The Relationship Between Social Issues, the Shareholder Value, and Stakeholder Management

The article aims at giving an analysis of the relationship between social issues, the shareholder value, and stakeholder management. Impressing the customer is a core priority for any business operations as it is the basis of establishing a strong base. Companies need to engage their stakeholders more deeply to remain in business and enjoy consistent profits. Developing a healthy relationship with an organization’s stakeholders such as suppliers, customers, and employees among others is a significant asset for the company’s shareholders income. Primary stakeholders experience risks associated with a firm through their financial, capital and human investments to the firm. Human resources are the most valuable resource for a business. It is also gives the company a competitive advantage among its competitors. As such, a firm’s reliance on its resources helps in the management of various social problems globally.

Notably, the management of stakeholders and participation in social issues lies in their roles in enhancing the creative process in a firm. According to the article, a firm should incorporate the resources of all its stakeholders and shareholders in successfully running the business. Focusing on a long-term investment in positive relationships with stakeholders leads to consumer and supplier loyalty. It also results in a lower employees’ turnover as well as creating a great reputation for the firm. Excellent final performance of a business is as a result of effective management of all stakeholders. The value created for shareholders depends on the level of interaction of the firm with the primary stakeholders. A firm can barely survive without the inputs of its stakeholders (Hillman and Keim, 2001). The company management can organize useful platforms to help in strengthening its financial capabilities. While investing in a firm, shareholders aim at reaping excellent benefits; thus closely watch the direction of the company’s activities. The firm’s resources can greatly affect the business success if not well managed. The future success of business highly depends on the efficient present management of the company’s resources. Proper management is a significant asset to the prosperity of the business.

The ability of a firm to generate and distribute wealth contributes significantly to continued profitability and achievement of its social-economic goals. As such, a firm should aim at meeting consumer needs by providing quality and affordable products. Through this, a customer is likely to make more purchases; hence increased sales to the firm resulting in high profitability in the long run. In the event a firm does not meet the consumers’ needs, all consumers face a series of negative effects due to a reduction in sales. Such effects could be major employees’ layoffs, reduced company purchases from suppliers, fewer taxes to the government and the future failure of the business. Through excellent management of stakeholders, an organization has the opportunity to establish a strong customer base; thus gaining a top position among its competitors in the long-term value creation. The ability of a firm to outshine its competitors highly depends on its ability to successfully incorporate the organizational, human and physical resources in its business operations (Hillman and Keim, 2001). To give shareholders ultimate value, a company should employ rare, unique, valuable and organized strategies in the implementation of its resources. The company should also strive to build a good reputation and a reliable corporate culture. Besides, it should seek to establish long-lasting relationships with the suppliers and customers to enhance business success.

In most cases, businesses face a challenge balancing its financial objectives and social ethics. Many firms may engage in activities that are illegal or harm the environment, or even worse negatively affect the health of consumers with the aim of gaining huge profits. The government may also collaborate with such firms as they are likely to attract massive taxes from the business. In the long run, the effects of the illegal dealings end up ruining the lives of the society by degrading the quality of life. As such, the article insists on the value of successful relationships between a company and the local community. Besides, it is of paramount importance for an organization to study the available social amenities and resources available in its region of operation. The information will be helpful in finding means of improving and taking care of these resources for the peaceful existence of all the stakeholders. Socially responsible strategies are effective in ensuring that the society reaps as many benefits from a business establishment such as availability of job opportunities, improved amenities (roads, schools, hospitals). As such, the community gives a peaceful and favorable atmosphere for the business to operate. Besides, the firm gets to purchase the raw materials from local suppliers within the community.

Nevertheless, it takes time for the community to accept a company and its operations fully. The period depends on the products or services the company produces and their effect on the surrounding environment. Handling social issues that affect a community and giving people better life experiences using corporate resources provides the society with a good impression about the firm. The company’s activities should not in any way affect the lives of the host community negatively. Also, it should ensure that the products and services are affordable and readily available to meet the needs of the society. The interests of the community should be a top priority. It should focus on environmentally friendly activities and legal dealings that support the well-being of the society. Unlike stakeholder management, social issue participation has an indirect link to the company’s primary stakeholders. As such, companies need to design strategic approaches in handling relationships between corporate social performances and financial performance. The company should seek to give the society the value of its natural environment for its operations.

Conclusion

Therefore, the role of a business in the society is enhancing the daily lives of the people affected directly or indirectly by the business. From the article, it is clear that the business world survives in a very competitive environment. As such, every firm is consistently on the move to seek ways of gaining a competitive advantage. Companies should invest heavily in building strong and valuable relationships with all the stakeholders ranging from the customers, suppliers, employees, local communities, the government and the shareholders. It is the responsibility of a firm to ensure that it brings a positive impact on all its operations. In the efforts of ensuring that the shareholders derive maximum benefits from the business activities, the firm should aim at balancing the stakeholders’ relationship and the social issues.

Reference

Hillman, A. J. and Keim, G. D. (2001), ‘Shareholder value, stakeholder management, and social issues: what’s the bottom line?’ Strategic Management Journal, 22(2), 125-139.