Business ethics

4. Conflicts between obligations to stakeholders

Fulfilling obligations to one set of stakeholders can involve a firm in conflicts with another set. A policy of reducing costs may be pursued to maximize returns to shareholders, and yet it may involve the dismissal of productive and loyal employees. Recalling faulty goods for the sake of consumer safety may similarly conflict with the duty to maximize returns. Keeping suppliers waiting for their money may be justified by a duty to manage the liquid assets of a firm as profitably as possible, but it may drive the supplier into bankruptcy; and so on. The existence of these conflicts does not show, as might be thought, that it is unprofitable to gear obligations in business ethics to stakeholders. But it does raise the question of whether there is a pecking order among stakeholders, so that obligations to one group typically outweigh obligations to another. The literature sometimes suggests that one or another group of internal stakeholders is pre-eminent: sometimes it is employees and sometimes it is shareholders. Neither group is uncontroversially the pre-eminent one, and much depends on facts about the firm with the conflicting obligations. It may be that for some firms at some times meeting obligations to employees makes the difference between staying in business and bankruptcy; for other firms it may be shareholders. Either way, considerations about the requirements of staying in business at a given time seem relevant to the pecking order; and when the survival of the business is not in question, it may be considerations about which group is the more important to the growth of the business.