What Are Stakeholders & Ethical Dilemmas?

The prevalence of major corporate scandals over the years has helped increase public awareness of two major ethics concepts – stakeholders and ethical dilemmas. While these concepts are not unique to the study of business, they tend to be more commonly applied to ethical corporate decision making. For example, the corporate social responsibility movement is a direct application of these ideas in business. But what exactly do they mean?

Stakeholders are broadly defined as anyone who is impacted by a decision-maker’s decision. Some examples of corporate stakeholders would be shareholders, employees, customers, suppliers, financiers, families of employees and the community in which the corporation is located. Stakeholders could also be less directly related to the operations of a corporation. For example, taxpayers who later need to fund a government rescue of a distressed company, the government and even those suffering the effects of corporate pollution are all stakeholders, in that they have a stake in decisions.

An ethical dilemma occurs when you have a moral obligation to abide by two different courses of action, but circumstances of the situation only allow for you to choose one of the two courses. An example would be reporting unethical wrongdoing by a boss who is engaged in some form of corporate fraud. Many employees in this situation would be conflicted in their fear of losing their jobs, making it difficult for them to meet obligations to provide for their families. However, by not reporting the wrongdoing, they put other stakeholders in jeopardy.

Identification of potential stakeholders is essential for ethical behavior. Failure to identify stakeholders has led many to make unethical decisions without realizing they had a moral dilemma in the first place. For years companies adhered to the purpose of making profit, legally. At first blush, this sounds reasonable and moral; however, it has also led to many corporate scandals where companies toed legal boundaries and though they never crossed statutory limitations, their poor decision-making hurt many millions of stakeholders. For instance, for many decades paper companies routinely and legally polluted rivers and lakes, making the water undrinkable for humans and uninhabitable for fish and animals.

Unfortunately, there is no perfect method for dealing with ethical dilemmas. Regardless of your choice, you will need to face and accept the consequences of your actions. However, there are two ways to look at your situation to help you come to a decision. The first way is to evaluate the potential actions you can take and then pick the course that is least morally problematic. The second involves analyzing the potential outcomes of your actions and selecting the course of action with the most benefits or least harm.