Historically, a business organization considered its sole purpose to be economic gain, concerning itself with other spheres of society only when required by law or self-interest or when motivated by philanthropy or charity. Charity was merely a celebration of a corporation’s good fortune that it desired to share with “outsiders” or a display of pity for the unfortunate. Indirectly, of course, even this rather uninspired notion of charity gave the company a good name and thus served a public relations function. In slack times, a company reduced its activities in all areas, instituting both inside cost-cutting measures and the lowering of commitments to all publics other than stockholders. Such a perspective worked well until the mid-1960s; however, with economic prosperity almost assured, different stakeholders have begun to demand a more equitable deal from corporations. Concern over environmental pollution by corporations, for example, has become a major issue in both the public and the private sector. Similarly, customers expect products to be wholesome; employees want opportunities for advancement and self-improvement; and the community hopes that a corporation would assume some of its concerns, such as unemployment among minorities. Society now expects business corporations to help in resolving social problems. In brief, the role of the corporation has shifted from that of an economic institution solely responsible to its stockholders to that of a multifaceted force owing its existence to different stakeholders to whom it must be accountable. As one of the most progressive institutions in the society, the corporation is expected to provide balanced prosperity in all fields. Two generations ago, the idea of a business being a party to a contract with society would have provoked an indignant snort from most businesspeople. Even 10 years ago, a business’s contract with society was more likely material for a corporate president’s speech to the stockholders than a basis for policy. It is a measure of how much the attitudes of middle-of-the-road businesspeople have changed that the notion of a social contract is now the basic assumption for their statements on the social responsibilities of a business. This new outlook extends the mission of the business beyond its primary obligation to owners.

In today’s environment, corporate strategy must be developed not simply to enhance financial performance, but also to maximize performance across the board, delivering the highest gains to all stakeholders, or corporate publics. And companies are responding to changing times. As former chairman Waldron of Avon Products noted, “We have 40,000 employees and 1.3 million representatives. . . . They have much deeper and more important stakes in our company than shareholders.” The “concept of stakeholders” is really an extension of the marketing concept, the central doctrine in marketing. Marketing concept and the stakeholder concept are strongly related with a common root or core. Clearly, one commonality is that the stakeholder concept recognizes the consumer as a public with concerns central to the organization’s purpose. Perhaps a further element of this common core is a realization of the importance of cooperative exchange with the consumer. In fact, all publics of an organization can be viewed in a cooperative vs. adversarial perspective. Cooperative strategies with labor, marketing channel members, etc., may result in eventual but not mutual symbiosis. For example, if a manufacturer cooperates with wholesalers, then these wholesalers may be more likely to cooperate with retailers. Similarly, retailers may then be more likely to treat the customer well. Consequently, the customer will be more loyal to certain brands, and this catalyzes the manufacturer to continue to be cooperative with channel members. This eventual, but not necessarily mutual, symbiosis may result in more long-run stability and evolutionary potential within the business system. One company that systematically and continuously examines and serves the interests of its stakeholders is Corning. It cooperates with labor, promotes diversity, and goes out of its way to improve the community. For example, the company’s partnership with the glass workers’ union promotes joint decision making. Worker teams determine job schedules and even factory design. All U.S. workers share a bonus based on point performance. All managers and salaried workers attend seminars to build sensitivity and support for women and African-American coworkers. Anetwork of mentors helps minorities (i.e., African Americans, Asians, Hispanics, and women) with career planning. Corning acquires and rehabilitates commercial properties, then finds tenants (some minority- owned) at market rates to locate their business there. It works to attract new business to the region and has invested in the local infrastructure by building a Hilton hotel, a museum, and a city library. More than the biggest employer in town, Corning plays benefactor, landlord, and social engineer. The company is half-owner of a racetrack and sponsors a professional golf tournament.

Affordable housing, day care, new business development - it’s doing all that, too. Corning is more directly involved in its community than most big U.S. corporations. . . . When a flood in 1972 put the town under 10 feet of water, the company paid area teenagers to rehabilitate damaged homes and appliances, then spent millions to build a new library and skating rink. But Corning’s recent efforts have been more focused: They aim to turn a remote, insular town into a place that will appeal to the smart professionals Corning wants to attract - a place that offers social options for young singles, support for new families, and cultural diversity for minorities. It’s a strategy that often borders on corporate socialism. Corning bought the rundown bars - which “didn’t fit with our objective,’’ says one executive - as part of a block-long redevelopment of Market Street, the town’s main commercial strip. More important, Corning is working to create a region less dependent on its headquarters and 15 factories. . . . To help support the flagging local economy, Corning bought the Watkins Glen auto-racing track, which had slipped into bankruptcy. It rebuilt the facility, took in a managing partner, and last summer, saw the track host 200,000 visitors. Similarly, the company lobbied a supermarket chain to build an enormous new store. It persuaded United Parcel Service to locate a regional hub nearby. In all, Corning expects its Corning Enterprises subsidiary, which spearheads community investments, to bring 200 new jobs to the Chemung River valley each year. It also wants to boost the number of tourists by 2% annually and attract four new businesses to town. Corning Enterprises funds its activities largely with rental income from real estate that it has purchased and rehabilitated.

