Instead of managing the stakeholders, managers should focus on cooperation, transparency and assistance. This shall help find a middle ground for stakeholders and the community
Managers must learn how to carve out strategies that are good for both the firm as well as society.
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Who is a manager responsible to? Is profit the only objective? A manager certainly has a responsibility towards shareholders, who have entrusted their investments in the hands of the manager. However, a manager is a citizen too. As a citizen, a manager has a responsibility towards the broader society as well, which has entrusted its resources in the hands of the manager. At times the responsibility of a manager towards the shareholders and towards the broader society comes into conflict. For example, during recession, should a firm sustain heavy losses by keeping underemployed workers on the payroll? This is a tough question. How can managers deal with such a dilemma?
Business needs to make money to survive, and this means the voice of shareholders will always be significant. In competitive markets, the risk of sinking is always high. Hence, there exists a natural bias for managers to be sensitive to the profit-centric concerns of shareholders. In such a world, pursuing and creating profits appears to be the central responsibility of managers as citizens–“greed is good” as corporate raider Gordon Gekko from the 1987 movie Wall Street would say. Managers who make losses are not any good, as profits are necessary for not just the firm but also socio-economic growth. It is profits that generate room for employment and innovation. But profits through which means?
[This article has been published with permission from IIM Bangalore. www.iimb.ac.in Views expressed are personal.]