Organization Design and Management: 964127

Introduction

Ride-sharing organizations such as Uber comprise of the main industries in the gig economy. In the gig-economy, a common claim that is purported by Uber is that the employees may work ‘whenever they want’, ‘wherever they want’, and that the employees can ‘be their own boss’. The paper frames Uber through Stakeholder’s Concept’s lens, – an ethical theory that, in part, more broadly frames the responsibilities of organizational management-, with the intention of analyzing and enunciating stakeholders’ interests with the platform. The stakeholder theory is this case is pertinent at this instance in the increase of on-demand labor platforms. Freeman, reacting to claims made by Friedman “The Social Responsibility of Business is to Create Profits”, argues against a managerial style that is fully justified based on the stockholders. Rather, the stakeholder theory, in this case, reacts to Uber’s design philosophy ‘The Social Responsibility of platforms is to serve consumer needs’.

Responding to the essay question, the analysis will be based on creating an understanding of how Uber interacts with its stakeholders on the basis of activities such as expenses and earnings, decision-making, as well as evaluation. Uber’s different stakeholder’s groups that have got an interest in the company’s operations will be discussed. Nonetheless, the Corporate Social Responsibility issues that are associated with these groups will as well be analyzed.

The Stakeholder Concept

The Stakeholder Theory refers to a managerial concept that initially responded to the then, – and maybe still- dominant stockholder-centric management model. A stakeholder is a person that is involved in something or is affected by a particular cause of action. However, a stockholder owns corporate stock. The Stakeholder Theory responds to the type of stockholder-centric management model that was embodied by Milton Friedman’s claim that states “The Social Responsibility of Business is to Increase its Profits”. Particularly, the Stakeholder Theory offers a deferring opinion on the notion that every type of decision made in an organization should be guided by the effect it has on the stockholders (Bridoux and Stoelhorst, 2014, pp.111). Alternatively, a major foundation of the Stakeholder Theory holds that the primary management responsibility comprises of the ultimate obligation of maintaining an equitable as well as a workable balance between the employees, communities, customers, stockholders, and the general public’s interests. The theory argues that such an outlook is aligned to the primary reason why the corporate entity exists in the first place, which is in part due to its ability to serve the community including all the stakeholders (Purvis, Zagenczyk and McCray, 2015, pp.11). As a result of the complex and the contradictory nature of the interests associated with the different stakeholders, theorists are of the opinion that it is quite hard to balance all these interests.

A device that the stakeholders’ theorists apply in dealing with the complexity of having to balance the various stakeholders’ interests is by diversifying the scope of the stakeholders’ legitimacy and identity. In the early 1990s, Freeman and Reed were inspired by Igor Ansoff’s work and proposed a wide and narrower definition of the term stakeholder (Brown and Forster, 2013, pp.307). Considering the wider definition, a stakeholder refers to any person or an identifiable group that has got an impact on attaining the organizational objectives. However, the narrow view defines a stakeholder as any group or an individual who an organization depends on for its continual survival. Responding to the essay question, the paper uses the narrow definition of the term of stakeholders, with the core stakeholders in Uber Company comprising of the employees, passengers, shareholders, and drivers. Nonetheless, considering the wide definition of the term stakeholder, external stakeholders such as the taxi drivers and the community are acknowledged (Esmail, Moore and Rein, 2015, pp.124). Being part of an on-going effort in Stakeholder Theory’s normative and theoretical underpinnings, researchers have argued several normative cores in support of this theory. Among the most common cores is of the opinion that the stakeholder-centric management theory is morally respectful and is not a viable model for organizational as well as strategic management. The core is commonly known as the Kantian core.

Among these core’s underpinnings include the rejection of the separation thesis that is of the assumption that business along with ethics contradicts each other. Rather, according to Freeman, organizations should ask itself the reasons behind its existence and beyond profit. The other core revolves around stakeholder relationship that should be relatively as well as mutually beneficial. Hence, the stakeholders should make mutual sacrifices that are proportional to the benefits that they accept. The core is known as the fairness core (Fernando and Lawrence, 2014, pp.155). The last core is the feminist core that frames companies as a network of relationships. Realizing stakeholders’ relatedness means that it is impossible for an individual stakeholder to succeed without having to rely on other stakeholders’ success. In some ways, the Stakeholders Theory aims at providing managers with guidance and in recent times, there have been increased emphases on how the theory can be put into practice. Primarily, the emphases have manifested itself in organizations that exercise Corporate Social Responsibility or exercise sustainability in their social science, financial, and environmental (Ferrero, Hoffman and McNulty, 2014, pp.56). Researchers such as Wheeler and Davis identify that properly identifying and managing the stakeholders is essential for Corporate Social Responsibility measures to stakeholders outside an organization. In addition, having an accountable Corporate Social Responsibility audits is capable of giving organizations a competitive advantage because the stakeholders continuously expect that the company responds to their moral concerns.

