Stakeholder theory is basically guided by moral and ethical principles in its decision making. It involves a management strategy aimed at creating maximum value to all the stakeholders involved.
(Rajendra, 2007) Its basic idea lays in the fact that business and its executives engage in operations that create value for customer, suppliers, the community, the shareholders and the employees. This creates a win-win situation for all the stakeholders with none benefiting at the expense of the other. This is guided by the understanding that business only exist within the realm of humanity.The firms that have adopted stakeholder approach in their operations through embrace of concepts unusual to the business world like love, authenticity, joy, empathy amongst others have come to be known as firms of endearment.
(Rajendra, 2007) As the name suggests, their operations end up endearing them to the stakeholders. Such firms having learnt that main concept behind profit maximization is motivating, have taken advantage of the stakeholder principle to develop environments that favor their operation.This limits the associated risks that such firms may have incurred needless to mention increased output per employees. The good will of the community too pays a fundamental role in enhancing operations of the firm.
A new era is thus coming into place where companies focus on engendering the affection and loyalty of the stakeholders through acceptance of the moral obligation owed to the community which may either be tangible or intangible.This is coupled with the consumer’s shift from materialistic association to that which bears a sense of meaning. Notable is the fact that the transcendence age involves people looking for more that monetary income but jobs that offer fulfill social needs as well as being able to offer psychological reward. This view is shared by the community in general too and it is no surprise when a community identifies more with product from a company that adopts more stakeholder approach that those keen on making of profits.The application of the theory by the firms of endearment certainly is in line by the propositions put forth by Al Gini when he asserts that researches have indicated that their exists widespread belief that the decline in success, productivity and business standards is a direct result of unethical behaviors on the side of the executives. (Al Gini, 1996) To further clarify this view Al Gini firm’s unethical behavior is usually accompanied by a similar approach on the part of the stakeholders, workers inclusive.
Such may include; absenteeism, time wastage, indifference and petty theft amongst others.His perception is conclusively embraced when he states that most of the American workers borrow their ethical approaches to work from the perceptions with which they view their employees. This then conjures to what is termed as the ‘witness’ of moral leadership. (Al Gini, 1996) what the stakeholders witness in terms of corporate leadership translates to their positive or negative contribution to the firm. In conclusion, it is worth noting that the world is moving towards socially responsible corporate entities and this can only begin from the ethical point of view that takes a humanistic approach in dealing with all the stakeholders.
Just like Al Gini describes in his paper, the changing world calls for more humanistic approach within the corporate role. Firms that have adopted such measures have been able to make more profit as compared to those that focus on stockholder approach. Firms that resist this new wave are bound to take a deep I their profits as customers, employees and their stakeholders gain more awareness and engage in counteractive activities.