Business and Society

how can corporate management manage the environment to enhance the firm?

1. retaining as much autonomy as possible when making decisions 2. recognizing that all stakeholders are not equal in accuracy of perceptions, quality of input, or importance of the firm 3. evaluating stakeholders and responding appropriately to each.

stakeholder power

means the ability to use resources to make an event happen or to secure a desired outcome.

what is social disaggregation?

when people feel the costs of membership exceed the benefits, they may attempt to reduce the societys control over them physical withdrawal-move outside of social control psychological realignment-identification with similar sub group rather than with the larger community delegitimization of authority-unwillingness to voluntarily accept social/legal expectations

salience

scholars have suggested that managers pay the most attention to stakeholders possessing greater salience. (something is salient when it stands out from a background, is seen as important, or draws attention) stakeholders stand out to managers when they have power, legitimacy, and urgency.

how did industrialization shape america?

1. america became economically and political independent of europe 2. growth of public institutions of higher education contributed to the concept of democratic meritocracy 3. growth in personal wealth created institutional philanthropy 4. increased immigration led to greater cultural diversity 5. economic power of corporations led to concerns about the potential for abuse of power. led to anti trust legislation, rise of industrial unionism

what was the industrial revolution all about?

1. development of technology to harness and apply new power sources 2. development of new materials for industrial and product applications 3. application of technology to transportation, manufacturing, and agriculture

how did industrialization change societies?

1. introduction limited liability 2. education increased emphasis on applied, "practical subjects 3. transportation improvements facilitated movement of people and shipment of goods 4. increased availability of products that imporoved quality of life for many 5. urban growth around production facilities led to growth of many social problems-sanitation and health, crime, illiteracy 6. rise of new economic social classes: capitalist upper class industrial middle class wage dependent working class

how did business change as economies industrialized?

1. new technology required large capital investment to develop and utilize it 2. unit cost reductions associated with volume production encouraged price reduction and market expansion 3. introduction of factories and mills requires relocation labor to production 4. increased size led to depersonalization 5. business decisions are influenced more by perceived role responsibilities than by personal values

ownership theory of the firm

also called property or finance theory; the purpose of the firm is to maximize its long-term market value, that is, to make the most money it can for shareholders who own stock in the company. in this view owners interests are paramount and take precedence over the interests of others

what is a stakeholder?

anyone who affects or is affected by a firms decisions operations or policies

stakeholder theory of the firm

argues that corporations serve a broad public purpose which is to create value for society. all companies must make a profit for their owners, if they did not, they would not survive long. in this view, corporations have multiple obligations, and all stakeholders interests must be taken into account.

economic power

customers, suppliers, and retailers have economic power with the company. suppliers can withhold supplies or refuse to fill orders if a company fails to meet its contractual responsibilities example: boycotting products

3 core arguments for the stakeholder theory of the firm

descriptive: stakeholder view is simply a more realistic description of how companies really work. managers have to pay keen attention, or course, to their quarterly and annual financial performances. instrumental:says that stakeholder management is more effective as a corporate strategy. good relationships with stakeholders are themselves a source of value for the firm. attention to stakeholders rights and concerns can help produce motivated employees, satisfied customers, and supportive communities all good for the companys bottom line normative: says that stakeholder management is simply the right thing to do. corporations have great power and control vast resources; theses privileges carry with them a duty toward all those affected by a corprations actions.

what are costs associated with societal affiliation?

economic costs-taxes, user fees, assessments conformity-pressure to conform to behavioral norms or beliefs restrictions on freedom-laws that are perceived as intrusive or oppressive limited opportunities-economic, legal or social restrictions on personal achievement

political power

exercise political power through legislation, regulations, or lawsuits. can use powers by passing new laws or enacting regulations. example: promoted local ordinances prohibiting cities from buying from certain companies

what societies need from social institutions

governmental institutions -protect the citizens from external threat -maintain order -administer justice cultural institutions -preserve, maintain and transmit common cultural values -give members a sense of common identity economic institutions -provide goods and services -create societal wealth

legal power

have legal power when they bring suit against a company for damages based on harm caused by the firm. ie lawsuits brought by customers for damages caused by defective products, brought by employees for damages caused by workplace injury or brought by environmentalists for damages caused by pollution or harm to species or habitats. example: brought a lawsuit for damages on behalf of Burmese villagers

nonmarket stakeholders

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. nonmarket stakeholders include the community, various levels of government nongovernmental organizations, the media, business support groups, competitors, and the general public. nonmarket stakeholders are not necessarily less important than others, simply because they do not engage in direct exchange with a business.

informational power

power when they have access to valuable data, facts, or details. the disclosure or nondisclosure of information can be used to persuade, mobilize, or threaten others example: gathered information about government abuses by interviewing burmese refugees and publishing the results online.

legitimacy

refers to the extent of which a stakeholders actions are seen as proper or appropriate by the broader society

urgency

refers to the time sensitivity of a stakeholders claim, that is, the extent to which it demands immediate action

voting power

the stakeholder has a legitimate right to cast a vote. stockerholders typically have voting power proportianate to the percentage of the companys stock they own. stockholders typically have an opportunity to vote on such major decisions as mergers and acquisitions, the composition of the board of directors, and other issues that may come before the annual meeting. example: activists organized protests at stockholder meetings

market stakeholders

those that engage in economic transactions with the company as it carries out its purpose of providing society with goods and services. stockholders invest in the firm and in return receive the potential for dividends and capital gains.

what are the 5 types of stakeholder power?

voting power; economic power; political power, legal power and informational power; activists use all of these kinds of power when they want to change a companys policy.