Stakeholder Groups

Uber Corporation has got four main stakeholder groups that comprise of;

Employees or suppliers: This group of stakeholder is responsible for making and delivering Uber’s products and services. Uber has managed to become a multibillion-dollar organization in the record by giving people an opportunity to become an entrepreneur. The major reasons that the drivers, -the company’s employees- prefer working with Uber is due to the fact that the company provides them with increased autonomy. Most of these employees argue that “being their own boss” as well as being in a position to determine their own schedule is the main reason why they want to be associated with Uber (Freeman and Moutchnik, 2013, pp.7). In addition, most of these drivers’ interest in the organization is because it provides them with an enhanced work-life balance. As the drivers search for increased freedom, they make more money. Uber’s employees have got a direct stake in the organization because of their interest in to earn income to improve their way of life and gain other monetary a non-monetary benefits (Harrison and Wicks, 2013, pp.115). Nonetheless, this group of stakeholders is affected primarily by their economic well-being on the basis of how much and how often the organization pays them, their job security, and profits.

Customers and Potential Customers: The main objective of why Uber is in operation is to meet the needs of its customers. The customers are after having a good experience while they ride using Uber’s cabs. The company has developed to become a classic example in providing the customers with a simple but clean experience. The user experience is an important subset of customer experience, as well as being a substantial piece (Hörisch, Freeman and Schaltegger, 2014, pp.340). The customers are also concerned with the amount they are charged for every ride. Based on Uber’s pricing, the company still charges cheaper prices compared to taxies but a little pricier than Lyft, their rivals. Through the company’s app, customers possess an enhanced experience because it is easy to operate, hence making it effortless and quick to book a ride. Through the app, the clients are able to see information regarding their driver, which results in improved security in the clients’ decision-making process (Jia and Zhang, 2014, pp.441). The customers also are provided with an ETA when booking for a ride. The feature allows the customers to make decisions based on their tight schedules.

Owners or Shareholders: Softbank Group Corp has closed a deal with Uber Technologies Inc. to become the largest shareholder in the company, as well as offering the much-needed boost to controversy-ridden Uber. With the new deal, all the other shareholders are to retain a 17.5% stake in Uber, while Softbank retains 15%, thus becoming Uber’s largest shareholder. Having made an investment in Uber, the shareholders that comprise of the Softbank, Benchmark, Travis Kalanick, Garrett Camp, GV, and others, are concerned with obtaining the profitability of their investment. The decisions that are made by Uber’s management and directors determine what these investors acquire in regards to capital growth, dividends, or profits, and which are normally reflected on the share price. Other shareholders for Uber include Google’s Alphabet as well as the Saudi Arabia’s Investment Fund. The company’s veteran Silicon Valley investor Matt Cohler is the topmost Uber shareholder, the managing director of Benchmark Capital holding 11% of the shares. Also, among the other largest shareholder is present-day Uber’s employees that include Thuan Pham, the organization’s CTO, and COO Barney Harford, along with CEO Dara Khosrowshahi.

Communities of Interest: Examples of communities that are relevant to Uber include the geographic locations where the organization operates, philanthropies that Uber associates with, regulators, as well as the schools that educate the future staff that Uber might have interest in. Such communities have an interest in the operations of Uber in that they are concerned with Uber’s adherence to the laid down-regulation such as when gaining market entry (Ketokivi and Mahoney, 2016, pp.134). The communities require that the organization listens to their perspectives and priorities, as well as obtaining feedback from the company and continuously engaging in face-to-face meetings to build on trust, including implementing mechanisms that can be used to raise complaints and concerns.