Corporate Publics: Analysis of Expectations Although the expectations of different groups vary, in our society growth and improvement are the common expectations of any institution. But this broad view does not take into account the stakes of different groups within a business. For planning purposes, a clearer definition of each group’s hopes is needed. One must be careful, however, not to make unrealistic or false assumptions about the expectations of different groups. Take owners, for example. Typically, 50 percent of earnings after taxes must be reinvested in the business to sustain normal growth, but the payout desired by the owners may render it difficult to finance growth. Thus, a balance must be struck between the payment of dividends and the plowing back of earnings. A vice president of finance for a chemical company with yearly sales over $100 million said in a conversation with the author: While we do recognize the significance of retaining more money, we must consider the desires of our stockholders. They happen to be people who actually live on dividend payments. Thus, a part of long-term growth must be given up in order to maintain their short-term needs for regular dividend payments. Apparently this company would not be correct in assuming that growth alone is the objective of its stockholders. Thus, it behooves the marketing strategist to gain clear insight into the demands of different corporate publics. Who in the company should study stakeholders’ expectations? This task constitutes a project in itself and should be assigned either to someone inside the company (such as a strategic planner, an assistant to the president, a director of public affairs, or a marketing researcher) or to a consultant hired for this purpose. When this analysis is first undertaken, it will be fairly difficult to specify stakeholders, designate their areas of concern, and make their expectations explicit. After the initial study is made, updating it from year to year should be fairly routine.

The groups that constitute the stakeholders of a business organization are usually the same from one business to another. Mainly they are the owners, employees, customers, suppliers, the banking community and other lenders, government, the immediate community, and society at large. The areas of concern of each group and their expectations, however, require surveying. As with any other survey, this amounts to seeking information from an appropriate sample within each group. A structured questionnaire is preferable for obtaining objective answers. Before surveying the sample, however, it is desirable to conduct in-depth interviews with a few members of each group. The information provided by these interviews is helpful in developing the questionnaire. While overall areas of concern may not vary from one period to another, expectations certainly do. For example, during a recession stockholders may desire a higher payout in dividends than at other times. Besides, in a given period, the public may not articulate expectations in all of its areas of concern. During inflationary periods, for example, customers may emphasize stable prices only, while product improvement and marketing efficiency may figure prominently in times of prosperity.

Corporate Publics and Corporate Strategy The expectations of different publics provide the corporation with a focus for working out its objectives and goals. However, a company may not be able to satisfy the expectations of all stakeholders for two reasons: limited resources and conflicting expectations among stakeholders. For example, customers may want low prices and simultaneously ask for product improvements. Likewise, to meet exactly the expectations of the community, the company may be obliged to reduce dividends. Thus, a balance must be struck between the expectations of different stakeholders and the company’s ability to honor them. The corporate response to stakeholders’ expectations emerges in the form of its objectives and goals, which in turn determine corporate strategy. While objectives and goals are discussed in detail in Article 8, a sample of corporate objectives with reference to customers is given here. Assume the following customer expectations for a food-processing company:

1. The company should provide wholesome products.

2. The company should clearly state the ingredients of different products in words that are easily comprehensible to an ordinary consumer.

3. The company should make all efforts to keep prices down.

The company, based on these expectations, may set the following goals:

Wholesome Products

1. Create a new position - vice president, product quality. No new products will be introduced into the market until they are approved for wholesomeness by this vice president. The vice president’s decision will be upheld no matter how bright a picture of consumer acceptance of a product is painted by marketing research and marketing planning.

2. Create a panel of nutrient testers to analyze and judge different products for their wholesomeness.

3. Communicate with consumers about the wholesomeness of the company’s products, suggesting that they deal directly with the vice president of product quality should there be any questions. (Incidentally, a position similar to vice president of product quality was created at Gillette a few years ago. This executive’s decisions overruled the market introduction of products despite numerous other reasons for early introduction.)

Information on Ingredients 1. Create a new position - director, consumer information. The person in this position will decide what information about product ingredients, nutritive value, etc., should be included on each package.

2. Seek feedback every other year from a sample of consumers concerning the effectiveness and clarity of the information provided.

3. Encourage customers, through various forms of promotions, to communicate with the director of consumer information on a toll-free phone line to clarify information that may be unclear.

4. Revise information contents based on numbers 2 and 3.

Keeping Prices Low 1. Communicate with customers on what leads the company to raise different prices (e.g., cost of labor is up, cost of ingredients is up, etc.).

2. Design various ways to reduce price pressure on consumers. For example, develop family packs.

3. Let customers know how much they can save by buying family packs. Assure them that the quality of the product will remain intact for a specified period.

4. Work on new ways to reduce costs. For example, a substitute may be found for a product ingredient whose cost has gone up tremendously.

By using this illustration, the expectations of each group of stakeholders can be translated into specific goals. Some firms, Adolph Coors Company, for example, define their commitment to stakeholders more broadly. However, this company is not alone in articulating its concern for stakeholders. A whole corporate culture has sprung up that argues for the essential commonality of labor-management community-shareholder interests.