Marketing communication: principles and practice

Corporate
performance
Figure 18.1
Determinants of corporate performance
Source
: Based on Brown, 1995

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2. those groups that themselves think they have some stake in the firm
It is then necessary to examine the nature of each relationship, as well as
recognizing that some stakeholder groups also have relationships with each
other. Stakeholder expectations cannot be ignored, but can be missed and/or
misinterpreted.
Corporate community is the new form of organization governance that
shifts emphasis from profit to democracy by unifying the goals of all parties
– by focusing on the needs of the corporation’s constituents (see Handy,
1995, for a discussion of federalism). The old profit-centred model of
business is too limited and limiting because it ignores the reality that business
is both an economic and a social institution. Corporate governance can evolve
towards collaboration among all stakeholders. The shift from profit to
democracy requires the creation of a coalition of investors, employees,
customers, business partners, and the public. Such a corporate community
can serve all interests better.
The onset of a knowledge-based economy has made cooperation efficient
and thus there is no longer a need to consider business as a zero-sum game
in which one party gains at the loss of another. The capitalist theory that
profit is the driving force of economic progress is at last being practically
challenged. The question is no longer whether to focus on making money
or on serving society. 
The old model required a focus on serving the interest of shareholders.
The interests of employees, customers, and other stakeholders were not really
goals of the company, but simply a means to meet the interests of shareholders
– to make money. If the goal of enterprise is narrowly taken to be merely to
make money (ignoring the wider costs), then the interest of business is
opposed to the interests of society. Even the concept of ‘corporate social
responsibility’ has not remedied the problem. It has proven useful in
educating people in business about their social obligations, but in focusing
on social service, the economic realities of productivity, revenues, and profits
have been ignored.
In recent years, however, major changes in corporate governance have
been underway. Collaboration with stakeholders is now occurring as they
gain power and because managers need their support. Institutional investors
have become more involved in the management of large corporations,
including ‘ethical investors’. Employee participation, often in the form of
shareholding, has grown significantly, especially in the USA. Women and
members of minority groups are becoming more influential in business. Other
social constituencies have gained influence in recent years: relationship
marketing to build trust and commitment with customers in long-term
relationships; partnership agreements with suppliers and government;
voluntary moves to protect the environment, and so on.
Halal proposes a stakeholder model of the corporation (1996) which views
the corporation as a socio-economic system composed of various equally
important constituencies: employees, customers, suppliers, the public and
its government representatives, and investors. Each stakeholder has obligations