Chapter 2: Stakeholder Relationship Flashcards
A business exist because of relationships between employees, customers, shareholders or investors, suppliers, and managers who develop strategies to attain success
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Business ethics issues, conflicts, and successes revolve all around relationships
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A stakeholder framework identifies the internal stakeholders (employees, Board of Directors, and managers)
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The external stakeholders are consumers, special interest groups, regulators
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A stakeholder framework identifies the internal stakeholders and the external stakeholders who agree collaborate and engage in confrontations on ethical issues
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Most ethical issues exist because of conflicts in values and beliefs patterns about right and wrong among and within stakeholder groups
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A formal system of accountability and control of ethical and socially responsible behavior is corporate governance
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Ethical issues relate to the role of Board of Directors, relationships with shareholders, internal control, risk management, and executive compensation
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In a business context, customers, investors and shareholders, employees, suppliers, government agencies, communities, and many others who have a stake or claim in some aspect of a company’s product, operations, markets, Industry, and outcomes are known as stakeholders
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There are three approaches to stakeholder theory: normative, descriptive, and instrumental approaches
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The normative approach identifies ethical guidelines that dictate how firms should treat stakeholders. Principles and values provide direction for normative decisions
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The descriptive approach focuses on the actual behavior of the firm and usually addresses how decisions and strategies are made for stakeholder relationships
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The instrumental approach to stakeholder theory 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 stakeholders relationships within an organization
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According to a recent Edelman trusts survey three industries in terms of the lowest level of trust were the media, banks, and financial services the most trusted industries were technology, automotive, and food and beverage
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There are two types of stakeholders primary stakeholders and secondary stakeholders
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Primary stakeholders are those who continued association is absolutely necessary for a firms survival. These include employees, customers, investors, and shareholders, as well as the government and communities that provide necessary infrastructure
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Secondary stakeholders do not typically engage in transactions with the company and are therefore not essential to its survival. These include the media, trade associations, and special interest groups like the AARP
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Stakeholder interaction model offers a conceptualization of the relationship between businesses and stakeholders
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The degree to which a firm understands and addresses stakeholders demand can be referred to as a stakeholder orientation.
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A stakeholder orientation involves activities and processes within a system of social institution that facilitate and maintain value through exchange relationships with multiple stakeholders
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The stakeholder orientation comprises three sets of activities:
- the organization wide generation of data about stakeholder groups and assessment of the firms effects on these groups
- the distribution of this information throughout the firm and
- The responsiveness of the organization as a whole to this information
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Social responsibility is an organization obligation to maximize its positive impact on stakeholders and minimize is negative impact
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Social responsibility can be viewed as a contract with a society, whereas business ethics involved carefully thought out rules or heuristics of business conduct that guide decision-making
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There are four levels of social responsibility economic legal ethical and philanthropy
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Business ethics comprises principles and values that meet the expectations of stakeholders
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Philanthropy responsibility refers to activities that are not required of businesses but that contribute to human welfare or goodwill
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Ethical decisions by individuals and groups drive appropriate decisions and are interrelated with all of the levels of social responsibility
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The term corporate citizenship is often used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders
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Corporate citizenship has four interrelated dimensions: strong sustained economic performance, rigorous compliance, ethical actions beyond what the law requires, and voluntary contributions that advance the reputation and stakeholder commitment of the organization
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A firm’s commitment to corporate citizenship indicates a strategic focus on fulfilling the social responsibilities its stakeholders expect
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Reputation is one of an organizations greatest intangible assets with tangible value
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Issues generally associated with social responsibility can be separated into four general categories: social issues, consumer protection, sustainability, and corporate governance
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Some major social issues are Internet tracking and privacy for marketing purposes, consumer protection, and corporate governance
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Consumer protection occurs in the form of laws passed to protect consumers from unfair and deceptive business practices
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Covert marketing occurs when companies use promotional tools to make consumers believe the promotion is coming from independent third-party rather than from the company
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We define sustainability 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
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Corporate governance involves the development of formal systems of accountability, oversight, and control
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Strong corporate governance mechanisms remove the opportunity for employees to make unethical decisions
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Adam Smith is one of the founders of capitalism
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Adam Smith developed the concept of the invisible hand and explore the role of self interest in economic systems he went on to explain that each individual has to produce for the common good with the values such as propriety, prudence, reason, sentiment and promoting the happiness of mankind
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Fiduciaries are persons placed in positions of trust that act on behalf of the best interests of the organization
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The national Association of corporate directors, a board of directors trade group, has helped formulate a guide for boards to help them do a better job of governing corporate America
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A duty of care or a duty of diligence is used to make informed and prudent decisions.
Dudy of loyalty which means all their decisions should be in the best interest of the corporation and its stakeholders
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Accountability is an important part of corporate governance. Accountability refers to how closely workplace decisions aligned with a firms stated strategic direction and is compliance with ethical and legal considerations
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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
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Control is the process of auditing and improving organizational decisions and actions
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There are two major approaches to corporate governance: the shareholder model and the stakeholder model
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Shareholder model of corporate governance is founded in classic economic precepts, including the goal of maximizing wealth for investors and owners
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Stakeholder model of corporate governance adopts a broader view of the purpose of business. Although a company certainly has a responsibility for economic success and viability to satisfy his stockholders, it must also answer to other stakeholders, including employees, suppliers, government regulators, communities and special interest groups with which it interacts
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The concept of board members being linked to more than one company is known as interlocking directorate
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One of the biggest issues corporate board of directors face is executive compensation
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Basic steps have been found effective in utilizing the stakeholder framework to manage responsibility and business ethics the steps include
- assessing The corporate culture,
- identifying stakeholder groups,
- Identifying stakeholder issues,
- assessing organizational commitment to social responsibility,
- identifying resources in determining urgency,
- gaining stakeholder feedback
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