Sample Business Studies Argumentative Essay on Stakeholders and Corporate Performance

Stakeholders and Corporate Performance

Being responsible for corporate performance can be a daunting task due to the unrelenting pressure to show positive results on behalf of the shareholders. The situation could even become more complicated if there is a need to expose close stakeholders with whom one has personal or professional ties. Shareholders expect those they have entrusted with the business to drive up and enhance performance, financial results, and quality by working in harmony. However, there is a conflict between the shareholder and the stakeholder theory concerning the operations and intent of business. While, on one hand, the stakeholder theory favors the discretionary expectations of the society, the shareholder theory is keen on maximizing shareholder wealth. It would be socially natural to develop a protective attitude of a close stakeholder member even when the situation requires to be exposed for the greater good. However, corporate performance is bigger than an individual stakeholder in the long run. Business scandals such as Enron would not have occurred had the responsible people exposed the involved stakeholders at the right time. Deserving stakeholders should be exposed for the sake of corporate performance.

Reasons for Exposing Stakeholders

Corporate businesses are meant to maximize shareholder value. For such corporations to maximize long-term shareholder value, all stakeholders must collaborate rather than promote their personal welfare. According to Cheers (2011), the shareholder model holds the most appropriate framework for setting the priorities right for business. Its framework is a guide necessary for balancing any competing and conflicting interests of stakeholders. Being in a position to expose a fellow stakeholder and choosing to protect goes against the principles of the shareholder model. Deciding to cover the operations of a dishonest stakeholder may not interfere with corporate performance in the short-run, but will most definitely jeopardize productivity and business objectives in the long run. It is important that any stakeholder faced by the dilemma to cover or expose a colleague to reflect on the aim of the corporation in maximizing long-term shareholder wealth. Furthermore, shareholders entrust the stakeholders to make tough decisions on their behalf with the aim of providing consistent returns. As such, failing to expose a fellow stakeholder would not only be a betrayal of this trust, but also a show of weakness in handling an issue that demands responsibility. In the long term, the decision to cover may come to have a catastrophic impact on the business where other individuals will suffer from the earlier oversight.

Corporate responsibility is a prerequisite for corporate success in performance and productivity. This is needed even more by the responsible stakeholders. According to Jensen (2001), the stakeholder theory appreciates value maximization in the sense that stakeholders, such as managers, have to be attentive to anything that could affect the firm. Stakeholders keen on maximizing value will not be swayed to fulfill short run interests at the expense of the corporation’s financial claimants. By covering the already compromised stakeholder, the firm-value is destroyed gradually. It is recommended that any person who is entrapped by the social groupings should focus on the principles of value-maximization and a touch of personal ethics. This means that any situation that compromises one’s ethics should be avoided because it betrays the guiding principles. Business ethics stipulates that applying ethical behavior constitutes operating honestly, competing fairly, abiding by provided regulation, and creating an enabling environment for the rest of stakeholders.

Not only should a responsible person keep the best interests of other stakeholders at the forefront, but also defend the business in line with the expectations. If this is not achieved, the business stands to lose its sustainability battle by covering what would jeopardize a corporation’s performance. So many scandals have been noted of businesses that have failed on corporate governance as a result of a few dishonest people who were allowed to commit inappropriate actions for too long. The corporate performance was affected by the scandals in Worldcom and Tyco to the extent that sustainability became a long lasting issue. What is evident is that the inability to make appropriate decisions reflected the behavior of irresponsible stakeholders who had failed to rely on business ethics and ignored the interests of all stakeholders. Exposing a stakeholder who has been compromised provides a pillar of sustaining a business and improving corporate performance.

Conclusion

Corporate performance is tied to the individual decisions made by individual stakeholders. Corporations are meant to maximize shareholder value in the long-term. However, this objective may become blurred when the stakeholders are compromised, and their colleagues decide to cover their operations. Several businesses have already failed to sustain their operations in the past as a result of such indecisiveness. Exposing rogue stakeholders acts as a critical prerequisite for corporate performance because business interests are prioritized rather than personal ones. Despite the need to cling on to social groups, it is recommended that anyone who is in a position to expose stakeholders should not hesitate. Compromised stakeholders should be exposed.

References

Cheers, Z. (2011). The Corporate Social Responsibility Debate.

Jensen, M. C. (2001). Value maximization, stakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance, 14(3), 8-21.