The desire to possess throughout the history of mankind has left the word ?profit,? and it has bound us by what we call ?organizations.? Organizations are collections of people who work together and coordinate their actions to achieve a wide variety of goals and desired future outcomes.1 Then organizations were divided into profit and non-for-profit organizations (after called ?NPOs?). Even though officially history of NPOs are less than one hundred years, these existed from the start of human?s economic activity. For example, churches, temples, charities, community colleges, and library are non-for-profit organizations. Today, the world economy is growing more and more, and so are the activities of organizations. However, NPOs had dilemmas as their activity area grew. These were ?for what,? ?why,? and ?for whom.? The profit organizations exist to make profits for owners. For them, the laws and theory have been already much arranged. On the other hand, NPOs did not have proper theory until stakeholder theory was arranged by R. Edward Freeman in 1984.2 Based on this theory; NPOs are increasing their activity area for human of modern society and ethics.
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To know the relationship between the stakeholder theory and NPOs, we should understand what a stakeholder is. A stakeholder is a person, a group or an organization that has an interest in organizations. Stakeholders have needs and expectations and can be internal or external to organizations. For example, charities and other NPOs have diverse stakeholder groups, often with conflicting needs and expectations, so prioritizing and focusing on the voices that must be heard is vital.3 It includes of stockholders, managers, employees, suppliers and distributors, customers, community, society, and nation-state, etc. Among these, stockholders, managers, customer and community play an important part. The stockholders have a claim on a company because when they buy its stock or shares they become its owners. Thus, they watch the company and its managers closely to ensure that management is working diligently to increase the company?s profitability.4 Secondly, managers are a vital stakeholders group because they are responsible for using a company?s financial capital and human resources to increase its performance and thus its stock price.5 They are the stakeholder group that bears the responsibility to decide which goals an organization should pursue to most benefit stakeholders and how to make the most efficient use of resources to achieve those goals. Customers are often regarded as the most critical stakeholder group since if a company cannot attract them to buy its products, it cannot stay in business. Thus, managers and employees must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones. Finally, community refers to physical locations like towns or cities or social environments such as ethnic neighborhoods in which companies are located. A community provides a company with the physical and social infrastructure that allows it to operate. In return, a company contributes to the economy of the town or region and often determines whether the community prospers or declines through the salaries, wages, taxes it pays, and their revenues. This shows the company?s social involvement and business ethics. Therefore we know that the stakeholder theory is a theory of organizational management and business ethics of the needs of numerous stakeholders.
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Namely, the business ethics is derived from the stakeholder theory. The dictionary definition of ethics are the inner guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the ?right? or appropriate way to behave.7 However, business ethics has a more detailed meaning than ethics. It (also known as corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics.8 Therefore, business ethics states the human morality for the people involved that arises from the stakeholder theory, and these cannot be easily found in contemporary for-profit organizations. However, NPOs are more close to business ethics for human than profit organizations. NPOs not only exclude profit, but also do not distribute its surplus funds to owners or shareholders, but instead use them to help pursue its goals.9 Such activities and purpose of NPOs are accord with business ethics and the stakeholder theory. For examples, Americans United for Separation of Church and State, Children?s Defense Fund, Animal Legal Defense Fund, Earth Island Institute, American Red Cross, Doctors without Borders, etc., are typical NPOs.
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Sometimes we asked ?why is it so important that organizations in general, should act ethically and temper their pursuit of self-interest by considering the effects of their actions on others?? The answer is that the relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way. For that reason, the stakeholder theory is necessary. The works and scopes of NPOs should extend more with its base on the stakeholder theory as the economy develops. As previously stated, the profits are NPOs? purpose. Their purpose is to promote public interests and contribute to our community through schools, hospitals, charities, and relief works. To help this, the United States government gives benefits to them such as tax exemption.10 However, today, they are facing a new problem. There is a conflict between profit organizations and NPOs as they both extend their scopes. NPOs get defeated by for-profit organizations in many areas. For example, Merck determined to close sixteen plants and cut sixteen thousand workers after merger and acquisition.11 However, NPOs that strives for employment stability cannot do anything. Furthermore, people have a fixed idea that non-for-profit organizations must have supports and cannot keep their organizations without support. Therefore, NPOs should find solutions to increase public benefits more efficiently and effectively. The government also needs to establish NPOs that would promote public benefit.
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We also can be Stakeholders. For us, we should think about why NPOs need us. NPOs are based on the business ethics, which are perfect demonstrations of the stakeholder theory. The stakeholder theory that emphasizes duty and moral between stakeholders is a theory for human and NPOs that exists for public benefit. As the society evolves, people are learning about the stakeholder theory. Therefore, we should promote NPOs that work with their base on business ethics as our community grows and develops.
G. R. Jones, Organizational Theory (2007). Design and Change. Upper Saddle River, NJ: Pearson
Freeman, R. Edward (1984). Strategic Management: A stakeholder approach. Boston: Pitman?
Knowhow Nonprofit (2010). Stakeholder analysis. Organizations. Retrieved July 27 2010. http://www.knowhownonprofit.org/organisation/strategy/directionsetting/stakeholder
J. A. Pearce (1982). The company Mission as a Strategic Tool. Sloan Management Review
C. I. Barnard (1948). The Functions of the Executive. Cambridge, MA: Harvard University
Jones. Gareth R, Essentials of contemporary management (2009). Managing Ethics and Diversity. P 81
Wikipedia, the free encyclopedia (2010). Business ethics. Article. Retrieved October 7 2010. http://en.wikipedia.org/wiki/Business_ethics
Gary M. Grobman, White Hat Communications (2008). The Nonprofit Handbook.? Everything You Need to Know to Start and Run Your Nonprofit Organization (Paperback)
Wikipedia, the free encyclopedia (2010). Non Profit Organization. Article. United State and Tax exemption. Retrieved October 6 2010. http://en.wikipedia.org/wiki/Non-profit_organization
10.? Daily Finance (2010). Merck to Cut 16,000 Workers as Drugmaker Closes 16 Plants, Labs. Economy. Retrieved July 8 2010. http://www.dailyfinance.com/story/company-news/merck-to-cut-16-000-workers-as-drugmaker-closes-16-plants-labs/19546356/
Source: http://www.med08.org/non-profit-organizations-must-be-spread-in-the-world.htm
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