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

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Role of stakeholders

provide resources that are critical to a firm's long-term success

Most basic level of Social Responsibility

Economic - maximizing stakeholder wealth and/or value

Third level of Social Responsibility

Ethical - following standards of acceptable behavior as judged by stakeholders

Fourth level of Social Responsibility

Philanthropic - "giving back" to society

Adam Smith's view

Values that a firm should adopt to produce in a more socially responsible way correlates with the needs and concerns of the stakeholders

Stakeholder Orientation activities

- Org.-wide generation of data about stakeholder groups and assessment of the firm's effects on these groups - Distribution of the generated data throughout the firm - Responsiveness of the org. as a whole to the data generated

Secondary Stakeholders

-Do not engage directly in transactions with a company -Not essential to a firm's survival -Include the media and trade associations

Normative Approach to Stakeholder Theory

Sets forth ethical guidelines that dictate how firms should treat stakeholders

Business exist because of what relationships?

The relationships between employees, customers, shareholders, and the community

Primary Stakeholders

-People whose support and resources are needed for a firm's survival - Include employees, customers, and shareholders

4 Interrelated Dimensions of Corporate Citizenship

1. Strong sustained economic performance 2. Rigorous compliance 3. Ethical actions beyond what the law requires 4. Voluntary contributions that advance the reputation and stakeholder commitment of the organization

Major areas of consumer protection

Advertising, disclosure, financial practices, and product safety

Social Issues in Social Responsibility

Associated with the common good, deal with concerns affecting large segments of society and the welfare of the entire society

Examples of Primary Stakeholders

Customers, Government Regulatory Agencies, Community, Suppliers, Shareholders, Employees

Sustainability in Social Responsibility

Defined as the potential for the long-term well-being of the natural environment, including all biological entities, as well as the mutually beneficial interactions among nature and individuals, organizations, and business strategies

Stakeholder Orientation

Degree to which a firm understands and addresses stakeholder demands

Corporate Citizenship

Degree to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their stakeholders

Accountability

Degree to which workplace decisions align with a firm's goals and its compliance with ethical and legal considerations

Instrumental Approach Stakeholder Theory

Describes what happens if a firm behaves in a particular way

Descriptive Approach Stakeholder Theory

Focuses on the actual behavior of a firm and addresses how decisions and strategies are made for stakeholder relationships

Corporate Governance

Involves the development of formal systems of accountability, oversight, and control - good corp. governance removes the opportunity for employees to make unethical decisions

Examples of Social Issues

Jobs lost through outsourcing, abortion, gun rights, and poverty Directly related to business: obesity, smoking, exploitation, Internet tracking/privacy

Second level of Social Responsibility

Legal - abiding by all laws and government regulations

Examples of Sustainability

New efforts regarding global warming and pollution

Consumer Protection in Social Responsibility

Often occurs in the form of laws passed to protect consumers from unfair & deceptive business practices - usually have an immediate impact on consumers after purchase

Reputation

One of the organization's greatest intangible assets with tangible value

Stakeholders

People who have a stake or claim in some aspect of a company's operations, markets, and industry

Examples of Secondary Stakeholders

Special Interest Groups, The Mass Media, Competitors, Trade Associations

Friedman's view

Stakeholders do not have any role in requiring businesses to demonstrate responsible and ethical behavior

Relationships are associated with both organizational success and misconduct

TRUE

Stakeholder support for companies that are socially responsible enhances a firm's profitability

TRUE

What does the stakeholder framework identify?

The internal and external stakeholders who agree, collaborate, and engage in confrontations on ethical issues

Stakeholder allows organizations to...

identify, monitor and respond to the needs and expectations of stakeholder groups

Stakeholders Role - foster decision making

the level of social responsibility of an organization can be assessed by scrutinizing its effects on the issues of concern to its stakeholders


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