Financial Performance and Stakeholder Management

Abstract

Companies need to make profits. But in recent years, it has been accepted that business and society are interlinked and both need each other. Business is connected to a web of stakeholders, issues of social development, environment etc. In short companies have social responsibilities to the society. Now the question arises as to whether these social responsibilities adversely affect the financial performance of the company or are they really help the companies to grow well. Companies that act responsibly toward their stakeholders benefit from increasing business and see their profits rise as it is used simultaneously by various stakeholders to achieve its goals. Organizations exist to satisfy stakeholders' goals. Organizations need to create environments that encourage ethical behaviors. Relationships lie at the heart of corporate profit making and sustainability in today's global, knowledge economy. Companies with strong stakeholder relationships are more profitable and sustainable than companies whose focus is exclusively on the bottom line. Recent academic studies show that good corporate governance increases valuations and boosts the bottom line. Research is showing that companies that establish a good reputation, trusting relationships with suppliers and community members, and sustainable environmental practices are more profitable. The article looks at this scenario how the corporate governance is now essential for the success of any enterprise.