Introduction: A stakeholder is a person who has a direct or indirect interest in the objectives of a firm, including customers, board of directors, employees, shareholders, and suppliers. They monitor the satisfaction of various constituencies that have critical interest in and impact on the company’s performance (Kotler Keller, 2012). For example, Gate Gourmet is a supplier for British Airways and plays an important role in the development of the firm. It is crucial to assess stakeholders for maintaining long-term relationships.
There are three main connection features that drive the value of stakeholders. This essay will map British Airways’ stakeholders as well as the ethical concerns it has dealt with from its different stakeholders.
Background of British Airways
The group of British Airways comprises British Airways plc and various other subsidiary companies. It is one of the greatest airlines in the world, providing transportation services to its customers up to 149 destinations in 72 countries.
British Airways succeeded in carrying 35 million passengers and 900,000 tons of cargo during the year 2004-2005. The airline’s network is centered in the United Kingdom, where it employs 85% of its workforce. The core activity of British Airways and its group is to provide international and domestic scheduled airline services for passengers, post mail, and additional services. British Airways has a variety of stakeholders, with most being considered dominant.
The code of conduct at British Airways applies to all stakeholders, including employees, customers, suppliers, financial institutions, local communities and directors of British Airways Plc and its subsidiary companies. It is discussed with each employee during recruitment and failure to comply may result in punishment or charges under the EG 901 act. The code of conduct covers conflicts of interest, misuse of opportunities and information, confidentiality and fair dealing.
Furthermore, British Airways’ approach is to develop strong relationships with its stakeholders. The company has implemented leadership programs to acquire professional leaders who can effectively communicate with people, involve them in the decision-making process, and make them feel like they are part of the company’s future.
Figure 1.0 shows British Airways’ stakeholders categorized by power and interest levels:
The company must ensure that it complies with legal regulations to keep the government satisfied due to their high level of power.
When tax or other duties are not met, the company can be closed down. The power of customers is high because they provide most sales for the company, even though they have very little interest in how BA runs its business. Key players include:
- Employees: They have high interest and power on the business because they can attract customers.
- Competitors: They can affect the decisions and strategies of the business due to market nature.
- Suppliers: BA relies mainly on Airbus and Boeing as suppliers because they generate high income for the business.
- Financial Institutions: Banks’ assistance is required to support BA, but they can refuse necessary finance if needed.
- Shareholders: They have power over employing and dismissing staff, as well as making key decisions for the company.
- Local Communities: Keeping communities satisfied is important for BA’s brand image. Environmental issues also hold high power over its direction of CSR (Corporate Social Responsibility).
- Media: Maintaining a good relationship with media is crucial for having a worthy relation with public opinion.
In figure 2.0 above, both employees and suppliers are shown to have high interest and power in British Airways’ development. In 2005, Gate Gourmet – a food supplier for BA – disputed with workers over restructuring plans which resulted in an unofficial strike. Prior to this incident, British Airways staff took action which was disapproved by trade unions after hundreds of workers were terminated by Gate Gourmet.
Actions taken by British Airways workers resulted in the cancellation of over 700 flights during a busy time of the year. Approximately one thousand Heathrow staff expressed their support for terminated gate gourmet workers. Both BA and gate gourmet staff belonged to the same union and community, which were mostly Asian British. The incident led to a thousand passengers being stranded, costing the company an estimated amount of ?40 million. Furthermore, it damaged the airline’s reputation.
For the third consecutive summer, BA passengers have faced severe disruptions due to industrial action. Without delay, BA was forced to intervene openly in the Gate Gourmet dispute because it relies on the company to provide a large quantity of meals for its Heathrow hub. BA decided to renegotiate its contract with Gate Gourmet on the condition that they resolved their own labor dispute.
BA proposed an extension of two years to their existing contract, moving it to 2010. They also made some progress in terms of assisting with the anticipated cost of a dismissal program, which was estimated at ? million.
After several days of negotiations involving the Trades Union Congress, a biased deal was reached that included a request for volunteers for an enhanced dismissal program. This involved a payment of two weeks’ pay for each completed year of service and was offered both to dismissed workers and those still employed by the company (including some who had been absent from work for other reasons). A reported 675 applications were received.
However, a major point of contention was that senior management stated they would not rehire any of the 200 workers they deemed as radicals. As a result, approximately 700 staff members applied for redundancy – 300 from those who were terminated and 400 from existing staff. Negotiations between the company and the union were scheduled to take place to address this issue.
The Gate Gourmet dispute has been one of the most bitter in recent British industrial relations history. The company accused certain sections of its workforce and their union of being stubborn in their resistance to necessary cost-cutting and flexibility measures.
According to management, shop stewards were attempting to hold the company hostage by using commercial penalties associated with late deliveries as a means of defending outdated and unproductive ‘custom and practice’ rules. They also claimed that radicals instigated the walkout on false pretenses, as it was typical for temporary workers to be hired during busy summer periods. The union countered these claims by accusing the company of inciting the strike in order to terminate workers without compensation, with union activists involved. (James A, 2005).
