BUSINESS SOCIETY

1. EXPLAIN IN DETAIL THE STAKEHOLDER IN A BUSINESS

CONCEPT

OF

The term "stakeholder" is one most often encountered in corporate literature, although the term can be applied to government and social activist activities as well. A stakeholder can be broadly defined as any person or organization affected by an organization's activities. However, this term is usually applied to identify specific interest groups. Corporations are motivated to involve stakeholders in their decision making and to address societal challenges because todays stakeholders are increasingly aware of the importance and impact of corporate decisions upon society and environment. The stakeholders can reward or punish corporations, thus. Corporate social responsibility requires the identification of various interest groups, which may affect the functioning of a business organization and may also be affected by its functioning. Normally, various groups associated with a business organization are shareholders, workers, customers, creditors, suppliers, government and society in general. "Stakeholder" was first used at Stanford Research Institute in 1963 to apply to "those groups without whose support the organizations would cease to exist." Since that time, the word has taken on a broader meaning and is used to also include all people, communities and organizations affected by specific activities or initiatives of business, government or non-governmental Organizations The range of groups that may be considered stakeholders in an organization's activities is surprisingly wide-ranging. From a business perspective, stakeholders can include the company's shareholders, employees and customers. But the circle of affected interests can become large when government regulatory agencies are included, along with suppliers, community groups, and social or environmental activist groups--all of which may have an interest, or stake, in a business's success or failure. Business and other organizations tend to consider the perspectives of shareholders most often when they are about to embark upon a large project or organizational change. For example, if a large department store is considering moving from a wellestablished location to another some distance away, it is usually in the business' best interest to consider the needs and perspectives of interested parties such as the store's customer base in the community; the store's unionized workers; or community organizations, to name a few. Many strategies and approaches for considering and reacting to the interests of stakeholders have been developed within corporate circles. The Encyclopedia of Management categorizes these into three main perspectives, which tend to place more or less influence upon the interests of corporate ownership and shareholders. The separation perspective sees corporate management as having a responsibility to owners above all other stakeholders. The ethical perspective stresses social ASSIGNEMENT BUSINESS SOCIETY UNIVERSITY OF TECHNOLOGY, MAURITIUS Page 1 of 10

BUSINESS SOCIETY responsibility to non-owner stakeholders, and the integrated perspective seeks to link the long-term interests of owners to the best interests of the many non-owner stakeholders. There is a somewhat less commonly-used legal definition of stakeholder that differs from the others. In a legal context, a stakeholder is a non-interested party who is entrusted with the care of property or money until the rightful owner may be determined. In this definition, a stakeholder may be a court of law that holds property until litigation determines the owner. A stakeholder might also be a trustee holding money or property until a beneficiary comes of age. The following are examples of stakeholders and some further explanation about them:

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BUSINESS SOCIETY

SHAREHOLDERS
The first responsibility of the manager is to protect the interest of the shareholders. The interest of majority of shareholders and large minority of shareholders are usually well protected through either direct participation in the management actions or they have real power to intervene, if necessary. They should be informed about the functioning of the organization adequately and timely Therefore, management has a responsibility to provide proper safeguard to the money invested by shareholders.

WORKERS
Workers have direct interest in an organization because by working there they satisfy their needs. Thus its the management responsibility to protect the interest of workers in an organization.

CUSTOMERS
Management owns a primary obligation to have a fair deal to the customers; this can be done in the following ways: Customers should be charged a fair and reasonable price The supply of goods and services should be of uniform standard and of reasonable quality.

CREDITORS, SUPPLIERS AND OTHERS

They affect the organization in various ways. Therefore, the management is responsible to fulfill the obligation towards them. This can be done in the following ways: Management can create healthy and cooperative inter business relationship between different businesses. Management should provide accurate and relevant information to creditors and suppliers, Payments of price of materials, interest and borrowings. Other charges should be prompt.

GOVERNEMENT
It is very closely related to with the business system of the country. It provides various facilities for the development of business. Government no doubt, exercises ASSIGNEMENT BUSINESS SOCIETY UNIVERSITY OF TECHNOLOGY, MAURITIUS Page 3 of 10

BUSINESS SOCIETY control over business, but these controls are meant for overall development of business. Management can discharge its obligations to government by: Management should be a law abiding citizen. Management should pay tax and other dues fully, timely and honestly. It should not corrupt government workers and public servants and the democratic process. It should not buy political favors by any means.

