Strategic Stakeholder Management
Joe, the new District Manager of Computer Operations, is faced with the ethical dilemma whether to lie in the letter his boss instructed him to write or tell the truth and lose the position he has worked so hard for. Joe knows how the system in question actually performs. He knows that it does not perform as projected and promoted by the company. He has already told this to Mary, his supervisor, but since she was one of the original supporters of the system, she wants Joe to draft a reply reiterating that the system works as it should. She also only reports positive feedback to the CEO. Joe thinks this is misinformation but he is held back by Mary’s subtle threat that she will fire him if he doesn’t follow her instructions.
Who are the decision makers? The primary decision maker in this dilemma is Joe. But since Mary is his superior, she also has power to decide what the consequences of Joe’s decision would be. Who are the stakeholders? The stakeholders are Joe, Mary, the employees and the shareholders, which includes the CEO. If Joe decides to tell the truth, including the fact that he had already reported this reality to Mary, Mary risks penalties from her superiors and the CEO. Why is this an ethical decision? Since “Ethics is the study and evaluation of human conduct in the light of moral principles” (Johnson, para. 1), this situation involves an ethical decision. Lying, misinformation or any form of deception is generally frowned upon by society.
Stakeholder Management — The Shareholder
What are the shareholders’ interests for each ethical issue or concern you identified in the Introduction?
“Shareholders are significant contributors to organizations, and from this perspective they are owed a significant obligation. Typically, this obligation takes the form of dividends and/or an increase in the market value of shareholders’ equity.” (Phillips, 2004, page 2)
The shareholders’ interests are the reputation of the company and the profits they could possibly lose if operations are hampered by the poor performance of the expensive system. The company could not always convince the complaining employees that the system is working as it should. Eventually, the corporation would suffer because its operations are not done successfully. It is not impossible that the company’s reputation and profits would suffer as consequence.
What are the shareholder responsibilities for each ethical issue or concern you identified in the Introduction?
The shareholder responsibilities are to ensure that the company could maximize its profits. This entails ensuring that system quality is at its best or at least competitive enough for ease of operations.
What are the possible decisions the corporation could make for each ethical issue or concern, and what are the possible effects on the shareholder?
If this is the first time such a complaint is received by the corporation, it is highly likely that the managers would dismiss it as an isolated case. They would continue business as usual. But since, according to Joe, the complaint is valid and reflects the actual performance of the system, it is also likely that there are other dissatisfied users. If the company ignores this it could reflect on lower returns to the shareholder’s investments.
But if the corporation takes the complaint seriously, the bosses could order a review of the system in question. Consequent actions would come after recommendations from the review committee are given. A possible recommendation would be the improvement of the system in question to make it perform as claimed. Shareholders would benefit from this action in the long-run because it means a more competitive product and more profits.
III. Conclusion and Recommendation
What is your recommendation to the corporation based on all of the facts, issues, and concerns of this case?
An Instrumental Approach to stakeholder theory posits that, “To maximize shareholder value over an uncertain time frame, managers ought to pay attention to key stakeholder relationships”(Strategic, para. 3). As final recommendation, the company should conduct a review of the system in question. The review should be done by a team. It could include original supporters, but there should also be unbiased representatives. Based on the report and recommendations of the review team, the company should take actions to improve the system to improve quality and competitiveness.
This action is recommended for these reasons: 1) it addresses the quality issue of the system in question; 2) it takes into consideration various stakeholders, including the employees and the shareholders; 3) it ensures that the operations and reputation of the corporation would not significantly suffer; 4) it holds to the truth that the system is not performing as claimed; 5) it would mean long-term benefits for the corporation.
What are the positive implications of your recommendation?
The corporation would be able to take care of its various stockholders. By reviewing its system, it ensures that operations could be done more efficiently, which means it would be easier for employees and it could promise higher returns to investment. “Ethical behavior foretells performance in general, enhances productivity, and helps companies avoid trust- and equity-destroying scandal” (How Business, para. 2).
What are the negative implications of your recommendation?
It would cost the corporation significant amount of money to review and improve the system.
What will critics of your recommendation argue?
Critics might say that the recommendation takes time to come to fruition and address the quality issue. It would also probably cost money to conduct a review and to make the necessary improvements to the system.
How would you address your critics` concerns? How will you defend your recommendations?
The recommendation ensures long-term benefits for the corporation. It outweighs whatever drawbacks it creates in the short-run.
“How Business Ethics Can Unlock Shareholder Value.” (n.d.). Retrieved March 1, 2007 from http://www.josephsoninstitute.org/business-ethics_how-business-ethics-can-unlock-shareholder-value.html
Johnson, M. (n.d.). Ethical Theories. Retrieved February 2, 2007 from http://www.stanford.edu/class/cs201/05_Ethical_Theories.pdf
Phillips, R. (2004, March/April). Some key questions about stakeholder theory. Retrieved March 1, 2007 from http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=471
Strategic Stakeholder Management. (n.d.) Retrieved March 1, 2007 from http://www.12manage.com/methods_strategic_stakeholder_management.html