Question

How should the financial interests of stockholders be balanced with varied interests of stakeholders? If you were writing a code of conduct for your company, how would you address this issue?

Answer 1

The stakeholders in a corporation are many, which includes its employees, their families, shareholders, suppliers, customers, the society at large and so on. This means that any decision taken by a firm has a significant impact on many lives. Now, a corporations primary objective is to maximize profit and value to its shareholders. This objective, on many occasions, can be in conflict with the interests of other stakeholders. For example, a company laying off employees as a measure to cut costs. Here lies an ethical dilemma of whether to pursue what is good for the company long term or try and please every stakeholder.

At the end of the day, if a business wants to survive, it cannot possibly please everybody. Harsh decisions that affect lives have to be made sometimes. But this doesn't mean that a company should practice all means possible to increase its profits. A balance has to maintained where interests of both parties and consequences of a corporation's decisions are considered. Following are some measures that can help balance the two sides:

• A focus on the long term as opposed to the short term: A major issue is that companies, especially the management, has an incentive to push for short term gains at the expense of a long term vision. This can have a significant impact on every stakeholder as in today's ever changing business environment, company's go out of business for not having a vision.
• An ethics based culture: Behaving ethically is something that has to be part of a company's culture and has to come from the top leadership. Only if the top leadership or the stockholders share ethical values can the company successfully balance the interests of both shareholders and stakeholders.

While writing a code of conduct, all stakeholders must be kept in mind and everybody should be given their fare share of respect and consideration. The firm should be focused not only on profits to their shareholders but also the profits to other stakeholders. The more inclusive approach a company chooses to take, the better can it accommodate each party's interest.