1.3. Stakeholders

Question 1

Corporate sustainability

Answer 1

companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis

Question 2

Purpose of corporate sustainability

Answer 2

Firms exist to satisfy the objectives of plurality of actors who contribute to its creation, development and success

A multi-dimensionaldefinition of firm goals (objective function) along economic, social and environmental objectives

Question 3

Process of corporate sustainability

Answer 3

strategic processes, governance mechanisms, innovation activities, learning, change and operating routines are orientated towards satisfactio of stakeholder’s interests

Question 4

Mindset of corporate sustainability

Answer 4

people mindset:

• cognitive frames (identity, values)
• emotional dispositions (empathy, fairness)

that are in line with collective purpose/goals

Question 5

Friedman view

Answer 5

1. social responsibility of business is to increase profits
2. only individuals have social responsibilities
3. executives are agents serving their principal
4. if executives exert social responsibility, they spend someone else’ money:
   
   • shareholder
   • employee
   • clients
5. agent imposes tax:
   
   • principle problem: is it the role of gov to impose tax? manager or public servant?
   • consequence problem: is the manager the right person to decide on how to allocate this money?

=> vision that the firm contributes to society by creating economic value

=> role of corporations and public policy to reduce externalities

Question 6

Stakeholders

Answer 6

1. Primary stakeholders (customers, communities, financiers, employees, suppliers) are vital to the growth and survival of the business
2. Secondary stakeholders: groups that can affect the primary relationships (media, gov, competitors, consumer advocate groups, special interest groups)

Question 7

Freeman view

Answer 7

1. who is primary/secondary stakeholders depends on the company’s overall purpose
2. interaction between stakeholders create value
3. capitalism is primarily a cooperative system of innovation, create value
4. success depends on the satisfaction primary stakeholders
5. ways to deal with stakeholders:
   
   • ignorance
   • sharing corporate story (public relations
   • implicit negotiation
   • stakeholder engagement
6. challenge: balancing and keeping their interests aligned

Question 8

Shareholders vs. stakeholders

Answer 8

Shareholders:

• Purpose: maximise profit
• Accountability of managers: to principal (financiers)
• Role of profit: end
• Role of stakeholder’s satisfaction: means

Stakeholders:

• Purpose: satisfy key stakeholders
• Accountability of managers: to key stakeholders
• Role of profit: means
• Role of stakeholder’s satisfaction: end

Question 9

Example (employees)

Answer 9

In 2014, Air France lost 400 milion due to pilots going on strike -> share value dropped by 2%

Question 10

Managing for clients

Answer 10

• Cooperatives, based on the principle of economic democracy
• Members are both clients and shareholders
• Main industries: agricultural, consumer cooperatives, cooperative banks, social cooperatives

Question 11

Managing for communities

Answer 11

• micro edit organisations
• development ngos
• social entrepreneurs
• triple bottom line

Question 12

Why is managing stakeholder difficult?

Answer 12

• conflicting interests
• identifying central and peripheral stakeholders
• customers and employees are also citizens
• complex nexus of relationships
  
  • – > E.g. damaging the environment can affect reputation, customer loyalty, employee turnover… and eventually profit