Workshop 1
As far as stakeholder value maximization in the firm is concerned, according to Freeman, the development of a stakeholder approach enabled firms to navigate the web of the 1980s. These were unprecedented times in corporate management. It was considering that there are new challenges that were cropping up every day (Patel, 2010). This matter made business difficult and conventional models of the time, obsolete. As far as the firm was concerned, the maximization of profit for shareholders was the driving motive. As such, the only stakeholder, for whom the business cared was the shareholder (Freeman, 1984)r. In response to this, Freeman came up with the stakeholder approach that encouraged businesses to look at stakeholders from a descriptive and prescriptive point of view.
Freeman’s rationale
The appropriate approach, according to Freeman, should provide a single strategic framework. This framework should be flexible enough to contend with the demands of the times. In this case, this single strategic framework will dictate that the firm would not only focus on the growth of the wealth of shareholders (Kessler et al, 2012), since in the long run, that will diminish their value. To action, the firm must distance itself from the perception of a perpetrator of deforestation towards the utilization of more sustainable beef production methods. Second, a stakeholder approach ought to be a system (Patel, 2010), rather than a planning approach. It ought not merely be a planning process, but ought to be a management process too. This facet makes it flexible and allows the company to address any swift challenges that might crop up to affect the firm’s ability to survive. The firm must acknowledge that environmental awareness in the world affects its bottom line and sales. The wealth of the shareholders may dwindle (Freeman, 1984). The third concern of a stakeholder approach is survival. The firm must be willing to cater to requirements at a particular point in time (Kessler et al, 2012). The fourth objective of the stakeholder approach is for the organization to achieve the objective; sustainability viability and innovation (Keay, 2010). Finally, the strategic approach is about being intentional. Achieving results calls for analysis and investment to solving problems of swift changes.
Solution
Production of beef using less destructive methods, such as rehabilitation of semi-arid areas into a pasture. The initial outlay may be a sunk cost. It would be covered during production in subsequent years. The firm ought to partner with companies and actors in other areas that have an interest in the environment to minimize the costs and external expertise on rehabilitating pasture land from the abundant arid and semi-arid region of Australia. Invest in reforestation efforts that would bolster its image amongst external stakeholders. It would initially decrease the bottom line of the company, but it would serve to allow entry into markets hitherto locked. Conscious marketing efforts should brand the company a responsible environmental actor. The company can push a corporate social responsibility framework that contributes heavily to a pro-environment agenda.
In conclusion, shareholder value growth transcends the growth of stockholder wealth to the growth of consumer welfare. Any company that insists on having a systematic approach to management that allows its stakeholders to maximize their money, in the long run, will inevitably be a sustainable business. To this end, it would solve the Australian beef company. A lot of welfare and positive customer perception will implore the company to change his approach and look for innovative ways of producing. That will increase its value. Increase the stakeholders’ value, as well as increasing environmental sustainability.
References
Freeman, R. E (1984). A Stakeholder Approach to Strategic Management. SSRN Electronic Journal. 10.2139/ssrn.263511.
Keay, A. (2010). The Ultimate Objective of the Company and the Enforcement of the Entity Maximisation and Sustainability Model. Journal of Corporate Law Studies, 10(1), 35–71. https://doi.org/10.1080/14735970.2010.11419820
Kessler, W., McGinnis, L., Bennett, N., Bodner, D. A., & Lee, I.-H. (2012). Organizational simulation in support of global manufacturing enterprises. Information Knowledge Systems Management, 11(1/2), 101–117.
Patel, R. I. (2010). Facilitating Stakeholder-Interest Maximization: Accommodating Beneficial Corporations in the Model Business Corporation Act. St. Thomas Law Review, 23(1), 137–158.