There is in fact a relationship between stakeholders and shareholders. In recent history it seems that the best interests of shareholders and that of employees or stakeholders are often opposed. To the contrary, those interests are not mutually exclusive and do share significant common interests.
Speak of investing and the first thought that occurs to most people is the stock market, bonds or perhaps real estate. The simple fact however is that one’s job or career is the most significant investment anyone will ever make. The largest commitment of time, energy and dedication any person ever makes is their job or career.
Pick up any business publication and you will see the latest figures on lay-offs,downsizing, restructuring, earnings reports and so forth, all of which is intended for the consumption of and the benefit for the shareholders, the owners.
Are the best interests of stakeholders really opposed to the best interests of shareholders? Think of any company or enterprise; are stakeholders treated as a commodity? To be bought and sold like a sack of potatoes? Would they lay anyone off in a heartbeat for a short-term bump in the price of the stock? Or are people in that firm treated as a valued member of a team who matters? It is truly ironic that for devoting time, energy, education and skills to a company, presumably for the benefit of the stockholders, most stakeholders have little say so into how that company is managed. Their only option is to vote with their feet. Any company’s success or failure is ultimately determined by its people and management. Good management practices make for good and motivated employees. Well motivated and driven stakeholders will result in stellar performance for the shareholders.
Any employer expects a return on investment in their people for the benefit of the stockholders; likewise it is in a stakeholder’s best interest to evaluate an employer’s management practices so that they are not stifled in their career. Bad management not only hurts stakeholder but in the long run hurts the stockholders as well.
It is a sad commentary that many managers are as myopic as they are mercenary. Many are in management positions simply because they have been there for years. Tenure is a poor substitute for expertise or vision. Others are there because it is politically correct or because they are somehow connected to managers higher up. Quite often the vision of senior management is undermined by middle managers that are more concerned with protecting their turf than the welfare of their people and the ultimate benefit of the stockholders. At the same time, there are management teams that are positively brilliant; many people should be so lucky as to work for these companies.
More than any other individual it is the Chief Executive Officer’s vision, skill and drive that determines the eventual success or failure of any organization. Does a company or organization empower its people? Or is its management team a victim of conventional thinking? Are innovation and creativity balanced with economic reality? The fundamental tenant of business is taking risk commensurate with potential reward but there is no reward without taking risk.
It is equally important to innovate one’s business as well as its products. Innovation and creativity are always worthwhile but in a business context is an academic exercise without learning how to read competitors actions and interpreting what is seen and heard.
In the final analysis, the individual stakeholder is responsible for their own success. People need to take a common sense and frankly a mercenary approach and look at management practices; not only from the stockholders perspective but from the stakeholders as well. This will help anyone to evaluate any firm or company, whether buying their stock or making the ultimate investment, working for them.
Savvy shareholders buy winners and sell losers. Should stakeholders do any less?
Dean Lundell - A capital markets professional with over thirty years of experience and a licensed Commodity Trading Adviser.
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