2. Stakeholder Theory and Legitimacy Threats- Polluter dilemma Flashcards
1
Q
Definition of a stakeholder
A
- A person, group, organization, or system who affects or can be affected by an organization’s actions, objectives and policies
2
Q
Stakeholder of a firm
A
- Governments
- Investors
- Political Groups
- Customers
- Community
- Employees
- Trade Associations
- Suppliers
- Interests of stake = Climate change
3
Q
Normative stakeholder theory
A
- Fallacy (Trugschluss) of separation thesis = Business and moral decisions are always interconnected with each other
- Stakeholders have a moral claim = Corporation has the potential to harm or benefit them
- Treat people as ends undo themselves (Selbstzweck)/ Corporate decisions should respect stakeholders wellbeing rather than treating them as means to a corporate goal (Freeman)
4
Q
From Stakeholder theory to Stakeholder management
A
- Normative = Stakeholders have legitimate and intrinsically important interests/ Each stakeholder merits (verdient) consideration for its own sake/ In the center of the circle
- Instrumental = Framework to analyze the effect of stakeholder management on corporate performance goals
- Decriptive = Description of the corporation as constellation of cooperative + competitive interests
5
Q
Normative Stakeholder Theory
A
- Stakeholders have legitimate and intrinsically important interests/ Each stakeholder merits (verdient) consideration for its own sake/ In the center of the circle
- Legitimacy/ 2. Urgency/ 3. Power
6
Q
Normative Stakeholder Theory- Strategic implications
A
- The primary responsibility of manager = Create as much value as possible for stakeholder
- Stakeholder theory explains how value is created and how it is distributed among different legitimate stakeholders
- Distribution involves more than just financial resources
7
Q
Instrumental stakeholder theory
A
- Instrumental = Framework to analyze the effect of stakeholder management on corporate performance goals
- Core = At the top/ Essential to firms survival
- Strategic = Associated with relevant threats and opportunities
- Environment = At the top/ All others
- Matrix = 1. Power High + Interest High = Manage closely/ 2. Power High + Interest Low = Keep satisfied/ 3. Power Low + Interest High = Keep informed/ 4. Power Low + Interest Low = Monitor
8
Q
Descriptive stakeholder theory
A
- It describes the corporation as a constellation of cooperative and competitive interests
- Primary stakeholders: Stakeholders that are directly or significantly affected by firms
- Secondary stakeholders: Stakeholders that are indirectly affected by firm’s activities or firm’s impact is not so relevant
9
Q
Stakeholder theory summary
A
- Socially responsible process innovations: (proactive) multinational companies vs. (reactive) small enterprises
- Descriptive, instrumental, and normative stakeholder theory
- Taxonomies for stakeholder management
10
Q
Guidant Industry analysis
A
- Very competitive
- High returns but huge investments
- High competition and highly regulated sector
- Sensitive sector
11
Q
Guidant Organization analysis
A
- Quantity valued over quality
- Manager were ambitious towards market objective
- Economic incentives cash bonus sand free tickets (become problematic if short term oriented)
12
Q
Why didn’t they disclose information to patients and doctors in 2001?
A
- Information would have had a negative impact on already damaged reputation
- Risks of replacing the ICD were bigger than the risks associated with having the faulty defibrillator
- No medical doctors involved in decision/ Committee made up of engineers and managers/ Pragmatic Legitimacy
- No legal requirement = Only required to inform FDA but no legal duty to inform doctors and patients/ When analyzing an ethical dilema you always have to look first at the legal requirements
- Economic Value = ICD implants were 45% of Guidant Sales
- Strong economic incentive because Johnson & Johnson wanted to buy Guidant in 2003 and negative information about the ICD implants would drive stock value down
13
Q
Different types and definition of Legitimacy
A
- Legitimacy = Perception or assumption that actions of an entity are Desireable, Proper, Approriate/ Within some socially constructed system of Norms, Values, Beliefs, Definitions
- Pragmatic Legitimacy = Directly/ Based on self-interested calculations of organizations immediate audiences
- Moral Legitimacy = Broader normative evaluation of social appropriateness
- Institutional Legitimacy = ?
14
Q
Ethical misbehaviors/ Legitimacy/ Market performance
A
- Ethics is linked to morality
- Morality in turn is in linked to values, beliefs, norms that define right or wrong for an individual or community
- From Ethical behavior to Thrive = 1. Ethical behavior/ 2. Legitimacy/ 3. Stakeholder support/ 4. Resources acquisition/ 5. Thrive
- From Unethical behavior to Organization failure = 1. Unethical behavior/ 2. Legitimacy threat/ 3. Lack of stakeholder support/ 4. Organization failure
15
Q
(Distorted) Situation factors affecting this choice
A
- Short term economic incentives
- Unclear legal framework
- Legitimacy/reputation
- Self-interest culture
- Moral framing = The way in which an issue is presented affects our choice/ E.G. “The technical problem increases the risk of malfunction of defibrillators by 0.11%” vs. “The technical problem could cause the death of 15 patients”
16
Q
Volkswagen Scandal: similar distorted mechanisms
A
- Admitted that 11 million of its cars were equipped with a software that was used to cheat on emissions tests
- Falsified the US pollution tests by installing software to make cars appear cleaner
- The profit as well as the stock price has fallen sharply after the announcement
17
Q
Nike example
A
- Nike Child labor and sweatshop boycott in 1994
- Nike boycott in 1999
- The only times when Nike had a sales collapse
18
Q
Guidant corporation summary
A
- Drivers for ethical misbehaviors at org. level
- Ethical misbehaviors, legitimacy threats, org survival
