Chapter 2 - Stakeholder Relationships, Social Responsibility, and Corporate Governance

Legal

abiding by all laws and government regulations

Stakeholder model of corporate governance

broader view of the purpose of business. A company has responsibility for economic success and viability to satisfy its stockholders it also must answer to other stakeholders including employees, suppliers, government regulators, communities, and special interest groups with which it interacts.

Secondary stakeholder

do not typically engage in transactions with a company and thus are not essential to its survival, these include the media, trade associations, and special-interest groups

Ethical

following standards of acceptable behavior as judged by stakeholders

Corporate governance

formal systems of accountability, oversight, and control.

Shareholder model of corporate governance

founded in classic economic precepts, including the goal of maximizing wealth for investors and owners. For publicly traded firms, corporate governance focuses on developing and improving the formal system for maintaining performance accountability between top management and firms shareholders.

Philanthropic

giving back to society

Corporate citizenship

is often used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their various stakeholders. Has four interrelated dimensions, strong sustained economic performance, rigorous compliance, ethical actions beyond what the law requires, and voluntary contributions that advance the reputation and stakeholder commitment of the organization.

Economic

maximizing stakeholder wealth and/or value

Reputation

one of the organizations greatest intangible assets with tangible value.

Stakeholder

provide resources that are more or less critical to a firm's long term success, in the business context, customer, investors, shareholders, employees, suppliers, government agencies, communities, and many others who have a "stake" or claim in some aspect of the company's products, operations, markets, industry, and outcomes

social responsibility

refers to an organizations obligation to maximize it's positive impact on society and minimize it's negative impact, business ethics embodies standards, norms, and expectations that reflect a concern of major stakeholders, including customers, employees, shareholders, suppliers, competitors, and the community.

Stakeholder orientation

the degree to which a firm understand and addresses stakeholder concerns. Comprises of (1) the organization wide generation of data about stakeholder groups and assessment of the firms' effects on these groups, (2) the distribution of this information throughout the firm, and (3) the organization's responsiveness as a whole to this intelligence.

Stakeholder interaction model

these are two way relationships between the firm and a host of stakeholders. Fundamental input of investors, employees, suppliers, this approach recognizes other stakeholders and explicitly acknowledges the dialogue that exists between a firms internal and external environments

Primary stakeholder

those whose continued association is absolutely necessary for a firm's survival, these include employees, customers, investors, and shareholders, as well as the governments and communities that provide necessary infrastructure