A Look at The Relationship Between Ford and Its Shareholders

On Ford and its Stakeholders

Ford is one of the truly multinational companies associated with the United States of America. It has been around for at least as long as any of us has been alive. Because of the time they have been around and the scope of their operations, a great many people are affected by the decisions they make and the actions they take. Over the years, like any large company, Ford has had its issues with corporate social responsibility to its stakeholders. However, lately the company has become very active in this regard, and the markets are responding positively to the changes being made by Ford.

Before any analysis is done, it is important to clarify the four types of stakeholders. There are supportive stakeholders, also called type one stakeholders, who have a high potential for cooperation with an organization, but a low potential for threat to an organization. There are marginal stakeholders, also called type two stakeholders, who have a low potential for cooperation with an organization, as well as low potential for threat to an organization. There are non-supportive stakeholders, who have a low potential for cooperation but a high potential for threat. And finally, there are mixed-blessing stakeholders, who have a high potential for both cooperation and threat.

Stakeholders are also organized by four key attributes: legitimacy, power, urgency, and proximity. Legitimacy refers to whether the stakeholder is perceived by outsiders to have a legitimate and appropriate claim to a stake. Power is the ability of a stakeholder to affect the course of a business’s operations, often tied to its legitimacy. Urgency has to do with how quickly the company in which the stakeholder has a stake feels the need to act on said stakeholder’s wishes. And finally, proximity has to do with exactly how far apart they are in a geographic and spatial sense.

In any company, some of the most important stakeholders are the employees. Current CEO, Alan Mulally, has written in a policy letter a basic code to which to adhere in dealings with all employees. Written earlier this year, the letter is clear in stating that employees are to be treated with respect and to be paid fairly and competitively (Mulally 2). This means that, as far as jobs go, Ford is likely a great place to work.

However, although employees may be treated with respect while on the job, many could argue that the constant layoffs that are the result of Ford’s klutzy growth in the past few decades are a form of worker mistreatment. During both of the last recessions, Ford has laid off thousands of workers (Webb) (24/7 Wall St.). In fact, according to AOL Jobs, Ford holds the spot for sixth-largest layoff of all time, at about 35,000 jobs in January of 2002 (24/7 Wall St.). Although the job may have been great while it lasted, for those people, Ford was not exactly a reliable employer that provided a steady job. One could present a sound argument stating that by being irresponsible with their growth and contraction, these people basically had good jobs dangled in front of them, which is an interesting interpretation of worker mistreatment.

Ford’s employees are type four stakeholders because they are very important to the company but also can pose a high potential threat, in particular the unionized laborers. They have very high legitimacy because they work within the organization, and their urgency relatively such that they are largely, if not entirely, responsible for the production of Ford’s products, vehicles and otherwise. Furthermore, although employees of any organization already have some power, being unionized gives them even greater power. This means that the employees of Ford are arguably the most important stakeholders.

The owners of Ford, namely the shareholders, are commonly thought of as very important stakeholders. They have high legitimacy and in some cases can have a lot of power – they can be united to vote out the current administration of the company, for example – but they have very little urgency absent having a large stake in the company. Someone who owns 400 shares of the Ford Motor Company is not going to get much attention from either the corporation or the media as to their opinions on Ford’s operations. The most the ordinary shareholder can do is buy and sell, affecting the market price of the stock, however minimally.

Shareholders at large, however, can make decisions that aggregate to form the market-decided stock price, which is something that can be either good or bad for the company for various reasons. Ergo, shareholders are most likely type one stakeholders, so Ford should do whatever they can to involve them in its operations. This can include having votes on various issues or holding events for shareholders to make them feel more like they are part of the company in which they have invested.

As is the case with any company, some of Ford’s most important stakeholders are its customers. Cars are very resource-intensive to produce and require quite a lot of research and development by a company, making them a hefty investment for the company that produces them. In addition, a vehicle is often one of the most expensive items owned by any household, so the decision on what vehicle to purchase is often the result of a lot of time and effort. If Ford were to continue to ignore the demands of its consumers, their dollars would speak volumes and move to their competitors like General Motors, Honda, etc.

Although customer cooperation is important, a single customer presents very little actual threat to an organization other than the threat of spending their money elsewhere. As such, they are supportive type one stakeholders. The best strategy would be for Ford to involve the customer in the production of new products, for example by holding events at Ford dealerships where owners can provide feedback on new vehicles. Through this strategy, Ford would not only gain valuable information from its customers, but also gain a more loyal customer base that feels actively engaged in the affairs of the company.

It is interesting to see how the dynamic of different stakeholders changes as you move among them. For instance, although the customers are often the least legitimate and proximate stakeholder of those mentioned throughout this conspectus, they are likely the most urgent. Ford, in most cases, will respond to the customers’ needs before anyone else’s because their source of revenue, in the end, is what matters most. It is debatable whether they have power, because they have power in groups but, in general, one individual customer of a company like Ford cannot have an extraordinary effect on the company.

Alternatively, although the shareholders are the most legitimate stakeholders – they actually own the company – they often have the least urgency. In any large company like Ford, it is difficult to imagine the interests of any one shareholder being particularly important, unless they are a large institutional shareholder or simply very wealthy. However, the lack of urgency for shareholders is mitigated by the fact that many businesses have historically kept their shareholders in mind because one of the primary goals of a business is to generate value for shareholders. Therefore, even though the demands of one particular shareholder may not be very urgent for a company, the overall prospect of generating value for shareholders is an overarching concept of business.

Ford also has many other stakeholders, like other drivers on the road, suppliers of after-market goods, and also the employees of dealerships in which Ford sells its vehicles. The environment also has a stake, because Ford does so much manufacturing and therefore uses and potentially pollutes a great deal of earth’s resources. A company as large as Ford will have some tangible effect on many aspects of society. Therefore, it is important that Ford recognize that many people have a stake in its operations and attempt to take these stakes into account before making business decisions. Ford has made progress in this and seems to have a team of leaders committed to maintaining their progress towards that goal.