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It is a traditional belief that business and ethics do not go together. They have always been considered as an oxymoron in the study of business as different stakeholders’ desire frequently collide and conflict. However, standing out from this traditional view, R. Edward Freeman’s Stakeholder Theory differentiates itself by reinforcing the coexistence of business and ethics and suggesting that ‘finding where all stakeholders’ interests go together is what makes capitalism tick’. (Freeman, Edward)
The detrimental collapse of the eight-story Rana Plaza factory in Bangladesh last year brought business ethics back into the spotlight. With at least 400 died and more than 1000 injured, this catastrophe soon became a strong argument to support the traditional view. (Disaster at Rana Plaza) The government of Bangladesh was blamed for the rudimental laws on national buildings and many foreign garment firms were condemned for not providing workers with elementary safety indemnification. Their neglect on the wellbeing of the labor thoroughly demonstrates the unethical side of modern business. Low wages, no health insurance for workers, cheap but environmental-irresponsible raw materials and abominable working conditions—all these factors, that aggressively reduce the cost and in-turn bring profit to the firms, are based on unethically lowering the life quality of the labor. Hence, this tragedy deepens people’s belief on ‘business and ethics cannot go together’.
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However, a new perspective of business thinking, led by Freeman’s Stakeholder Theory, is created when the effects of this tragedy on all stakeholders are examined. Following Freeman’s idea, this business is pre-determined to fail due to its imbalanced consideration of shareholders’ profits and stakeholders’ needs. Albeit profit is maximized, demand of employees, suppliers, customers, governments and the community are not satisfied. Quoting Freeman, ‘if you just focus on financiers, you miss what makes capitalism tick.’(Freeman, Edward) The situation would completely alter if the garment firms aimed to find a common interest of stakeholders. Employees could have had better working conditions so this accident would have been prevented. More environmental-friendly raw materials could have been used so suppliers could have supplied more without problems considering the environmental responsibility and the community could have been more satisfied. Consumers could have paid more, but knowing the product has a better quality with less exploitation of the labor. Financiers could have invested more to ensure the need of stakeholders, but knowing more revenue is earned from the increasing sells of their products with better quality. When all stakeholders’ needs are satisfied, business ethics will be fulfilled in the process.
Freeman’s Stakeholder Theory, in my opinion, is optimistic and difficult to achieve, but possible and feasible. Concluding with another Freeman’s quote, ‘If you look to see how interests of stakeholders go in the same direction, you might not find it, but I’m certain you won’t find it if you don’t look.’ (Freeman, Edward)
Works Cited:
Freeman, Edward. “Stakeholder Theory.” YouTube. YouTube, n.d. Web. 11 Sept. 2014.
“Disaster at Rana Plaza.” The Economist. The Economist Newspaper, 04 May 2013. Web. 11 Sept. 2014.