The application of the Triple Bottom Line Concept (TBL) to British Airways was initiated by Elkington in 1999. This enhanced approach supports social development, environmental stewardship, sustainable development, and social equality. The triple bottom line consists of social, environmental and economic factors – the people, planet and profit”. Triple bottom line strategies vary depending on the firm and society within our statewide network. This approach moves towards a more flexible and innovative building of new economies that protect, improve and restore natural resources as well as educational, historic and social resources.
The importance of Triple Bottom Line can be seen in various aspects. Social improvement is one of them, which includes training, improvement in the training and educational systems, dismantling of racism as well as power sharing (Crane and Matten, 2004). Secondly, economic gain involves job creation, engaging environmentally responsible industries and reducing poverty. Finally, environmental benefits include protecting resources, local ownership of lands, managing water resources effectively while reducing environmental pollution and improving its quality.
Environmental Perspectives (Responsibilities) Of British Airways: In the case of British Airways minimizing the ethical issues is an appreciated effort and has benefited many lives. It is a business that struggled in minimizing the waste on the environment from the raw material and the production process, to the shipping and administration. It includes recycle of goods. Although this maybe true but British Airways has been trying to reduce its CO2 emissions since the year of 2005 and it won’t reach its target until the year 2050. Below is a graph showing climate target. ( CO2 emissions)
Source: British Airways Corporate Responsibilities Report 2010-2011.
The graph above illustrates future improvements in carbon efficiency and climate change. The upper dotted line represents projected emissions if the industry does not invest in new technology, and governments do not introduce policy measures. The demand reduction area represents the reduction in flying due to the inclusion of carbon costs in airfares. The lowest line is the net emissions level achieved after all emission reduction actions have been implemented.
Social Perspective (Responsibilities):
Many employees at British Airways prefer to participate in charitable activities on a large scale. Management also supports employees in these good causes. Charitable projects conducted by British Airways include the giving scheme, the British Airways community volunteering awards, and British Airways fun runs for Cancer Research UK. Social responsibilities are promoted through onboard announcements and displaying onboard videos. Overall, British Airways has a crew of almost 2400 members who coordinate onboard collections from passengers.
British Airways has built a collection point where people can donate as much as they want. The airline also offers support in the form of funding, free flights, excess baggage, merchandise, cargo space and fundraising events. Their main concerns for funding are community and conservation which started in 1984. These schemes are offered around the world. Many BA staff members are involved in aid organizations both domestically and internationally. As part of their management strategy, they support their staff in their charitable work.
The economic responsibility is an essential aspect of a company’s operations. It involves creating a sincere profit while also considering the other two principles of People and Planet. In the past, major corporations used to disregard the idea of a Triple Bottom Line reporting system, but there has been a progressive movement towards influencing their suppliers. This is because supply chains are responsible for creating an overall impression of a company. An effective implementation of economic responsibility focuses on the corporation’s financial performance.
The responsibility of management is to develop, produce, and market products that ensure long-term economic performance for the company. This involves emphasizing strategies that indicate a long-term rise in share price, revenues, and market share rather than short-term bursts of profits at the cost of long-term feasibility. When critically examining this approach, it becomes apparent that there have been negative outcomes that have impacted the industry. To understand these problems further, we must analyze another stakeholder involved in the dispute: Gate Gourmet, who were key players from the suppliers’ side.
The negative outcome of the situation was that British Airways lost an estimated amount of money due to the cancellation of 700 flights. Approximately 100,000 passengers were affected, which had a significant impact on British Airways’ reputation. The root cause of the problem was attributed to the suppliers’ employees, and there was less attention given to them.
However, it is worth noting that British Airways has made commendable efforts in Corporate Social Responsibility (CSR). The company recognizes its responsibilities towards the environment and its employees. Its vision is to become the world’s most responsible airline.
British Airways has taken a socially responsible approach with the help of the triple bottom line model and stakeholder mapping. It is commendable to see such a large corporate industry making efforts for the benefit of people and the environment. However, it is important for corporate industries to calculate the projection of each CSR initiative, as negative impacts could potentially harm their reputation. Therefore, BA should conduct thorough research to understand who they will be doing business with in order to avoid any potential conflicts or misunderstandings with stakeholders.
On the other hand, due to the high power of British Airways’ employees, the company was able to ethically assist Gate Gourmet workers by getting involved in a more concerned way.
References:
- Petya Laleva, 2011, British Airways Stakeholder Analysis,” [Online] Available at: http://www.slideshare.net/petysha/1-british-airways-stakeholder-analysis-petya-laleva [Accessed: October 12, 2012]
- James Arrowsmith, 2005, “British Airways’ Heathrow Flights Grounded by Dispute at Gate Gourmet,” [Online] Available at: http://www.eurofound.europa.eu/eiro/2005/09/feature/uk0509106f.tm [Accessed: October 12, 2012]
- Strategic Report, 2009 [Online] Available at: http://www.scribd.com/doc/23329171/British-Airways-Strategic-Plan [Accessed: October 13, 2012]
- British Airways ,2010, “Corporate Responsibility Report” [Online] Available at : http://www.britishairways.com/cms/global/pdfs/environment/ba_corporate_responsibility_report_2010-2011.pdf [Accessed: October 12, 2012]
Sources:
- Andrew C., Dirk M., (2010). Business Ethics. (3rd ed.). Oxford University Press Plc. New York.
- Kotler K., (2012). Marketing Management. Pearson Education Limited.
