Powerful Stakeholder Policy to Prevent Industrial Environmental Impact
Friedman's stakeholder theory emphasizes the critical function of stakeholders in determining company's goals and responsibilities. Responsibility in a corporation is stated as individual role of each employee and manager to act and report to the upper level and finally to the decision-making boards.
As the top-level management and decision makers, corporate directors address their responsibility to the stakeholders, literally as the "owners" of the company, to whom all the running processes in the company, goal settings, and money spent should be reported. To follow the track, a manager is tied to what his/her employers have defined in the tasks list. Whatever skills and creativity managers possess must be utilized within the range of responsibility they have to the stakeholders, as stakeholders are the top decision-making board.
Company directors act based on the interest of shareholders as stakeholders. Scholl reads them as the "agents of the shareholders"; when there is any discussion about ethical concern in the business operation, it should refer to the concern on shareholders' needs. The whole air to breath in the company is created by the shareholders funds, so that the employees need to show their maximum performance to make as much profit as possible. Companies will gain profit every time, which should be for the shareholders' benefits.
They need to comprehend stakeholders' demands to any definition of profit they define. Since for-profit organization finds financial satisfaction as the ultimate goal, most likely they will make the most of the operational actions to gain the success for this objective.
For long time capitalism is the measurement of business' success. Friedman thought that business is just a matter of management and strategy to gain profits. When it has to deal with the places where the business operates in, it is quite difficult to enforce them into responsibilities to the society. It is very common that business only concentrate on how to maximize resources and working performance to gain inclining annual profit, as the financial success is the only measurement to value a company. To fulfill the goals, business will make the most of the capitals and strategy, and stay in the clean competition to ensure public acceptance to the products. Environment issues are rare to be found in the organization's description of "responsibility consequences of contribution of the organization's member" (Demosthenous, 2000).
Demosthenous explains, Friedman associates corporation as "private property"; they will see them on their own shoes. What they define as social / environmental responsibility is that they are operating within the lines, in the existing fair trade rules, "open and free competition."
In "Beyond Grey Pinstripes," Edward Freeman emphasizes that companies can gain "competitive advantages" by putting the serious concern about environment, as one of their social responsibilities. They need to take society's future into account. It has been started anyway through several major studies as global warming, or species extinction, although usually scientists or society's pioneer starts it.
Freeman introduced environment as one of measuring factor or logical approach in corporation's life in his book "Environmentalism and The New Logic of Business." He said that environmental responsibility is a present factor in capitalism, as a part of "values and ethics" - the heart of capitalism itself. A business is collaboration and cycle of management, employee, shareholders, vendor, and customers in a certain location. Each part contributes a certain value, also automatically carries the effect on the surrounding materials and dimension. Freeman emphasizes that cooperation means, "putting relationship together to create value." He explains the need of stakeholders of value creation.
Price says that Freeman introduced the new meaning of stakeholders in the "big five." There are five elements as stakeholders: shareholders, employees, suppliers and the communities where the firm operates." The stakeholders are responsible to the output of the business to fulfill the main business goal (profit and growth), as well as satisfying the each element's needs. A corporation operates in a shared circumstances, that they need to maintain "balances among the big five interests" during the whole company activities.
Scholl reviews business ethics-based stakeholder theory as a combination of several point-of-views to apply different approach to each case to fulfill several different aims of the organization. Each stakeholder in the business has a basic value and power to take into account despite the literal power or legal privileges in the organization. With this power, it is necessary for the stakeholders to explore and set "certain norms for managerial behavior," to apply during their (the managers') ride in achieving company's goals - including financial goals - into a set of policies. It will give clear picture, legally stated description, about what to do and what not to do to put into practice. It will still put the main goal of profit tracking to be the major concentration of the managerial practices, but it will also give an apparent guidance on how the ship should be operated; to keep it sail in a straight line.
It is necessary to see the positions of stakeholders in these following cases. There are too many things to put in line by the deforestation of Amazon forest. At least, there are three major stakeholders confronting needs on this land: farmers, loggers, and environmentalists. The three of them see the rainforest in three different perspectives accommodating their own needs.
Amazon covered about 300 million hectares of tropical forest, containing 50-90% biodiversity of the world, around 300 tree species every hectare. The timber industry finds heaven in Amazon; since there is permission to expand the industry, cutting, log transporting, and other expansion or product diversification such as plywood and sawn wood established successfully. Camill, citing Grainger (1993), says that forestry has contributed hundreds of people and provided them jobs in the sawmill, logging firm, and vaneer plant.
Is it merely the social function of the theory applied here? In fact, the deforestation has been clearing up one to three million hectares annually; therefore around 11 to 16 species are destroyed every day, first by clearing (farmers' need) and next by logging (logging firm need).
Selective cutting - seems like an appropriate solution at first - has been applied in a wrong approach. Selection is made to take commercial species only, which means invading the forest even further to find the particular trees and cut them down and risking the surrounding vegetation. Camill cited that every cut damages 27 individuals around the tree. Logging also increases the risk of fire damage.
It does not mean that the companies do not carry out the benefit-cost analysis before establishing their plants there. Most likely they had employed some assessment in forest composition, cost, and risks analysis, but the point is from whose point-of-view?
The deforestation itself is a result of some possible causes. Brazilian government at first found Amazon as abundant resources to accommodate the people. As the need to build infrastructures increased, peasant relocations into the forest looked like a winning solution.
As Scholl says in his paper, the stakeholder theory not only applicable to "private-sector," but also to public-sector decision making process. Many environmental problems are because the loose policies in the government. While government is urged to provide jobs for the people as soon as possible and maximize the value of a land/water area to the economic growth, environmental issue is often left behind in the discussion.
De Leon and White (1997) shows that Philippines' government policies encouraged aquaculture expansion in the 60's and 70's; resulting in the clearance of mangrove forest from 450000 hectares in 1920 to 150000 hectares in the late 1980. The government needs to be in one of the stakeholders as they set the rules and defines what are necessary to provide to the community. However, their stakeholder position is often treated in irresponsible approach.
The national policy against destroying the forest failed to bar the rapid growth of aquaculture companies, owners of more than 95000 hectares of commercial fishpond around the country. Around 63000 hectares of the area were under 25-year fishpond lease for two dollars per year per hectare. It was an awful bargain while a study found that the environmental cost should be around $550-1500 per hectare annually.
If the balanced stakeholder theory could be applied here, the policy will consider environmental analysis as a critical point in the decision making process. Therefore it will be able to decide there is any operational cost - an appropriate amount of money - to supply to environmental assessment just as what is spent on production cost. It will "violate" the main goal of for-profit company whatsoever - making more profit than last year - but it gives a gain in the community respect, as they succeed to carry out the social responsibility to the environment. The company in fact does not spend the money to lose it but to invest it to ensure the achievement of the future goals, maintaining resources. Especially for natural resource-based businesses, it is not necessary to think twice. When efficiency comes into…