Lecture 1 Flashcards
What is the shareholder perspective on profitability?
Shareholders only provide capital because they expect a higher return than elsewhere, with successful businesses finding it easier to attract employees, opportunities and raise new capital.
What are the implications of the shareholder approach?
It could lead to excessive incentives, increased unnecessary risk, short-term thinking, could ignore externalities
What is a shareholder?
Someone who owns shares of a company
What is a stakeholder?
Any identifiable group or individual who can affect the achievement of an organisation’s objectives or who is affected by the achievement of an organisation’s objectives
List some examples of stakeholders.
Government, suppliers, customers, employees, civil society, competitors, shareholders, stakeholders of suppliers
What is enlightened shareholder value?
Recognition that the relationship between companies and their stakeholders is mutually beneficial
What is pluralistic stakeholderism?
“The welfare of each group of stakeholders is relevant and valuable independently of its effect on the value of shareholders” (Bebchuk and Tallarita (2020) p. 19)
What is the value of enlightened shareholders?
They encourage all stakeholders to work towards a common goal rather than the maximisation of their own interests
Can organisations create value and do good?
Yes, they can through creating social values (CSV) and by following principles and operating practices
Is pluralistic shareholderism possible?
Difficult but achievable: Defining stakeholders and making trade-offs is difficult but it is something directors already do (and so do we as individuals). Governance can be shifted through adoption of clear ‘purpose’ and ‘values’ statements – investors can then decide what type of organisation they want to invest in. Measures exist and become standardised. Law and regulation are important but are reactive, not universal across the globe and can be circumvented. Changing corporate cultures is more effective.
What steps can be taken to achieve sustainability as a corporation?
Every corporation to publish a ‘purpose statement’, Development integrated reporting, Legal responsibility
What is stakeholder mapping?
It is used in strategic decision-making to identify stakeholder power and level of attention stakeholders may pay to strategic decisions. Focuses on two variables: Power - the ability of individuals/groups to influence the strategic direction of the organisation and Attention – the level of attention a stakeholder pays to an individual company
What is a mission?
The enduring set of fundamental principles that forms the base of a firm’s identity and guides its strategic decision making “why do we exist?”
What are values/principles?
what do we believe in? How will we behave?
What is a company’s vision?
The desired future state of an organisation. “What do we want to be”
