Navigating Corporate Governance- Stakeholder vs. Stockholder Approach

Navigating Corporate Governance- Stakeholder vs. Stockholder Approach

One of the organizations that I worked at was the Michigan Psychological Care. This organization is managed by the stakeholder approach, which means that the organization considers the interests of various stakeholders, including employees, customers, suppliers, and the community, in addition to the shareholders. This approach aims to create value for all parties involved rather than solely prioritizing the financial returns for shareholders (Freeman, 2010) (Hill, Schilling & Jones, 2017). I completely agree with the stakeholder approach, considering that this organization is in the healthcare industry for several reasons.

One of the key aspects of the stakeholder approach is balancing interests. This seeks to balance the often-competing interests of various stakeholders (Hadi, 2017). This means that decisions and actions are taken with the aim of creating value for multiple groups rather than focusing solely on the interests of shareholders. Secondly, there is long-term sustainability because prioritizing the interests of all stakeholders often leads to more sustainable business practices. This is because the organization is not solely focused on short-term financial gains but on building lasting relationships with employees, customers, and the community. To build such a relationship, trust has to be maintained; the only way a healthcare institution can do that is by taking good care of their patients. The third reason is the enhanced reputation, whereby by considering the impact of its actions on a broader set of stakeholders, the organization can build a positive reputation. This can be crucial in attracting and retaining both customers and talented employees.

Risk reduction is my fourth argument in favour of the stakeholder method. Taking into account the concerns and interests of various stakeholders can help identify and address potential risks early on (Mojtahedi & Oo, 2017). This proactive approach can contribute to better risk management and crisis avoidance. Nevertheless, while the stakeholder approach is generally associated with positive ethical and social outcomes, its effectiveness can depend on the specific context, industry, and the commitment of leadership to implement and sustain this approach. Further, organizations need to carefully balance the diverse interests of stakeholders to ensure a harmonious and sustainable business operation.

References

Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.

Hill, C. W., Schilling, M. A., & Jones, G. R. (2017). Strategic management: An integrated approach: Theory & cases. Cengage Learning.

Hadi, N. U. (2017). Balancing Conflicting Interests between Organisation and Uncontrollable Actors: The Stakeholder Perspective. Journal of Managerial Science, 11(3), 15-24.

Mojtahedi, M., & Oo, B. L. (2017). Critical attributes for proactive engagement of stakeholders in disaster risk management. International Journal of Disaster Risk Reduction, 21, 35-43

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Unit 5 DB: Stakeholder or StockholderUnit 5 DB: Stakeholder or Stockholder
After completing this week’s readings, analyze a current or past organization where you have worked. Is your current organization managed by the stakeholder or stockholder approach?

Navigating Corporate Governance- Stakeholder vs. Stockholder Approach

Do you agree/disagree with the approach that has been utilized? If you agree with the approach, please state why. If you disagree, what changes would you make? Be specific with your analysis.