SOCIETY
Organizations exist within a social system and get facilities from the system. Therefore, they owe obligations to the society as a whole. This can be done by: Management should maintain fair business policies and practices It should play a proper role in civic affairs It should provide and promote general amenities and help in creating better living conditions in general.

Stakeholder concept is an ethical theory of management in which the welfare of each stakeholder must be considered as an end. An important part of stakeholder concept is the Common and conflicting interests of stakeholders. The different stakeholder groups have different interests some in common with other stakeholders and some in conflict. Examples of common interests: Shareholders and employees have a common interest in the success of the organization. High profits which not only lead to high dividends but also job security. Suppliers have an interest in the growth and prosperity of the firm. Examples of conflicting interests: Wage rises might be at the expense of dividend. Managers have an interest in organizational growth but this might be at the expense of short term profits. Growth of the organization might be at the expense of the local community and the environment. The stakeholder concept suggests that the managers of a business should take into account their responsibilities to other groups - not just the shareholder group - when making decisions. The concept suggests that businesses can benefit significantly

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BUSINESS SOCIETY from cooperating with stakeholder groups, incorporating their needs in the decisionmaking process.

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BUSINESS SOCIETY

2. Differentiate between primary and secondary stakeholders in a business situation; give examples of each from the Mauritian businesses corporation.
Market also known as primary Stakeholders are usually internal stakeholders, are those that engage in economic transactions with the business. For example, stockholders, customers, suppliers, creditors, and employees. Non-Market also known as secondary Stakeholders are usually external stakeholders, are those who although they do not engage in direct economic exchange with the business are affected by or can affect its actions. For example the general public, communities, activist groups, business support groups and the media. A narrow mapping of a company's primary stakeholders might identify the following stakeholders: o o o o o Employees Shareholders Creditors Investors Customers

A broader mapping of a company's secondary stakeholders may also include: Suppliers Labor unions Government regulatory agencies Government legislative bodies Government tax-collecting agencies Industry trade groups Professional associations NGOs and other advocacy groups Prospective employees Prospective customers Local communities National communities Public at Large (Global Community) Competitors Schools Future generations Analysts and Media Alumni (Ex-employees) ASSIGNEMENT BUSINESS SOCIETY UNIVERSITY OF TECHNOLOGY, MAURITIUS Page 6 of 10

BUSINESS SOCIETY Research centers Each Person Stakeholders are an integral part of a project. They are the end-users or clients, the people from whom requirements will be drawn, the people who will influence the design and, ultimately, the people who will reap the benefits of your completed project. It is extremely important to involve stakeholders in all phases of your project for two reasons: Firstly, experience shows that their involvement in the project significantly increases your chances of success by building in a self-correcting feedback loop; secondly, involving them in your project builds confidence in your product and will greatly ease its acceptance in your target audience. There are different types of stakeholders and each type should be handled differently: Executive Executive stakeholders are those who pay the bills. Typically they are managers or directors who are involved with commercial objectives for the project. They should restrict themselves to commercial considerations and be actively discouraged from being involved in technical design, their experience and skills are vastly different to that of 'typical' end-users. End-User These are the one that are going to use the product. No one knows more about what the product is supposed to do when it hits their desks than they do. No one! You may think you know better but if you don't listen to them you're kidding yourself.
Expert

Sometimes you need input from experts in other fields. People like graphic designers, support, sales or sometime lawyers and accountants. In the Mauritian context we can take the example of a company such as MCB (Mauritius commercial bank) to analyse its primary and secondary stakeholders: Stockholders- as it is a public limited company the shares are sold on the stock exchange of Mauritius and everyone, the public as a whole have the right to buy the shares issued and become owners of the company they have the right to vote at the Annual General Meeting and they obtained dividend as a recompense for their investment, so, they have an interest in the way the business is ran and controlled as they expect profit in return.

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BUSINESS SOCIETY Customers - as their money is being kept in this bank, they expect the bank to make profit and to manage their resources in the most efficient way possible thats why they are interested in the affairs of the organization.

Suppliers- they are interested in the cash flow and liquidity of the business of the ability for the firm to pay them thats why they are interested in the financial or even any other aspect that might affect the position of the business.

