Chapter 2 Stakeholder Relationships, Social Responsibility, and Corporate Governance

Business ethics

-involves carefully thought-out rules or heuristics of business conduct that guide decision making. -involves the decisions of every employee -more important in forming brand attitudes. What a firm does internally—not externally—has a measurably larger impact on corporate reputation and brand attitude than social responsibility, no matter how valuable those initiatives are.

Implementing a stakeholder perspective

1. assessing the corporate culture, 2. identifying stakeholder groups, 3. identifying stakeholder issues, 4. assessing organizational commitment to social responsibility, 5. identifying resources and determining urgency, and 6. gaining stakeholder feedback.

stakeholder model of corporate governance

A broader view of the purpose of business that considers stakeholder welfare in tandem with corporate needs and interests

Reputation

A corporation's image and an intangible asset with tangible value

A firm that recognizes other stakeholders beyond investors, employees, and suppliers, and explicitly acknowledges that dialogue exists between a firm's internal and external environments, has adopted which of the following?

A stakeholder interaction model

Which of the following would typically be considered a primary stakeholder group?

Community

Stakeholders

Customers, shareholders, employees, suppliers, government agencies, communities, and many others who have a "stake" or claim in some aspect of a company's products, operations, markets, industry, and outcomes

Ethics and social responsibility can be used interchangeably.

False

shareholder model of corporate governance

Founded in classic economic precepts, including the goal of maximizing wealth for investors and owners

Executive compensation

How executives are compensated for their leadership, organizational service, and performance

Discuss the difference between primary and secondary stakeholders in the stakeholder interaction model and provide examples of each.

I personally love the stakeholder interaction model because at times we collectively want to manage the most impactful groups of influence, yet secondary stakeholders do have that type of influence! Secondary stakeholders do not have direct impact on the company, while primary stakeholders do. Secondary stakeholders influence the primary stakeholders the majority of the time about the issues they have for or against a company. The primary stakeholders are customers, the government regulatory agencies, employees, suppliers, shareholders and the community. The secondary stakeholders are mass media, trade associations, competitors, and special interest groups.

Social responsibility in business refers to maximizing the visibility of social involvement.

No

The most significant influence on ethical behavior in an organization is the opportunity to engage in unethical behavior.

No

Three primary stakeholders are customers, special interest groups, and the media.

No

Explain why ethical misconduct is more difficult to overcome than poor financial performance.

Poor financial performance has checks and balances and tried and true strategies to become profitable once more. Ethical misconduct burns bridges down with stakeholders, which can due irreparable damage to their customer share in the market. It can be quite costly to change the image of the company.

Which of the following groups is defined as one that does not typically engage in transactions with a company and therefore is not essential for its survival?

Secondary stakeholders

Secondary Stakeholders

Stakeholders who do not typically engage directly in transactions with a company and are therefore not essential to its survival. Special interest groups, mass media, trade associations, and competitors

Interlocking directorate

The concept of board members being linked to more than one company

Stakeholder Orientation

The degree to which a firm understands and addresses stakeholder demands

Corporate Governance

The development of formal systems of accountability, oversight, and control

Corporate Citizenship

The extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders

Corporate governance

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

Explain why some businesspeople and scholars question the role of ethics and social responsibility in business.

The is much debate as to whether a business owes all duties and responsibility to stakeholders, or if the well being of the stakeholders must be considered. We also learned that some scholars question if financial success make it an option to be ethical, or being ethical and socially responsible leads to financial success.

Duty of care

The legal obligation of an individual or organization to make informed and prudent decisions and avoid behavior that could cause harm to others (Duty of diligence)

Duty of loyalty

The obligation of individuals to make decisions that are in the best interest of the corporation and its stakeholders

Stakeholder Interaction Model

This approach recognizes other stakeholders and explicitly acknowledges that dialogue exists between a firm's internal and external environments

Primary Stakeholders

Those whose continued association and resources are absolutely necessary for a firm's survival. Customers, community, employees, suppliers, government regulatory agencies, and shareholders

Stakeholders provide resources that are more or less critical to a firm's longterm success.

Yes

The stakeholder perspective is useful in managing social responsibility and business ethics.

Yes

Social issues

are associated with the common good. The common good is the idea that because people live in a community, social rules should benefit the community

Native Advertising

blends digital advertisements or company promotions with content on the website where it is featured.

Strategic social responsibility

decisions that impact stakeholders are usually made by top management.

Instrumental approach

describes what happens if firms behave in a particular way.* This approach is useful because it examines relationships involved in the management of stakeholders including the processes, structures, and practices that implement stakeholder relationships within an organization.

The obligation of individuals to make decisions that are in the best interests of the corporation and its stakeholders is known as a _______.

duty of loyalty

Descriptive Approach

focuses on the firm's behavior and usually addresses how decisions and strategies are made for stakeholder relationships.

Accountability, oversight, and control all fall under the definition and implementation of corporate _______.

governance

Normative Approach

identifies ethical guidelines that dictate how firms should treat stakeholders.

Social Responsibility

involves carefully thought-out rules or heuristics of business conduct that guide decision making.

Control

is the process of auditing and improving organizational decisions and actions.

Covert Marketing

occurs when companies use promotional tools to make consumers believe the promotion is coming from an independent third party rather than from the company

Oversight

provides a system of checks and balances that limit employees' and managers' opportunities to deviate from policies and strategies aimed at preventing unethical and illegal activities.

Accountability

refers to how closely workplace decisions align with a firm's stated strategic direction and its compliance with ethical and legal considerations.

Those who have a claim in some aspect of a firm's products, operations, markets, industry, and outcomes are known as _______.

stakeholders

Sustainability

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.

Fiduciary Duty

to assume a position of trust and confidence that entails certain responsibilities, including acting in the best interests of those they serve. Thus, board membership is not intended as a vehicle for personal financial gain; rather, it provides the intangible benefit of ensuring the success of both the organization and the people involved in the fiduciary arrangement.

Consumer Protection

which often occurs in the form of laws passed to protect consumers from unfair and deceptive business practices