Responsible Business Guide: A Toolkit for Winning Companies

RBG
Responsible Business Guide: A Toolkit for Winning Companies
RBF Pillar 4: Stakeholder Involvement and Social Investment
Talking to stakeholders and seeking their active involvement, from product feedback to
social investments, is seen as a major benefit to business because such feedback and
resulting empathy from clients as well as the community drive the success of a company’s
strategic approach.
Shareholders and Stakeholders
Few people had heard of the term stakeholder in the business community not too long
ago. When the term first appeared in its present context in the early 1980s, it was confined
to academic debate on who really matters to a business. Not until the mid-90s did the
stakeholder attain relative prominence within corporate circles, amid controversy driven
by a well-informed consumer society newly awakened to the exploitative tendencies
exhibited by major companies.
The shareholder has traditionally been at the center of business decision-making, because
modern economic theory is rooted in profit maximization, which in turn creates an incentive
for the shareholder to push for the most returns at the least cost. This desire of the
shareholder has progressively altered the global business model, most significantly
demonstrated by U.S. or European multinationals shifting manufacturing of their products
to poorer countries where wages are much lower and implementation of work-place safety,
human rights, and financial controls are quite weak.
This remained a successful formula for maximizing profits for the better part of the last
century, propelling consumer goods companies, apparel and textile manufactures, footwear
and fashion brands, all to create extensive global supply chains. However, in the 1990s,
a succession of press exposés highlighted the poor treatment of workers producing goods
for multinationals, often on duty beyond the working hours mandated by law, paid belowsubsistence
wages, and in workplaces that an American or European worker would find
unacceptable and the law would not allow.
The 1990s mark the entry of the stakeholder into the corporate canvas. Perhaps the
watershed was the story about Taiwanese managers mistreating local workers in Nike’s
footwear factories in Vietnam, just as there were reports of children stitching Adidas
footballs in Sialkot, Pakistan. In the wake of public outrage and community campaigns
against the offending brands, there was a movement to monitor the behavior of multinational
companies more closely in the developing world. Public campaigns such as the “Foul Ball
Campaign” demanding the banning of footballs from Sialkot, or the “Global March Against
Child Labor” demanding an end to the exploitation of underage workers resonated across
the world. Stakeholder sentiments were reflected in shareholder value; in the aftermath
of the Vietnam report, Nike’s share value fell significantly.
Responsible Business Initiative 37