Stakeholders, Essay Example

Abstract

Stakes and stakeholder awareness encompasses a broad relationship between the organization and those that are interested in the success of that organization.  The ability to manage and provide successful key performance indicators and objectives to the stakeholders is valued differently in different organizations.  The progression of stakeholder management allows for the organization to increase their awareness of the needs and desires of the stakeholders and allows for the appeasement of these requirements.  The governance of organizations relies upon accountability, enforcement and auditing capabilities.  Each level of the organization is responsible for the implementation of governance.

Explain the concepts of stake and stakeholder from your perspective as an individual. What kinds of stakes and stakeholders do you have?

With stakes and stakeholders the key concept revolves around the interest in a particular idea or entity.  The stake comes in many forms such as a vested interest in an outcome or key deliverables for a project.  The stake itself is the individual interest in the process or outcome.  The stakeholder is the person that holds that interest.  I have stakeholders that have permanent stakes in my life as well as recurring or temporary stakes.  My family has a permanent stake in my life as they have an interest in me becoming successful.  Their return on my success is a sense of accomplishment and happiness.  On a micro-level, my friends and colleagues have recurring or temporary stakes and roles as stakeholders.  When we go out to lunch, the group of people all has interests in what to eat and where to go.  Each has an interest or stake in the process of lunch.  The interest in the process or objective creates a responsibility as a stakeholder.

Explain in your own words the differences between the production, managerial, and stakeholder views of the firm.

The production of the firm has a clear and concise view of the business process.  The production must take the output of the suppliers, process the output to create the firms good and make sure it gets to the customers.  The production’s view is linear with three major functional areas including the supplier, the firm and ultimately the customer.

The managerial view is a bit more complex.  The first reason is that the linear view of production now flows both ways from the supplier?firm?customers as well as in reverse from the customer?firm?supplier due to the necessary feedback from the key points of contact that occurs during the business process.  There are also outside factors that influence the managerial process.  This includes input from the ownership of the organization as well as the employees throughout the organization.

The stakeholder view is the most complex and includes the production and managerial views but also every outside factor such as the political, social, technological and economic environments.  These outside factors influence the stake or interest the stakeholder has within the organization.  The stakeholder view is critical because they encompass many different individuals with differing perspectives influenced a multitude of different external and internal factors.  Management of the stakeholders’ interest is vital to business operations/success.

How can a firm transition from Level 1 to Level 3 of stakeholder management capability (SMC)?

The first level is identification of the stakeholders and the third level is the actual engagement of the stakeholders in key business transactions.  In order to transition from level 1 to level 3 there are key tasks that must be accomplished.  The movement is a progression that builds on the previous level.  In level 1, the organization is building the relationship with the stakeholders and takes assessment of their interests, needs and expectations.  In level 2 there is a process to build on the stakeholder assessment.  The development and implementation of the approach to take the information garnered from the stakeholders and utilize it in the business processes takes place.  The major task is to plan how to integrate the ideas and actions of the stakeholders into the business process.  Level 3, the highest level of stakeholder engagement, takes the planning phase and puts action toward the plan.  Full engagement of the stakeholders including communication and actions based upon the assessments and processes of the previous levels takes place.

Is the stakeholder corporation a realistic model for business firms? Will stakeholder corporations become more prevalent in the 21st century? Why or why not?

A stakeholder corporation is a good theory that takes into account all aspects of the organization and all opinions on how and where to direct the organization.  The major downfall is the decentralized command of the organization based on the varying opinions of the stakeholders.  There is also the prioritization of who the most important stakeholder is and how to determine when the individual has the most important issue or not.  While each stakeholder is dependent upon the other for success there would need to be a centralized command and control of the organization to make key business decisions.

Explain the evolution of corporate governance.  What problems developed?  What are the current trends?

Corporate governance is based on legitimacy.  Legitimacy provides the level of importance to the differing levels of the organization.  The CEO of the organization has a higher level of legitimacy than the line work.  This does not mean that one is more important than the other in the overall process of the organization, both could be vital, but the CEO has more legitimate power to manage organizational governance.  The evolution of governance is moving from a localized interaction with organizations to a global stake in international organizations.  As this move takes place, shareholders want to have more governance processes that they are familiar with and are standardized globally.  With this move there is a separation of ownership and control of the organization.  The owners, shareholders, of the organization are no longer controlling the actions of the organization and need a system of governance to help facilitate their interests.  The trend to move to a ownership (shareholders), to board of directors and ultimately the management provided a separation that left the direction of the company in the hands of those closest to the organization.

What are the major criticisms of boards of directors?  Which single criticism do you find the most important? Why?

The board of directors serves a critical component of organizational governance.  The purpose of the board of directors is to oversee the management on behalf of the shareholders.  This key capability and function is only effective if the board of directors carry out their responsibilities and ensure their due diligence to the shareholders.  The major breakdown comes when the board of directors does not follow their due diligence.  To create a check and balance system, auditors are then brought in to ensure compliance with governance.  This ability to uphold the core responsibilities of the board of directors is the most critical to ensure the governance policy works.  Without the ability for the board of directors to represent and uphold the interests of the shareholders the organization is not working in the interests of the shareholders.

Outline the major suggestions that have been set forth for improving corporate governance.  In your opinion, which suggestions are the most important? Why?

The first and most broadly known is the Sarbanes-Oxley Action which purpose is to protect investors by providing better financial reporting and auditing of financial reports.  There is also an increased level of accountability that is included for SOX compliance.  There are also areas within the board of directors that provide awareness to potential issues and mitigation steps to help remedy those issues.  These red flags and mitigation steps will help ensure an improved process and governance impact.  With the improved visibility and awareness of risk factors there are also steps to increase the board diversity and utilization of board members.  The board members are aligned from internal and external areas and then they are used to focus as an audit committee to ensure and improve the adequacy of internal financial reporting and controls.

The single most important improvement for governance is the increase in accountability throughout the organization.  The reason for this importance is that mere fact that the members of the organization will take the appropriate actions if they have intrinsic and undeniable accountability to the shareholders, the organization and themselves.

In what ways have companies taken the initiative in becoming more responsive to owners/stakeholders?  Where would you like to see more improvement?

One area includes the movement to increase shareholder democracy.  This is in response to the lack or perception of the lack of power the shareholders, owners, felt within the organization.  This action to increase the opportunity for influence within the organization spread through the election of board members by majority vote, classification of boards, and the ability for proxy access for voting.  I would like to see more improvement for the involvement of the management and owners of the organization.  This includes spanning the gap between the owners’ strategic vision with the operational activities of management.  By raising the accountability of owners, the board of directors and management the ability to meet the requirements of each level within the hierarchy becomes a possibility.

References

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons

Dobson, M. (2004). The triple constraints in project management. Vienna, VA: ManagementConcepts.

Project Management Institute, P. M. (2008). A guide to the project management body of knowledge. (4th ed.). Newtown Square: Project Management Inst.