Employees- they are the one who are the most interested in the position of the business as they are the first one who will suffer, through a redundancy if the business is negatively affected. Some of the secondary stakeholders, usually external are as followed: The Government- in Mauritius the government plays a very important role as it act actively in the financial position of organizations. It is also interested for a very important reason; this is the paying of taxes. Taxes represent the main source of revenue for the government so it feels concern towards the business. The government is willing to know how the business is performing as the economy depends on this money.

The community- the community that is the public is general is concerned with the ethical behaviour of the bank, if the latter would be willing to do something for the community. For example MCB is very concerned with the youth. The bank sponsors a lot of youngsters for football matches or even concerning the health programmes such for the fight against diabetes or cardiovascular diseases. In Mauritius not only MCB does this but also other influent organizations. It is becoming more and more common as it help these organizations to have a better reputation.

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BUSINESS SOCIETY

3. Is the stakeholder corporation a realistic model for business firm in Mauritius?

As we have analysed above we all agree that stakeholders are those that have an interest in the way an organization is own controlled and managed and that there are two types of stakeholders primary and secondary stakeholders. The primary one is directly related with the organization; they are internal pressures from existing commitments, managers, employees and their trade unions there is also the personal ethical and moral perspectives of senior managers. And the secondary stakeholders are those who are not directly related with the organization, they are External pressure from the market place, including competitors, customers, suppliers, shareholders, and pressure groups threatening a boycott, the government (through taxation and spending). The shareholder model requires that the needs and interests of all of those affected by management decisions: management itself, employees, suppliers, customers, communities, and environment take a back seat to the shareholders' needs and interests. Shareholder corporations traditionally have owed little to their employees beyond wages, to their suppliers beyond payment for supplies, to their customers beyond delivery of purchased goods, or to governments beyond taxes often relatively small. They owe little to the communities in which they operate or to the environment as a result of harmful byproducts, waste, depletion of resources, and pollution of earth, air, and water. That is beginning to change as some corporations move toward the stakeholder model. The stakeholder model requires that all of the parties affected by management decisions, in addition to the shareholders themselves, management, employees, customers, suppliers, communities in which the company operates and the environment from local to global, all must be considered as fairly and justly as possible. In Mauritius the stakeholder model is realistic as well as non realistic; as Mauritius is in a transition stage between the shareholder and the stakeholder model, leading to the emergence of related concepts like corporate social responsibility, good governance and ethical decision making and ethical management in the Mauritian context. If we consider primary stakeholders in business firms in Mauritius, we will conclude that the stakeholder model is to some extent realistic indeed. This is simply because primary stakeholders are well considered and well treated by the businesses as they are of great importance to their survival; but we cant exclude problems like that happening in the BPO sector recently where employees had to go on strike for better equality and justice. Never the less, all those having a personal interest in the activities of the business are now well represented and having a say in the business corporation. This is because there are laws that have been passed to protect these stakeholders and ensure that the business firms respect them. On the other hand, if we consider the secondary stakeholders, in the Mauritian context, it is not really realistic as they do not participate actively in the decision ASSIGNEMENT BUSINESS SOCIETY UNIVERSITY OF TECHNOLOGY, MAURITIUS Page 9 of 10

BUSINESS SOCIETY making process as they do not have the force of law. Thus, they play the minimum role that exists as they do not feel really concerned. Moreover, Mauritians have for a long time been passive concerning matters external to them but it seem to be changing if we consider recent national events. However, one important factor is that this behavior is changing; it is becoming, even though slowly, realistic. The associations such as ACIM- Association des Consommateurs de LIle Maurice, are using their power to protect consumers by becoming more interested in the way the business is ran, produce its product and distribute them. This is a clear example which shows in what way the stakeholder concept is becoming more realistic. Moreover if we consider the ISKCON v/S MAC DONALD affair in February 2011 we can conclude that business firms decisions are at a certain level regulated by stakeholders point of view though not legally supported. The stakeholder model as a key to sustainable development is increasingly understood and practiced. In the last few years it has been proven that it is possible to treat employees, customers, suppliers, communities, and natural environment well better than most companies are now doing, and at the same time both make a good profit and produce products which themselves help assure sustainable development. Examples of such products are high efficiency, low cost, low polluting, and alternative renewable energy sources.

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