Chapter 1

stakeholder salience

A stakeholder's ability to stand out from the background, to be seen as important, or to draw attention to itself or its issue. Stakeholders are more salient when they possess power, legitimacy and urgency.

Nonmarket Stakeholders Examples

Communities Nongovernmental organizations Business support groups (e.g., trade associations) Governments The general public Competitors

Market Stakeholders Examples

Employees Shareholders Customers Suppliers Retailers. Wholesalers Creditors

A basis for both the shareholder and stakeholder theories of the firm exists in law. The legal term ...

Fiduciary means a person who exercises power on behalf of another, that is, who acts as the other's agent. In U.S. law, managers are considered fiduciaries of the owners of the firm (its shareholders) and have an obligation to run the business in their interest.

Stakeholders

Refers to persons and groups that affect, or are affected by, an organization's decisions, policies, and operations. individuals or organizations that own shares of a company's stock are one of several kinds of stakeholders. All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address.

focal organization

The organization from whose perspective a stakeholder analysis is conducted.

Boundary-spanning departments

are departments, or offices, within an organization that reach across the dividing line that separates the company from groups and people in society. Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management's role.

Nonmarket stakeholders

are people and groups who-although they do not engage in direct economic exchange with the firm-are nonetheless affected by or can affect its actions.

Supporters of the stakeholder theory of the firm make three core arguments for their position:

descriptive, instrumental, and normative.

Globalization

growth to a global or worldwide scale the process by which businesses or other organizations develop international influence or start operating on an international scale.

Stakeholder power

means the ability to use resources to make an event happen or to secure a desired outcome. Stakeholders have five different kinds of power: - voting power - economic power, - political power - legal power - informational power.

business

refers here to any organization that is engaged in making a product or providing a service for a profit.

instrumental argument for stakeholder theory

says that stakeholder management is more effective as a corporate strategy. A wide range of studies have shown that companies that behave responsibly toward multiple stakeholder groups perform better financially, over the long run, than those that do not. stakeholder theory is more effective as a corporate strategy: financially

normative argument for stakeholder theory

says that stakeholder management is simply the right thing to do. Corporations have great power and control vast resources; these privileges carry with them a duty toward all those affected by a corporation's actions. Moreover, all stakeholders, not just owners, contribute something of value to the corporation. stakeholder management is the right thing to do

Shareholder theory of the firm (ownership theory)

the firm is seen as the property of its owners. The purpose of the firm is to maximize its longterm market value, that is, to make the most money it can for shareholders who own stock in the company.

Stakeholder Analysis

the term used when a decision maker views a problem from different perspectives and measures the impact of a decision on various groups

Stakeholder Theory of the Firm

, argues that corporations serve a broad public purpose: to create value for society. All companies must make a profit for their owners; indeed, if they did not, they would not long survive.

General systems theory

, first introduced in the 1940s, argues that all organisms are open to, and interact with, their external environments.

Society

, in its broadest sense, refers to human beings and to the social structures they collectively create. In a more specific sense, the term is used to refer to segments of humankind, such as members of a particular community, nation, or interest group.

Market stakeholders

are those that engage in economic transactions with the company as it carries out its purpose of providing society with goods and services.

External stakeholders

are those who-although they may have important transactions with the firm-are not directly employed by it.

Internal stakeholders

are those, such as employees and managers, who are employed by the firm. They are "inside" the firm, in the sense that they contribute their effort and skill, usually at a company worksite.

descriptive argument for stakeholder theory

says that the stakeholder view is simply a more realistic description of how companies really work. stakeholder view is a more realistic description of how companies work, have to focus on all stakeholders to be successful