Stakeholder Relationships, Social Responsibility, and Corporate Governance

Implementing a Stakeholder Perspective

1. Assessing corporate culture 2. Identifying stakeholder groups 3. Identifying stakeholder issues 4. Assessing organizational commitment to social responsibility 5. Identifying resources and determining urgency 6. Gaining stakeholder feedback

3 Activities of Stakeholder Orientation

1. Generation of data about stakeholder groups 2. Distribution of the information throughout the firm 3. Organization's responsiveness to this intelligence

Oversight: Corporate Governance

A system of checks and balances to minimize opportunities for misconduct

Legal

Abiding by all laws and government regulations

Reputation

An organization's greatest intangible assets with tangible value Difficult to quantify, but very important

Social Responsibility

An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact

Interlocking Directorate

Board members linked to more than one company

Stakeholder Model

Broader view of the purpose of the business Includes satisfying concerns of stakeholders

Four levels of social responsibility

Economic Legal Ethical Philanthropic

Ethical

Following standards of acceptable behavior as judged by stakeholders

Shareholder Model

Founded in classic economic precepts Maximization of wealth for investors and owners

Philanthropic

Giving back to society

Board of Directors

Holds final responsibility for its firm's success, failure and ethicality of actions

Accountability: Corporate Governance

How closely workplace decisions align with a firm's strategic direction

Stakeholder Framework

Identify internal and external stakeholders Helps monitor and respond to needs, values, and expectations of stakeholder groups

Trends for Board of Directors

Increased demands for transparency Trend toward "outside directors" chosen for expertise Executive compensation is a growing concern

Associations of Stakeholder Orientations

Increased profits Increased employee commitment Greater customer loyalty

Economic

Maximizing stakeholder wealth and/or value

Secondary Stakeholders

Not essential to a company's survival Media, Trade Associations, Special interest Groups

Importance of a Stakeholder Orientation

Social responsibility cannot be reactive, must be part of business strategy

Corporate Governance Models

Stakeholder Model Shareholder Model

Four Interrelated Dimensions

Strong sustained economic performance Rigorous Compliance Ethical actions beyond what is legally required Voluntary contributions to advance reputation and stakeholder commitment

Stakeholder Orientation

The degree to which a firm understands and addresses stakeholder demands

Corporate Citizenship

The extent to which businesses strategically meet their econ, legal, ethical, and philanthropic responsibilities

Corporate governance

The formal system of accountability and control of ethical and socially responsible behavior

Control: Corporate Governance

The process of auditing and improving organizational decisions and actions

Primary Stakeholders

Their continued association is necessary for a firm's survival Employes, customers, investors, governments, and communities

Stakeholders

Those who have a stake or claim in some aspect of a company's products, operations, markets, industry, and outcomes Can influence and are influenced by businesses

Worlds Most Ethical Companies

Trader Joe's Xerox Aflac General Mills Starbucks Best Buy Ford, General Electric, etc