CSR Issues

Customers: Regarding the customers, it is increasingly becoming difficult to make a comparison of products and services, including making informed decisions regarding what to purchase. Specifically, this is as a result of the increased number of products along with the complexity associated with many markets. The customers are thus reliant on a firm adopting fair business along with adopting a fair business as well as marketing practices and ensuring that their safety and quality of products and service is guaranteed (Laczniak and Murphy, 2012, pp.290). All these entail providing the customers with accurate product information and taking the customers’ concerns seriously. According to the New York Times, most of the Uber drivers have been charged with sexual harassment as well as sexually assaulting the customers. Some of the factors that result in these CSR issues in the organization is due to improper background checks on the company’s drivers, and there exist no set criteria that provide the requirements for becoming an Uber driver (Tullberg, 2013, pp.137). Some of the recent issues include a case whereby passenger in Chicago filed a lawsuit claiming that an Uber driver had sexually assaulted her. In 2016, another lawsuit was filed in Chicago, with the Uber driver being arrested as a suspect of kidnapping a drunk passenger and sexually assaulting her.

Employees: Organizations are capable of creating high-quality jobs by making sure that they provide the best possible work conditions according to the applicable statutory provisions as well as international labor standards, specifically employees that work in the International Labor Organization (Van Puyvelde, Caers, Du Bois and Jegers, 2012, pp.448). Primarily, these concerns necessitate granting union rights, abolishing child and forced labor, along with eliminating employee discrimination. Also, an important part of this is having constructive cooperation with social partners (Mishra and Mishra, 2013, pp.262). Such CSR issues that have been associated with Uber include the increased number of cases that have been filed regarding Uber’s drivers’ security from the customers which comprise of beating up the drivers or even assaulting the drivers. Regardless, all these claims, Uber is reluctant to take any necessary action to enhance the security of its drivers. An example of such an assault took place in 2016 in Miami whereby Florida’s Doctor aggressively assaulted the company’s driver. Another instance took place in 2015 whereby a Californian drunk passenger, over the weekend assaulted an Uber driver.

Communities of Interest: Having responsible environmental management ensures that an organization continuously improves the environment. In addition, organizations should work to combat corruption because it impacts negatively on democratic institutions, international competition, good corporate governance, along with investment. Companies play a crucial role in combating corruption by ensuring that they put in place internal control mechanisms aimed at avoiding and exposing it. In addition, companies should continue to adhere to regulation put in place to govern businesses (Park and Ghauri, 2015, pp.196). In the case of Uber, the company has had ongoing and aggressive cases with the regulators as they seek to gain market entry. The company has been involved in a worldwide program that seeks to deceive the regulators in such markets and states where the company’s low-cost ride-hailing was facing resistance from the law enforcement or in other instances the company’s services were outrightly banned (Wagner, Alves and Raposo, 2012, pp.1873). Nonetheless, questions have also been raised regarding whether the organization, with its rush to come up with autonomous vehicles, was actually carrying out tests on these vehicles in cities that had been prohibited from doing so.  

Shareholders: the shareholders are concerned about the corporate governance of an organization. Good corporate governance strives towards achieving transparency as well as a balanced ratio of control along with management while at the same time protecting the topmost corporate level’s efficiency and protecting the decision-making power (Retolaza, Ruiz-Roqueñi and San-Jose, 2015, pp.1011). The issues are linked to the company’s accounting and reporting practices, respecting the rights of its shareholders as well as putting into consideration their concerns, and ensuring there is supervision by the Board of directors (Perez-Batres, Doh, Miller and Pisani, 2012, pp.169). Some of Uber’s investors have gone public to ask the company to change its corporate culture. Despite that one of the other shareholders is an active member of the company’s independent review of the Human resources, questions still exist regarding the “Greyball” that the company has been using to deceive governments and as to whether the shareholders should be held accountable for the company’s act of breaking the laws.

