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First of all, for a company to be successful, its directors must consider the impact of their decisions on a number of groups. Since a poor reputation is likely to pose a threat to long-term profitability, a company must also pay attention to its broader social performance. Firstly, the standard of social responsibility is very important to evaluate a company’s performance. Moreover, it would substantially influence a company’s profitability. For instance, people would like to choose a supermarket with high reputation in environment protection rather than a worse one. Secondly, the relevant restrictions reflect society’s judgement that for reasons of morality or social policy certain interests should not be overridden in the pursuit of private gain.
Secondly, stakeholder theory can invoke the advantages of long-term co-operative relationship as a means of increasing efficiency. The key relationships are those between the company and its employees, and between the company and its customers and suppliers. It is commonsense that, if there is no good relationship between a company and its employees, the employees would not contribute their work efficiently and actively. It will certainly reduce the efficiency and profitability of this company. Similarly, the advantages of co-operative relationships between a company and its customers and suppliers can be understood by contrasting relationships based on “classical” contracts and those involving “relational” contracts. These parties can be treated as a system. Good relationship among them could promote free flow of information, reduce cost, and monitor quality and delivery schedules. Obviously, a company can obtain benefits of this kind of co-operative relationships.
3. CFFs Development and Stakeholder Theory
3.1 General Introduction
In China, from late-Qin Dynasty to 1949, CFFs is a major part of Chinese economy, despite frequent war and weak central government. Even now, the largest of Taiwan business enterprises are still family controlled. After P.R. China was set up, almost all the private business is highly restricted by the Chinese Communist Party. It seems that all the family firms changed their identities to state owned firms, or collectively owned firms, over night. As illustrated above, around two decades ago, Chinese government began its economic reforms, including allowing the development of a private economy. In this situation, again, CFFs have shown their great activity and creativity in Chinese economic activity.
3.2 Low Social Class in Ancient China
From a historical perspective, Chinese businessmen have little social position about their careers. Ancient China was a strict hierarchical country. The sole respectful job was to be an intellectual and it was the only way for normal people to be an official. At that time, people were generally defined into several classes by their jobs. Businessman was nearly the lowest one. For this reason, Chinese businessmen appeared seriously suspicious of the public. They were not proud of their business and most of them began to operate a business purely for living not for investment. When they carried out their businesses, the tendencies were to keep as modest a public appearance as humanly possible. At that time, wealth didn’t give them accorded social position and power. They were doubtlessly discriminated even by poor intellectuals. Therefore, Chinese businessmen considered that they had the same social position as their employees, suppliers, and other stakeholders. Admittedly, they would show sympathy and care to those stakeholders.
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