Question

Delta Airlines

In your opinion, which of the following best characterizes the purpose of the firm? Explain your answer and describe possible implications to the other stakeholders. For example, if you believe the purpose of the firm is to “maximize shareholder value”, what would be the implications to customers or employers?  If you believe the purpose of the firm is to “create value for a broad set of stakeholders”, what would be the implications to shareholders, customers, or employees?

-Maximizing shareholder value

-Bringing value to customers

-Creating value for employees

-Creating value for a broad set of stakeholders, including society and the environment

Answer 1

In my personal opinion, the purpose of the firm should be to create value for broad set of stakeholders, including society and the environment. Stakeholders includes internal stakeholders (e.g. Board of Directors, executives at top level management, employees etc.) and the external stakeholders (e.g. society, investors, shareholders, government agencies etc.). A business is made up of both internal and external stakeholders and can't exist without proper interactions with each one of them. The firm must try to maximize the profits at the same time taking into consideration the fact that it must also keep employees happy and also deliver the best possible products to its customers, keeping the best in class customer experience.

The implication of this purpose on other stakeholders :

Customers: Creating a value for a broad set of stakeholders would include the firm's responsibility towards customers as well. Firms must try to provide best possible utility to the customers for the price that they are going to pay. Also, it is important that customer is provided best in class post sale services.

Society: A business is brought up in the society using the human and other resources from the society. Since the firms uses the society's resources, it is important duty for any firm to pay back the society for its investment. Firm must benefit the society in the best possible way they can. This can include and is not limited to corporate social investments.

Environment: A firm should not exploit the environment resources to the extent that they become scarce resource and help in the environment degradation. Firm must make sure that they are not polluting or harming the environment just to benefit few set of stakeholders in the society.