53 What is a “stakeholder retaliation threshold” (SRT)?

In a discussion on the purpose of business, a point that is often made is that businesses exist to create value for their stakeholders. Customers purchase products made by a business because they add value to their lives. Employees work at a business because it creates value for their careers. Shareholders invest in a company expecting a valuable return on their investment. Business partners such as suppliers engage with a business because of the shared value created by exchange.

However, there may often come a time when stakeholders begin to feel the business is not creating value for them in the way they desire. When this happens, they may begin to retaliate against the business. Customers may switch products or file class action lawsuits against a company. Employees may begin to stage walk-outs or leave to work for competitors. Local communities may begin to protest the business or attempt to shut down its operations. Suppliers may not renew contracts. In each of these cases, a stakeholder has moved from a position of shared value to one of antagonism against the company.

We call this tipping point the “stakeholder retaliation threshold“.^[1] This may not represent a single, well-defined point in the history of a company, but it serves as a useful heuristic tool for analyzing the effects a decision may have on a company’s future.