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Summary of Stakeholder Management Theory - Management Essay Example

5 pages
1347 words
Wesleyan University
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The stakeholder theory is substantiated evidence compromising of organizational management and uncompromised practices that addresses accepted codes of behavior and ethical values of an organization or other corporation (Mok et al., 2015). According to the stakeholder theory, businesses are not only simply run to meet the interests of the internal stakeholders such as the shareholders, employees, and management but also a whole lot of stakeholders. The external stakeholders comprise of the outside interested parties, for instance, the government, creditors, suppliers, community and the customers.

The stakeholder theory recognizes the various groups of stakeholders and creates a model that is geared towards satisfying all stakeholders. The stakeholder theory, further, recognizes the responsibilities that ethical organizations have towards the various stakeholders. Stakeholder management theory is interrelated with ethical business practices which ensure that no controversial business issues arise in the working environment. Indeed, ethics cuts out clear difference between acceptable and unacceptable behaviors. This essay is aimed at exploring the impacts of relocating a garment manufacturing company that specializes in jeans to an offshore country on stakeholders.

Impact on employees/unions

The 980 employees working for this manufacturing company will suffer dire consequences when the planned relocation takes effect. To start with, a substantial number of employees will lose their jobs. The garment manufacturer will not be able to shift with all its employees. It will only be practical to carry a few hands-on employees to offer experience and support in the new location. The labor laws in the new location may not favor one hundred percent employees migrating with the business. The unions will also suffer a great set back on memberships and monthly deduction fees that were remitted to their unions (Korschun, 2015). The union strength which is dictated by the membership will also be weakened as some employees will retire from the company as the transferred employees might be forced to join other unions in the new locations. In line with business ethics, it will be expected that the garment manufacturing company communicates and prepare the employees for termination of service in lieu.

The employees who will be working with a company in the new location will most likely not be able to receive their dues on time. The company will have to re-establish itself as the company will be working to reach the break-even point. As a result, the company might have to delay in remitting employees salaries. Also, it will be difficult for the company to provide conducive working and welfare environment for its employees. The diversities in culture and values that will be witnessed in the new environment will take time to be consolidated and take shape.

The employees on permanent and pensionable contract terms will have been fully compensated in the event the company terminates their contract. By so doing, the garment manufacturing company will be operating by the guidelines of business ethics. In the new business location, most of the employees will not have job security to start with. The job security of the employees will only be achieved in the long run when the business realizes profitability.

The new employees who will be absorbed in the new business will have to undergo on-job training to facilitate the acquisition of basic knowledge and skills related to manufacturing of jeans. They will be placed on the job on probation until the employer is satisfied to absorb them on a permanent basis. Such probation treatment creates unfairness on job placements. Consequently, it may take the company time to recognize and honor workers right to the business ethics.

Impacts of relocation on community

The garments manufacturing company intends to leave the United States for an offshore market will impact negatively on the US community. First, business ethics requires businesses to give back to the community by initiating, implementing and supporting community projects through the corporate social responsibilities. The projects that company directly supports financially, for instance, the building of hospitals, schools and roads will stall in the event the company relocates. Consequently, the community will have to seek alternative financial resources to complete the projects and keep them running. The laid-off employees will go back to the US community. This will create another unethical burden which shall be a burden to the society.

Secondly, when the company relocates to another country, the US community who are the main consumers of the garments manufactured by the company will suffer dearly. The consumers of the garments in the US will be forced to import the garments at a higher price if they must continue using the products from the company. The consumers in the US will have their right to ease-to-use product long-lived. They will have to wait longer for the product to be delivered. In case of a complaint on the quality of the products, the local community in the US will not have their product-related issues addressed instantly. Delaying in responding to customer related issues is unethical.

On the other hand, the community to which the garment manufacturing company will relocate to stands to reap maximum benefits. The first and the leading beneficiaries will be the local community around. They will be able to access job opportunities as casuals and permanent employees. Other investors, especially in the banking, insurance, and transport, will put up their business in the locality. The government will be forced to allocate a big development budget in the provision of roads, electricity, and security in the area where the industry will be located. All the developments are to the maximum benefits of the community members. All these development efforts are in line with business ethics (Mason & Simmons, 2014).

Impacts of relocation on Stockholders

When the garment manufacturing company relocates, it is estimated that the cost of production will reduce by a third on the cost of production per unit. Cumulatively, this will translate to $10,000,000 savings from production costs. This will offer the shareholders maximum returns on capital invested. In the long run, the shareholders will get high dividends returns. The amount saved can be plowed back into the business to increase the equity, open new subsidiaries, motivate the employees and carry out product promotion aimed at promoting the image of the company globally.

Change of name Made in the USA will require the stockholders to rebrand the garment that reflects the new location and maintain the huge following. By so doing, the company will attract more following and enjoy the prestige that comes with it. Eventually, the company will enjoy the ever-rising profitability.

Recommendations to the employer

The proprietor of the garment manufacturing company should see the new location as an opportunity to save tens of millions valued in dollars while growing the business empire to new locations. It is an opportunity worth embraces since higher profitability is realized more with extended market share. Even in the new location, the garment manufacturer will need to maintain the US market as her products are adored in the US. In fact, her products are considered a cult in the home country of the US.

In the process of profit optimization, ethical business practices must be upheld with utmost at all times. In this 21st century, consumers have become more and more aware of their rights and ethics. Any infringement will create conflicts that could taint the image of the business organization. It is, therefore, prudent to uphold business ethics and stakeholder management theory provisions in the day to day running of the businesses. Ethical organizations are those that put into their considerations the responsibilities they have towards all its stakeholders both internal and external to avoid long-term negative rewards (Trevino et al., 2014).


Mok, K. Y., Shen, G. Q., & Yang, J. (2015). Stakeholder management studies in mega construction projects: A review and future directions. International Journal of Project Management, 33(2), 446-457.

Korschun, D. (2015). Boundary-spanning employees and relationships with external stakeholders: A social identity approach. Academy of Management Review, 40(4), 611-629.

Mason, C., & Simmons, J. (2014). Embedding corporate social responsibility in corporate governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), 77-86.

Trevino, L. K., den Nieuwenboer, N. A., & Kish-Gephart, J. J. (2014). (Un) ethical behavior in organizations. Annual Review of Psychology, 65, 635-660.

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