Stakeholders and Business

BYP 1-6: Stakeholders

Being part of the management of a company can be a very rewarding role, however, this does not mean that it comes with a lack of personal responsibility, and more importantly professional responsibility. With that being said, ethics is a common concern that faces many leaders in the business world today. There have been many cases where leaders of organizations have put their own self-interest ahead of the interest of the entire company, without considering the implications that could result, e.g. Enron, Worldcom, and Tyco.

In the case of Robbin Industries, there is a conundrum present in terms of how to report an expensive advertising campaign using US GAAP financial standards. To understand the issue, one must understand who the stakeholders are in this situation. The first set of stakeholders are the Board of Directors of Robbin Industries. The Board’s role is to appoint senior management to the company with the idea that the people they appoint are the most qualified and responsible. In the event management does something ill-conceived, the board will be affected in some form, such an example would be termination of their role—which can also affect their reputation.

The second set of stakeholders for this issue are the members of the management team of Robbin Industries. The president and vice presidents all had conflicting viewpoints on how to report the advertising campaign. Being that they are management, there are incentives in place for them to ensure the company does well. Typically, the better the company performs, the more salary and bonuses they may receive. This concept also holds true for the third group of stakeholders that exist, the employees—such as the controller and all other mid-low tier employees of Robbin Industries.

The employees first are faced with knowing that a misrepresentation of data is going to occur, consequently they may be faced with a moral issue. Furthermore, although their compensation may not be directly tied to the performance of the company, they could still be potentially invested in the company through stock options or a 401k package. Subsequently, anything that could negatively affect the stock price of Robbin, the employees will be impacted by losing their investment in the company. By the stock being affected, this leads to the next group of stakeholders, the shareholders.