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to boycott the company. 134 The company may, as a result of consumer reaction, be
forced out of business.
6.3.3.2 Local Communities 135
Though their action may not be immediate and direct, the local community may
influence the government by lobbying for regulation of the company‟s policies in
respect of the use of land and disposal. 136 Further, they can also influence the
government‟s decision on tax policy which could affect the company‟s business. 137
Without good relations with the local communities, it will be difficult for the
company to maintain its goodwill. 138 Hence, the current trend is for the company to
be involved with the local community as part of its social responsibility. Many large
corporations are involved with education and environmental programmes as part of
their contribution to the communities.
6.3.3 Limitations of the Stakeholders Theory
Despite continuing recognition, there are many criticisms of the theory that have
been discussed in the literature. Firstly, by serving the interests of many groups, the
theory resurrects the agency problem because it provides better opportunity for
unscrupulous directors to act in their own interests. 139 Directors have wide
134 Ibid.
135 See section 172(1) (d) of the UK Companies Act 2006 which requires a director to consider the
impact of the company‟s operations on the community and the environment.
136 Freeman above n52 at 25.
137 Ibid.
138 Parkinson above n50 at 267.
139 Hill and Jones above n59 at 145; Phillips above n 56 at 19-20; Keay “Corporate Objective” above
n40 at 677.
145