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