SERIOUS BUSINESS: Stakeholders to share in the profits
Mon, 12/19/2016 - 12:00am
Dr. Basil Springer
“Do not neglect to do good and to share what you have, for such sacrifices are pleasing to God.” – Hebrews 13:16.
A relatively recent publication on stakeholder theory entitled “Stakeholder: Essentially Contested or Just Confused?” (2012), by Samantha Mills, is relevant to this week’s topic.
Our countries are faced with the disturbing global statistic that 90 percent of start-up businesses, which are pregnant with the potential for future growth, fail in the first five years. To do nothing about this is irresponsible as it shatters the dream of many an entrepreneur, increases the wealth divide, stymies the rate of economic growth and, in small communities, impacts heavily on the rate of unemployment which then fuels the increasing incidence of crime. Not a happy mix in the context of sustainable development.
The poor management of business systems was deemed to be the cause of this high business mortality rate and the Shepherding Model emerged as a solution to the problem. A comprehensive Shepherding tool was introduced to address this situation which includes aspects of business morality.
Stakeholders in a business include owners (shareholders), directors, government, investors, creditors, marketers, customers, suppliers, people development managers and unions all of whom can affect or be affected by the policies, objectives and actions of the
business. They all contribute to the success of the business which is measured in terms of its profitability.
Although not all stakeholders are equal, each category of stakeholder has a role to play in the generation of profits and if they continually work in harmony the business will be well on the way to sustainability.
In the context of start-up companies, I shall focus primary on a group of six stakeholders which includes the board of directors, the financial investors, the sales and marketing personnel, the company itself as an entity, the people and the Shepherd.
Traditionally, costs of production and overhead expenses would be disbursed monthly, the board of directors would be paid a monthly fee, the financial investors would receive an amortized monthly loan payment of principal and interest, the sales and marketing personnel would get a commission on monthly sales generated, the people (management and staff) would get monthly salaries and weekly wages, and the Shepherd (essential to the start-up enterprise) would get a limited monthly fee.
The company’s owners would be left with the residual profit from which it exercised its corporate social responsibility, distributed dividends to its owners, invested in the company’s development infrastructure and paid corporate taxes to the government leaving a reserve to be kept or distributed at the discretion of the board and shareholders.
If this reserve is small then there is no issue. However, if this reserve is massive then should those stakeholders, who in some way contributed to its generation, not get a “dividend” as well?
In this way not only the shareholders benefit from the reserve but all those preferred stakeholders (board directors, the financial investors, sales and marketing personnel, management and staff and the Shepherd) who have contributed to the reserve benefit as well, before taxes are paid.
Let us review our strategies of profit distribution to include attractive innovations to motivate and financially reward our preferred stakeholders, for much pleasure and satisfaction may be derived from such actions.