BY VICTORIA N. IKEANO
When the question is asked, ‘what is the objective of a corporate organisation’, the answer is usually, ‘to maximise profit’. This is not correct. Yes, companies are in business to make profit which is why they often say that they are not a charity organisation or a Father Christmas that dishes out money anyhow, that whatever money they intend to dole out is weighed against a cost/benefit analysis with their eye on the ball, namely to make as much profit as possible; in other words, to maximise profit. However, there are a number of groups/persons that contribute to a company remaining a going concern. Each of these groups expects the highest reward/return for their own contributions. But they each have conflicting claims in that meeting the desires of one group in toto impinges on the ability of the company to satisfy the expectations of other jeopardised groups. But satisfy them one way or other it has to, otherwise its operations could be. Hence, it sets out not to fully meet desires of all its stakeholders including its own desire to maximise profit but to make SATISFACTORY profit and to satisfactorily meet everybody’s expectations.
Those that have a stake in a company or contribute to it thereby, enabling it to remain afloat are its shareholders, workers, suppliers, customers, the community, government and the management. Arguably, they all have equal stake in the organisation. For each of them, their contributions are just as important as those of others. Shareholders/investors provide the funds with which the company operate as a going concern and their reward for this contribution is payment of dividends. They want to be paid the highest of dividends but should the company acquiesce to their wishes, then there will be nothing left for the others. Workers who produce the goods or service that are sold by the company desire to be paid the highest of salaries and wages but then, paying highest wages means it would not be able to reward other stakeholders.
Suppliers, both of raw materials/services and bank credit to the organisation wish to get the highest price for their services and materials, just as customers that patronise goods and services produced by the company would wish to pay the least price for such items while the company itself would want to set highest price for them. But selling its products/services at give-away prices or floor prices means it cannot recoup its expenses and would have little money left to continue its operations while selling them at the highest of prices would put them out of reach of many customers, resulting in poor turnover. Ditto, paying highest amounts to suppliers of raw materials, services and bank credit. Rather, it strikes a balance between the two, selling and buying at equilibrium prices.
Government in theory provides the enabling environment for the company to carry on its business through policy formulation. For this the government expects prompt payment of taxes from it. Management it is that literally makes things happen in the organisation through its managerial skills, by running it in an efficient way, which is, using the least amount of resources to get the most results. And its reward lies in receipt of dividends and bonuses.
The community provides the land on which the company is sited and for this they expect in return, some form of employment and social amenities. These are generally referred to as corporate social responsibility (CSR), that is, the responsibility of a corporate organisation to its host community. They include provision of scholarship, roads, renovation or building of classroom blocks, health facilities, etc. Of course, the company cannot give scholarship to every indigene of the community nor can it build all the roads or provide healthcare facility to everybody in its host community at the same time. These are not its core business. But it has to find a way of recompensing the community for its own contribution to the company as a going concern for, without their land, the company cannot undertake anything. In fulfilling its social responsibility to the community and society, the company is also assuring its future as a going concern as it is only when its host community is happy generally that it can carry on its operations in peace and harmony.
Besides, giving out educational scholarships could help enhance quality of its manpower, providing some health facility could help ensure that its workforce are healthy enough, just as constructing good roads within and around its operational base would help reduce wear and tear on both its vehicles and human bodies due to bad roads which could affect productivity. As the company cannot possibly meet all of its social responsibilities in one fell swoop, it would do well to take them one after the other by setting aside a minimum or satisfactory amount of money for its CSR. A certain percentage of companies’ net profit is being advocated for this. Government is being asked to encourage CSR bby giving tax incentives for such activities. In addition the community itself should decide the particular social amenities they want the funds so allocated expended on every year. This way the community would feel like a true stakeholder in the affairs of the industry, viewing it in positive light rather than regarding it negatively as an exploiter of its resource.