibility above all else. In an ethical stakeholder analysis, organizational leaders value the needs of all stakeholders, including their shareholders.
Compliance vs. Integrity Based Ethics
Organizational leaders may focus on conducting business practices that simply comply with all applicable local, state and federal laws. However, it is essential to remember that just because an action is legal, this does not necessarily make it ethical. Organizations that focus only on adhering to the law practice compliance-based ethics, while those who go above and beyond what is simply legal to look out for the best interests of their stakeholders practice integrity based ethics. The integrity-based ethics model is an essential element of ethical stakeholder analysis.
Responsibility to Shareholders
To be truly ethical, the stakeholder analysis must include the needs of all stakeholders, including shareholders or owners. While it's important to consider all stakeholders when conducting business, it is also essential to remember that the corporation's number one responsibility is to its shareholders. Remember, if the company does not profit, employees lose their jobs, and the community at large misses out on the tax revenue generated by successful businesses. Organizational leaders must balance the need to remain profitable with need to act in a responsible manner that benefits all stakeholders.
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