Chapter 6: Stakeholders & institutions Flashcards
What is shareholder value?
Milton Friedman developed the doctrine as a theory of business ethics that states that “an entitys greatest responsibility lies in satisfaction of the shareholders.” Therefore, the business should always aim to maximize its revenues to increase returns to the shareholders.
What is stakeholder theory?
R.E Freeman said that a firm should create value for all stakeholders, not just shareholders. This is a perspective that stresses the interconnected relationships between a business and its customers, suppliers, employees… and others who have a stake in the organization.
What is the definition of stakeholders?
Stakeholders are individuals or groups that
depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends on
What are the five different categories of stakeholders?
Economic stakeholders.
Social/political stakeholders
Technological stakeholders
Community and society stakeholders
Internal stakeholders
What is stakeholder mapping?
Also called the power/attention matrix. There’s so many stakeholders: categories them and understand the priority stakeholders by mapping them.
Which are the four different groups in the power/attention matrix? (Stakeholder mapping)
A. Key players (high attention and high power)
B: Sleeping giants (low attention but high power, keep them satisfied)
C: Gadflies (high attention but low power)
D: Irrelevants (low power and low attention)
How can you deal with different expectations of stakeholders?
CSR
Triple Bottom Line
Shared Value
Hybrid organization (different institutional logics)
What is organizational purpose?
Purpose defines what an organisation is FOR; what they are trying to achieve with their strategy. But coherence around purpose is hard to achieve with the potential for conflict, particularly between financial and non-financial forms of value. Therefore it is important to address the relationship between purpose and the goals of various stakeholder groups.
What creates organizational purpose?
It is the goals of stakeholders (investors, costumers, employees and communities) that typically inform organisational purpose.
Purpose becomes strategic when it is incorporated into the mission, vision and objectives of the organisation.
What is CSR?
Corporate social responsibility. It is the commitment by organizations to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.
What are the 4 different approaches to CSR?
The four approaches to Corporate Social Responsibility describe how different organizations view their responsibility to society.
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Laissez-faire:
This approach is hands-off, where companies believe they should focus on making a profit and not worry about social issues beyond what the law requires. -
Enlightened Self-Interest:
Here, companies do some good for society, but mainly because they believe it will benefit their business in the long run (like improving their reputation). -
Forum for Stakeholder Interaction:
In this approach, companies actively engage with their stakeholders (like customers, employees, and local communities) to understand their needs and address them. -
Shaper of Society:
- Explanation: Companies with this approach see themselves as responsible for leading and driving positive changes in society, even beyond business interests.
These approaches range from minimal involvement (laissez-faire) to proactive engagement (shaper of society), depending on how the company views its role in society.
What are the critiques of CSR?
Greenwashing at a firm level and product/service level.
What are the critiques of Triple Bottom Line?
Just used as an accounting tool and not set into practice.
What is the Triple Bottom Line? (3)
The Triple Bottom Line (TBL) is a framework that expands the traditional focus of business performance from just financial outcomes to include social and environmental impacts as well. It emphasizes the idea that companies should measure their success not only by profits but also by their contributions to people and the planet. (also called the three Ps; profit, people and planet.)
The factors of TBL include: economic, environmental and social.
What is a hybrid organization and how can they create value and be managed?
A hybrid organization combines values and structures that normally would not go together. Having different institutional logics. Like Capio being in the public sector, healthcare, but is privately owned, meaning they are for-profit.
- Shared value approach (Virtuous cycle model)
Strategy is set to serve both social and financial objectives at the same time. The social and financial feed into each other in a self-reinforcing circle. For instance, more better healthcare will be great both for patients that receive high quality care and for the shareholders, since it might attract more patients and hence increase revenue. - Dynamic balance model
Fits situations where social and financial objectives conflict with each other. So there are real trade-offs between objectives.