Conclusion

The stakeholder Theory can be described as quite a new theory in the manner in which it introduces the Stakeholders’ concept in the strategic management of international organizations. The primary objective of multinational organizations is no longer to make profits for its shareholders but rather to defend its image as well as values thus respecting every stakeholder. Regardless that empirical studies have not proven it, a link exists between the shareholders’ wealth and all the stakeholders’ wealth because for the multinational organizations to sell their products and services, they need a good reputation. The Stakeholders Concept is very common at these times because people along with the stakeholders are worried regarding the economic system’s sustainability. Due to globalization, companies are becoming extensively important, and in many instances more powerful compared to the states. Under such conditions, the actions of these organizations greatly impact on the society, and it is the duty of these companies to possess “ethic” as well as values. As a result of deregulation along with reduced power of a country in favor of the economy, the organizations should enjoy the rights and duties resulting from such deregulation. That is specifically what the Stakeholder concept is about.

Bibliography

Bridoux, F. and Stoelhorst, J.W., 2014. Microfoundations for stakeholder theory: Managing stakeholders with heterogeneous motives. Strategic management journal, 35(1), pp.107-125.

Brown, J.A. and Forster, W.R., 2013. CSR and stakeholder theory: A tale of Adam Smith. Journal of business ethics, 112(2), pp.301-312.

Esmail, L., Moore, E. and Rein, A., 2015. Evaluating patient and stakeholder engagement in research: moving from theory to practice. Journal of comparative effectiveness research, 4(2), pp.133-145.

Fernando, S. and Lawrence, S., 2014. A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and institutional theory. Journal of Theoretical Accounting Research, 10(1), pp.149-178.

Ferrero, I., Michael Hoffman, W. and McNulty, R.E., 2014. Must Milton Friedman embrace stakeholder theory?. Business and Society Review, 119(1), pp.37-59.

Freeman, E. and Moutchnik, A., 2013. Stakeholder management and CSR: questions and answers. uwf UmweltWirtschaftsForum, 21(1-2), pp.5-9.

Harrison, J.S. and Wicks, A.C., 2013. Stakeholder theory, value, and firm performance. Business ethics quarterly, 23(1), pp.97-124.

Harrison, J.S., Freeman, R.E. and Abreu, M.C.S.D., 2015. Stakeholder theory as an ethical approach to effective management: Applying the theory to multiple contexts. Revista brasileira de gestão de negócios, 17(55), pp.858-869.

Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346.

Jia, M. and Zhang, Z., 2014. How does the stock market value corporate social performance? When behavioral theories interact with stakeholder theory. Journal of business ethics, 125(3), pp.433-465.

Ketokivi, M. and Mahoney, J.T., 2016. Transaction cost economics as a constructive stakeholder theory. Academy of Management Learning & Education, 15(1), pp.123-138.

Laczniak, G.R. and Murphy, P.E., 2012. Stakeholder theory and marketing: Moving from a firm-centric to a societal perspective. Journal of Public Policy & Marketing, 31(2), pp.284-292.

Mishra, A. and Mishra, D., 2013. Applications of stakeholder theory in information systems and technology. Engineering Economics, 24(3), pp.254-266.

Park, B.I. and Ghauri, P.N., 2015. Determinants influencing CSR practices in small and medium sized MNE subsidiaries: A stakeholder perspective. Journal of World Business, 50(1), pp.192-204.

Perez-Batres, L.A., Doh, J.P., Miller, V.V. and Pisani, M.J., 2012. Stakeholder pressures as determinants of CSR strategic choice: Why do firms choose symbolic versus substantive self-regulatory codes of conduct? Journal of business ethics, 110(2), pp.157-172.

Purvis, R.L., Zagenczyk, T.J. and McCray, G.E., 2015. What’s in it for me? Using expectancy theory and climate to explain stakeholder participation, its direction and intensity. International Journal of Project Management33(1), pp.3-14.

Retolaza, J.L., Ruiz-Roqueñi, M. and San-Jose, L., 2015. An innovative approach to stakeholder theory: Application in Spanish transnational corporations. Revista brasileira de gestão de negócios, 17(55), pp.1007-1020.

Tullberg, J., 2013. Stakeholder theory: Some revisionist suggestions. The Journal of Socio-Economics, 42, pp.127-135.

Van Puyvelde, S., Caers, R., Du Bois, C. and Jegers, M., 2012. The governance of nonprofit organizations: Integrating agency theory with stakeholder and stewardship theories. Nonprofit and voluntary sector quarterly, 41(3), pp.431-451.

Wagner Mainardes, E., Alves, H. and Raposo, M., 2012. A model for stakeholder classification and stakeholder relationships. Management decision, 50(10), pp.1861-1879.