Over the years, the focus of starting a business was to earn maximal profits. The profits, in a substantial proportion, go to the firm’s shareholders. That has led to the current debate arguing for the shareholders or stakeholders. Business Roundtable, which is comprised of CEOs from various institutions, has over the years, campaigned for the value of shareholders in the company (Business Roundtable, 2019). They argued that businesses are for profit-making, which means increasing the customer’s value. The stakeholders in a corporation include the customers, suppliers, the community, employees, and the shareholders, while the shareholders own the company after the acquisition of shares with it. Businesses are involved in numerous activities, which require material supplies, a conducive community for operations, employees for the product or service provision, customers to purchase the products, and the shareholders to make essential decisions. Just as every person has a function in production, I believe it is critical for them all to get adequate compensation for their work. That is in comparison to when it was previously, and for 50 years argued that in to be socially responsible, the primary aim of a business is to make profits (Gelles & Yaffe-Bellany, 2019).
I agree with the argument by Business Roundtable on the essentiality of considering stakeholder’s value in businesses. The stakeholders are a very critical part of a business, and therefore, they should be invested in. Companies need to ensure substantial growth in the communities they operate on, and also the general society at large. When only the shareholders benefit from businesses, there will be the creation of an economic system that is unbalanced, because there is a vast social disparity between the wages and shareholder benefits. Notably, we can argue that without the stakeholders, there would be neither profits nor shareholder benefits. As Kline (2019) puts it, if the stakeholder’s value is not prioritized, and risks that may lead to the deduction of value mitigated, the shareholders risk getting profits.
When the value for stakeholders is created and managed accordingly, it does not lead to the reduction of profits for the shareholders. Still, instead, it adds to their long-term profitability (Kline, 2019). As a result, catering to the needs of the stakeholders benefits the whole community. When the employees have better wages and benefits, that reflects on their livelihood, which also reflects on the societal growth, if the suppliers are ethically treated, they will provide their services with minimal work stresses. Provision of high-quality products and reasonable prices will please the customers and increase purchases, hence, increased profits. Being responsible for the surrounding communities provides a conducive environment for business support. Therefore, t is vital to consider stakeholders when making decisions and allocating profits and other investments. Besides, as noted by Gelles & Yaffe-Bellany (2019), the total focus of businesses in shareholders has significantly contributed to the current economic inequalities. However, Gelles & Yaffe-Bellany (2019) continually argue that the set rules alone cannot alter the economic and social impacts of businesses. It is, therefore, up to the investors to view the companies in terms of the effect made socially, instead of the returns at a yearly quarter.
The debate on who is more valuable between a shareholder and stakeholder did not start with the statement by the CEOs. In 2003, Smith gave examples of companies which have shown the failure of the shareholder theory, which puts the manager in charge of maximizing the profits of the shareholders. He argues that the stakeholder’s theory was upheld in several occasions, which implies that the task of a manager is to balance the profit needs of the shareholders, but still consider the stakeholders’ interests even if they reduce the returns for shareholders (Smith, 2003). Therefore, both factors should be considered when evaluating the value to increase. Also, we can determine more the fact that it is possible to cater for the shareholders’ financial needs while providing to the stakeholders’ interests. As Carlson (2019) depicts, an organization can practise social responsibility, and increase its profits. Additively, Carlson (2019) argues that “Business firms cannot exist and profit in the long run without being socially responsible.” Therefore, integrating both the shareholder and stakeholder interests is essential. That is made possible by investing in the value of stakeholders for the long-term benefit of the shareholders.
I argue that for the benefit of both the shareholders and stakeholders, it is critical to invest in the stakeholder values. Investing in the stakeholders means focusing on the interests and ethical treatment of the customers, suppliers, employees, and the community at large while considering the benefits of the shareholders in the long run. Investing both time and resources in the stakeholders means that they operate under a conducive environment. People with less harmful stress in business are usually attributed to higher productivity. Focusing on the stakeholders means practising democratic leadership, where they can contribute to factors affecting them, or propose better ways to perform a task. Considering the opinions of stakeholders is essential because they are the ones on the ground, and have a better understanding of the performances. All the stakeholders, including the customers, know more about the satisfactory rate of the product, and their input can be beneficial. Considering their conditions, and ensuring they maximally produce, leads to an overall increase in profit for the organization. However, it is essential to know that the shareholder benefits might not necessarily apply in the short term. That is because, before the system is stable, there needs to be an investment in the stakeholders, which means a reduction in their short period returns. To sum it up, I believe that the statement of ideology by the Business Roundtable was relevant in maintaining economic stability and minimizing the social gap. I argue that more companies will refer more to the report now that is highlighted, comparing to the previous assimilations.