Tuesday, January 19, 2010

Companies operate for stakeholder’s benefits, but isn’t it shareholders?

Since quite some time I have been thinking about writing this post, and when I found the article on Davos 2010, I realized this was the moment. When I started my professional life, people used to tell me companies had four key stakeholders, shareholders, employees, clients and suppliers. Today, frankly, most CEO’s only focus on the first, the shareholder, and receive insanely large bonuses while leaving employees out of a job, pushing suppliers to bankruptcy and barely looking at customer satisfaction. How have we gotten there?

As long as the world was bifocal (liberalism and communism), the people oriented values were present in our cultures. People were respected, their well being was part of what enterprises and businesses were looking for. Since the collapse of the communism, the egoism has taken over. I think about myself and don’t care about others. That’s the ultra-liberalism that is currently being pushed by businesses. Companies have completely lost their social responsibilities. Oh, don’t understand me well, we have never spoken as much about social and environmental responsibilities, but it’s all related to avoiding that the supplier uses child or slave labor. The basic thinking around the employee for example has completely been lost.

I already hear you. The writer of this entry is a dangerous communist or socialist. Actually that can’t be further of the truth, but I strongly believe in a social liberalism where a company takes its responsibilities towards all four stakeholders.

The current trend results in employees no longer finding any bonds with their company, ready to jump from one to another as soon as a good proposal comes along. Loyalty is quickly disappearing, and with it the knowledge that makes the company unique. While in the short term, the large profits obtained by firing employees and squeezing suppliers, will benefit the shareholder, in the long run, many companies will collapse as they have lost their essence.

Sure a shareholder should be rewarded for the money he/she invests in the enterprise, the employee should be rewarded for his/her time, creativity, initiatives, energy and enthusiasm he devotes to the company, and the supplier should be allowed to make a reasonable profit.

The CEO’s that have driven this future catastrophe will no longer be there when the disaster strokes. In the mean time they will have made hundreds of million on the back of employees and suppliers. What a strange world we are in, where people are no longer responsible for their acts.