Chapter 2 - Stakeholders and social responsibility Flashcards
Explain the agency relationship
A contract in which the principal (shareholder) engages the agent (directors) to perform a service on their behalf (run the business)
What is the agency problem?
That agents will act in their own self-interest and not aligned with interests of shareholders.
What can be used to monitor agents?
- Formation of committees
- Employ consultants
- Increase number of NEDs
- Attend AGM and question board
Give examples of agency costs
- Purchase of consultant
- External auditors’ fees
- Time spent attending company meetings
What is the difference between a direct and indirect stakeholder claim?
- Direct claims made with their own voice
- Indirect claims unable to make claims themselves as they are inarticulate or voiceless
What are the different types of shareholders?
- Internal
- Connected
- External
How does Mendelow’s matrix work?
Stakeholders are assessed based on ‘power’ and ‘level of interest’
- Low power, low interest - minimal effort
- Low power, high interest - keep informed
- High power, low interest - keep satisfied
- High power, high interest - key player
What can make a stakeholder claim more influential?
- Legitimacy - perceives claims to be valid
- Urgency - if requires immediate action
What does Carroll’s CSR pyramid suggest?
There is a hierarchy of needs an organisation should aim to fill, starting at the bottom
- Philanthropic - charitable donations
- Ethical - act in a fair and just way
- Legal - obeying law
- Economic - to shareholders wanting dividends
What does Matten and Crane corporate citizen suggest?
Three views of citizenship:
- Limited view - self-interest only
- Equivalent view - CSR
- Extended view - going above and beyond
What are the Johnson ethical stances?
- Short term shareholder interest - no obligation beyond law
- Long-term shareholder interest - image enhanced by assumption of wider responsibilities
- Multiple stakeholders - without customers etc wouldn’t be able to function
- Shaper of society - visionary leadership for social and market change
What is a pristine capitalist?
Business has no moral responsibilities beyond obligations to shareholders
What are the Gray CSR viewpoints?
- Pristine capitalist
- Expedient
- Social contract
- Social ecologist
- Socialist
- Radical feminist
- Deep ecologist
What is the ‘expedient’ viewpoint?
Social responsibility is only appropriate if in business economic interests
What is the ‘social contract’ viewpoint?
There is a contract between organisations and those affected by their decisions
What is the ‘social ecologist’ viewpoint?
Strategies leading to waste and pollution must be modified and organisations should be responsible for resource usage
What is the ‘socialist’ viewpoint?
Business decision-making should promote equality
What is the ‘radical feminist’ viewpoint?
Aim to promote feminine values (co-operation and empathy) over masculine values (aggression and conflict)
What is the ‘deep ecologist’ viewpoint?
Humans have no greater right to resources than any other species.
What does Visser CSR 2.0 suggest?
CSR Good Catch Five principles should be adopted to overhaul CSR: - Creativity - embrace new ideas - Scalability - translate across borders - Responsiveness - ability to change - Globality - made on global scale - Circularity - cycle of events
Explain triple bottom line accounting
Organisational activities are accounted for in less obvious ways
- People - social accounting - charity
- Planet - waste management
- Profit - success of business, redistribution of wealth to local community
Define integrated thinking
The active consideration of relationships between operating and functional units and the capitals that the organisation uses
What are the benefits of integrated thinking?
- Improve approach to decision-making - not made in isolation of wider situation
- Look at where they can create value in long term
- Think holistically
- Build relationships with employees
- Increased transparency
What are the capitals of integrated reporting?
FISH MN
- Financial - funds for use in production
- Intellectual - intangible assets
- Social - relationships between stakeholders
- Human - skills, experience, motivation
- Manufactured - physical objects used in production
- Natural - inputs to goods and services, and natural environment.
What is integrated reporting?
A process that results in a periodic integrated report about value creation.
What is a disadvantage of integrated reporting?
Auditors are concerned by high costs of being able to provide even limited assurance.
