Which stakeholder should get priority?
Who should come first in a business: customers, shareholders or staff? At Johnson & Johnson, the fabulously successful healthcare business, the
answer is, apparently, customers. Serving them well over many decades has clearly worked for the other stakeholders – its shares have performed outstandingly in the long run, while its staff have enjoyed the security of working at an expanding and reputable company.The British conglomerate Hanson Trust, its overriding motto was shareholders first, second and third. All other interests were subordinated to the demands of the providers of capital: an increasing share price, and a progressive dividend policy. This philosophy guided the group in an acquisition spree over two decades. But eventually the stock rating declined, and takeover targets resisted its entreaties. Meanwhile, British Airways is another category altogether. There, thanks to power-crazed unions and a defined benefit pension scheme, the hierarchy is clearly staff. The flight crew’s aborted strike was a self-destructive attempt to defend partisan interests at the expense of everyone else – even if it meant obliterating the entire enterprise.There can be no question that a bankruptcy of BA would actually be a rational outcome for the travelling public.The ideal arrangement is for the three constituents to co-operate for their mutual benefit. Such profitable and harmonious partnerships are very hard to maintain, since each party tends to expect a growing slice – and the pie is shrinking almost everywhere.