Multiple constituents influence the success of an organization. Businesses and stakeholders are continually developing an interdependence. Profits are increasingly being channeled into creating value for stakeholders other than shareholders. The stakeholder theory, rather than shareholder theory, therefore takes precedence because the pursuit of stakeholders’ interest and value addition to them ensures organizational sustainability and a better chance of businesses favorably competing in the global business environment.
Businesses should pursue stakeholder theory other than shareholder theory because of the advantages accrued to stakeholders’ care. It ensures sustainability and helps firms leverage the different advantages related to globalization’s impact on organizations. The tremendous growth in B Corporations movements signifies a shift from an overemphasis on corporate profits to the impact an organization has on immediate stakeholders such as customers, suppliers, the community in which an entity is situated, and employees. Honeyman et al. (2019) assert that public markets, multinationals, private venture investors, and academic institutions are increasingly focusing on becoming B Corps. To exemplify the paradigm shift towards stakeholders’ theory, the authors point out that venture capital investors have invested more than 2 billion in approximately 150 companies with B Corp certification. Companies attract investors who believe in the same cause; positive social impact. Besides the above, organizations that believe in Stakeholder Theory create a symbiotic relationship with stakeholders. In turn, this influences the creation of a favorable environment in which a business or an entity thrives. Sustainability, therefore, comes about because while an entity might depend on the stakeholders for aspects such as the provision of raw materials, the stakeholders, in turn, depend on the company for favorable contractual terms or even commitment towards good causes by the company through corporate social responsibility. There is also a need for organizations to take advantage of benefits accrued to stakeholder power and legitimacy ( Mitchell et al., 1997). Dominant stakeholders influence an organization’s wellbeing and sustainability because of their impact on indispensable organizational elements such as policies.
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Globalization has increasingly become instrumental in the interaction between different businesses and stakeholders. Likewise, there has been increased interdependence between stakeholders and businesses or entities. Such developments have also influenced understanding between different stakeholders about the need to engage maximally with business owners and directly or indirectly benefit from such interactions (Jensen et al., 2011) . This has created a situation where all the concerned parties have to ensure the wellbeing of those they engage with. Moreover, it is undisputed that extensive communication that has come with globalization has influenced the presence of different types of markets and stiff competition within such settings. Winning customers, suppliers, and even employees is mainly influenced by organizations’ ability to add value to such stakeholders. On the other hand, stakeholders also compete to engage with firms that offer good terms and those that thrive in different economic situations. Hence, corporations and stakeholders have been interdependent, one that mostly leads to a win-win situation for the involved parties. Therefore, companies concerned with stakeholder theory thrive compared to those that emphasize shareholder theory.
To convince others of my views, I would present expert opinions about the topic, discuss data related to the topic, and avoid ambiguity in explaining my viewpoint. The specific information I would site is data or statistics and all information that might not be common knowledge to the audience.
In conclusion, stakeholder’s theory, rather than shareholder theory, takes precedence because the pursuit of stakeholder’s interest and value addition to them ensures organizational sustainability and a better chance of businesses to compete in the global business environment favorably. An increase in the investment into companies with B Corp certification is an indicator that more organizations believe that they can only increase their influence and growth by positively impacting stakeholders other than profit distribution among shareholders. Therefore, organizations need to realize the need to expand their social responsibility and good deeds among different stakeholders because that is the best way they can grow their influence.
References
Honeyman, R., & Jana, T. (2019). The B Corp Handbook: How You Can Use Business as a Force for Good . Berrett-Koehler Publishers.
Jensen, T., & Sandström, J. (2011). Stakeholder theory and globalization: The challenges of power and responsibility. Organization studies , 32 (4), 473-488.
Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of management review , 22 (4), 853-886.
