The success of every organization is dependent on the effectiveness with which it takes into consideration the various demands, interests, and wishes of the various stakeholders. This is seen as a credible move towards the achievement of social-economic accountability. According to Davis (2003, p. 206), organizations are charged with the responsibility of creating a balance between the conflicting demands of the stakeholders.
One of the major issues through which organizations need to address in the attainment of such a balance is how the organization releases information to all stakeholders. Additionally, the type of information released to stakeholders is vital for the realization of the company’s social-economic objectives. Davis (2003, p. 206), adds that the purpose of full disclosure of social information to all stakeholders is largely intended to avoid the costly social, economic, and environmental consequences.
It is imperative to state that there are problems notable with the company’s approach to information handling, especially with regards to disclosure. In this case, BHP failed to release valuable information to all its stakeholders, with dire consequences as a result. Such problems are magnified by the definition with which BHP perceived stakeholders. According to Davis (2003, p. 214), BHP acknowledged that it had the ethical responsibility of increasing the wealth of its stakeholders.
This implies that the company did not acknowledge its ethical responsibility in disclosing information to all stakeholders about its business practices, and the effects that those practices would accrue not only to the environment but also to the various stakeholders and the overall BHP’s business performance.
The company also seemed to have the incorrect definition of the term stakeholder. Davis (2003, p. 34) state that the definition of the full term stakeholder has expanded over time. Traditionally, Davis (2003, p. 208) states that stakeholders are taken to be those parties who only have a financial interest in an organization. This implies that only financiers, lenders, and the company’s management as well as creditors can be termed as stakeholders.
However, the definition and the full implication of this term has over time expanded to include other parties such as employees, the local communities, business partners, the government as well as any other individual, organization, or association directly or indirectly affected by the organization business practices. Davis (2003) adds that all these stakeholders have equal rights based on their interests, duties as well as specific rights.
Davis (2003, p. 208), asserts that BHP only acknowledged its legal stakeholders as only those parties who hold financial interests. In this case, BHP ignored the rights, the interest as well as the duties of other stakeholders such as the local communities within the OK Tedi area. Additionally, as Davis (2003, p. 206), asserts, BHP had the ethical and legal obligation to consider the right of all stakeholders to have full access to information regarding its business information, and the consequences of those business practices.
In its operation, BHP faced intense pressure from the society within which it operated due to its failure to disclose information regarding its operations. Such failures led to severe damages both to the company reputation, the business prospects, and the relationship between the company, its subsidiary, and the locals.
From the case study, there are various advantages that can be accrued from full disclosure of the conditions and events at Ok Tedi to all its stakeholders (Davis, 2003, p. 207). According to Frost and Wilmshurst (1999) by choosing to operate in a given area, and the organization enters into a social contract with the local communities. Uh, the social contract is attained through legislative procedures, undertaken by few public representatives in parliament. As such, an organization has a legal as well as ethical liability to release information concerning its business practices to the public. This has several outcomes.
By providing full disclosure of information, the company gains public legitimacy in the face of the public. In such a case, the company not only gains the trust of local communities but hoists itself to an advantageous negotiation position. This further allows the organization to avoid confrontation with the locals, business partners, the government as well as all other stakeholders. As such, by disclosing the social-economic information to all its stakeholders, BHP would have gained social legitimacy and thus avoided the confrontations with the Ok Tedi communities, the government, Ok Tedi Mining Limited, and other stakeholders. This would have established the company’s credibility.
Gibson (2000) argues that the effects of a company’s business practices fall unequally on various stakeholders. In such cases, the issues of social justice and equity arise. To address such issues, social accounting becomes vital. Organizations have the mandate of not only releasing social accounting information but in the process of conducting a thorough social accounting factor in alternative social values that govern the utilization of resources by local communities.
By disclosing information about its business practices, an organization engineers a process of negotiation with local communities on how to effectively utilize resources for mutual benefits. Gibson (2000) adds that when organizations operate outside the capitalist west, such disclosure becomes seven more important for the inclusion of social values from the local communities that govern the management of resources. Through the process of disclosing social accounting information, a company negotiates with the locals regarding the utilization of resources. This is virtually important in noncapitalist communities, where resources are not only mostly managed on a communal basis but constitute the social-economic setup.
In doing so, companies utilize local resources without disrupting the social-economic order of the local communities. This has other accrued advantages, such as the avoidance of conflict with social communities. Additionally, the management of local resources is done in such a way that there are minimal environmental effects. As such, by committing to releasing social information BHP would have engineered the process of negotiation with the Ok Tedi communities regarding the management of resources.
Thus, social-economic and environmental effects would have been largely avoided. Additionally, by releasing social amounting information to the Ok Tedi communities, BHP would have enabled the local communities to input its social values on the management of resources. As such the local communities would have negotiated the protection of its traditional means of earning a livelihood. Davis (2003, p. 206) asserts that this would have helped BHP in achieving a balance between the conflicting interest of all stakeholders.
The United Nations (2004, para. 5) acknowledge the roles that large corporations play in the growth and development of economics in the region they operate in. h
However, the UN notes that these corporations can have negative effects on local economies. As such, there is a need to mitigate these effects. The UN suggests transparency about the effects of the corporations’ business activities does help mitigate such effects as the most effective way to achieve sustainable growth. By transparency, the UN refers to the disclosure of social accounting information not only to the local authorities, but also to other business partners, financiers, and the local communities. As such, With regards to United Nations (2004, para. 6) assertions, BHP ought to have been transparent enough to avoid the negative social, economic, and environmental effects of its business practices, and thus promote sustainable development in the Ok Tedi area.
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