Organizational Stakeholders

One reason for the difficulty in understanding corporate social responsibility is that man- agers must confront  the question, “Responsibility to whom?” Recall from Chapter 3 that the organization’s environment  consists of several sectors in both the task and general environment. From a social responsibility  perspective, enlightened  organizations view the internal and external environment as a variety  of stakeholders.

A stakeholder is any group within or outside the organization that has a stake in the organization’s  performance.  Each stakeholder  has a different criterion of responsiveness because  it has  a different interest in the organization.33   For example, Wal-Mart  uses aggressive bargaining tactics with suppliers so it is able to provide low prices for customers. Some  stakeholders see this type of corporate  behavior  as responsible  because the greater efficiency benefits customers and forces.

Others,  however, argue that the aggressive tactics are unethical  and socially irresponsible because they force U.S. manufacturers to lay off workers, close factories, and outsource from low- wage countries. For instance, Wal-Mart now purchases about 10 percent of all Chinese imports to the United States, and company executives are considering  increasing their China purchases significantly  over the next five years, which critics charge will hurt American companies and workers even more. One supplier said clothing  is being sold so cheaply at Wal-Mart that many U.S. companies could not compete even if they were to pay their employees nothing.34

The organization’s performance affects stakeholders, but stakeholders  also can have a tremendous effect on the organization’s performance and success. Consider   the case of Monsanto,  a leading competitor  in the life sciences industry.

Other important  stakeholders are the government and the community,  which have be- come increasingly important  in recent years. Most corporations exist only under the proper charter and licenses and operate within the limits of safety laws, environmental  protection requirements, antitrust regulations, antibribery legislation, and other laws and regulations in the government  sector. The community  includes local government, the natural and physical environments,  and the quality of life provided for residents. Special interest groups, still another stakeholder, may include trade associations, political  action committees,  pro- fessional associations, and consumerists.

Socially responsible organizations consider the effects of their actions on all stakeholder groups and may also invest in a number of philanthropic causes that benefit stakeholders. Cummins Engine, for example, funds the development of schools in China and India, where it has facilities,  and has purchased biodiverse forest land in Mexico to demonstrate the company’s commitment to the natural environment.37 Bristol-Myers Squibb provides funding for health clinics in areas of Texas, California,  and Florida to hire promotoras de  salud,   or peer health educators,  to help fight Type 2 diabetes  in the Hispanic population.38

Today, special interest groups continue to be one of the largest stakeholder concerns that companies face. Environmental responsibility has become a primary  issue as business and the public alike acknowledge the damage that has been done to our natural environment.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.