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Stakeholders’ Wealth as a Business Ethical Issue Essay

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Updated: May 13th, 2021

Introduction

Conducting business encompasses the exchange of goods and services with the intention of making a profit. However, a stakeholder (an individual or a group of people who can affect or are affected by the organization’s purpose) in any business will manage the resources not to increase the proceeds of the business, but to elevate their socioeconomic standing. This idea has been viewed as one of the elements used to justify the existence of the business. The ethics surrounding an affirmation that the primary goal of a business is to maximize the wealth of the stakeholder is discussed in this paper. The main objective of the discussion is to ascertain whether it is ethically acceptable or unethical for any business to maximize the wealth of its stakeholders.

Legitimate Existence of a Business

The existence of any business is aimed at several factors, including raising the living standards and welfare of the entrepreneur (Miller & Breton‐Miller, 2014). However, the legitimacy of the existence is governed by the overall effects of the business on society and the ability to meet the set standards of operations. If a business poses a threat to consumers and society through exploitation, its existence could be compromised. Therefore, any business must address the welfare of its stakeholders. However, the interests addressed should not override the benefits of the business to society (Ayuso, Rodríguez, García-Castro, & Ariño, 2014).

Maximization of Stakeholder Wealth is Ethical

The stakeholder theory proposed by Harrison, Freeman, and de Abreu (2015) explains that the core objective of any business is to attend to the interests and wellbeing of its stakeholders. This statement means that all stakeholders should be treated with equality, decency, and generosity, which is an ethically acceptable concept. However, as a business satisfies the needs of its partisans, its operations should be in line with the set morals as defined by the statutes of the society. Any operations contrary to the norms render the actions of the business unethical.

Business practices that exploit the minority, pollute the environment, avoid paying taxes to the government, and commit other vices are unethical. The justification of business as ethical in maximizing the wealth of its stakeholders only holds if it considers a fair environment that brings equity and harmony to every person involved. Capital invested in the business should be accounted for, and part of the profits shared among stakeholders through dividends at the close of every financial year.

When accountability exists, the stakeholders are confident that their investment is in safe hands, which motivates them to invest more to expand the business and create more wealth. Business expansion creates employment, which benefits the community and leads to economic growth. This concept justifies the need to maximize their wealth through investments.

Unethical actions may not be illegal behavior per se. Determining the ethical soundness of a business or business decision should consider three main aspects: whether the deed discriminates an individual unfairly or interfere with the legal or moral rights, whether the business decisions bring about a conflict among stakeholders, and measures put in place to remedy potential disputes, and conformity to accepted ethical standards.

Conclusion

Scholars should well address the existence of various ethical theories concerning business activities. An additional aspect that should be clarified is how a business should operate and derive its principles from already existing statutes within the society. Nevertheless, a business should strive to support the needs of its stakeholders as well as the surrounding community for peaceful coexistence.

References

Ayuso, S., Rodríguez, M. A., García-Castro, R., & Ariño, M. A. (2014). Maximizing stakeholders’ interests: An empirical analysis of the stakeholder approach to corporate governance. Business & Society, 53(3), 414-439.

Harrison, J. S., Freeman, R. E., & de Abreu, M. C. S. (2015). Stakeholder theory as an ethical approach to effective management: Applying the theory to multiple contexts. Revista Brasileira de Gestão de Negócios, 17(55), 858.

Miller, D., & Breton‐Miller, L. (2014). Deconstructing socioemotional wealth. Entrepreneurship Theory and Practice, 38(4), 713-720.

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IvyPanda. (2021, May 13). Stakeholders’ Wealth as a Business Ethical Issue. Retrieved from https://ivypanda.com/essays/stakeholders-wealth-as-a-business-ethical-issue/

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1. IvyPanda. "Stakeholders’ Wealth as a Business Ethical Issue." May 13, 2021. https://ivypanda.com/essays/stakeholders-wealth-as-a-business-ethical-issue/.


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IvyPanda. 2021. "Stakeholders’ Wealth as a Business Ethical Issue." May 13, 2021. https://ivypanda.com/essays/stakeholders-wealth-as-a-business-ethical-issue/.

References

IvyPanda. (2021) 'Stakeholders’ Wealth as a Business Ethical Issue'. 13 May.

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