Lecture 2 Flashcards
What are the key facts about corporations
Typically regarded as artificial persons in the eyes of the law
Notionally owned by shareholders but exist independently of them
Managers have a fiduciary responsibility to protect the investment of shareholders
What does Friedman say about corporations ethical responsibilities
The social responsibility of business is to increase profits based on m
Only humans have a moral responsibility for others
Managers responsibility is to act solely in the interests of shareholders
Social issues and problems are the responsibility of the state
Why is CSR justified?
More satisfied customers
Employer attraction
50% of businesses engage in CSR for brand reputation
CSR may forestall legislation
Long term investment that benefits the company
Friedman argues this is not CSR as they are carried out for profit maximisation purposes
What are the elements of Carroll’s pyramid
Economic
Legal
Ethical
Philanthropic
CSR and strategy
Reaction- deny responsibility
Defence- admit responsibility but fight it
Accommodation- do what is demanded
Proactive - go beyond the industry norm
Can shift responsibilities e.g tobacco companies
What is the definition of a stakeholder
Any group or individual who can affect or is affected by the achievement of the organisations objectives
What is the principle of corporate rights
The corporation has the obligation to not violate the rights of others
What is the principle of corporate effect
Companies are responsible for the effects of their actions on others
What are the forms of stakeholder theory
Normative- provides reasons as to why corporations should take into account stakeholder interests
Descriptive- attempts to ascertain whether corporations actually do take into account stakeholder interests
Instrumental- answers the question of whether it is beneficial for the corporation
What are the main influence strategies?
Frooman
Who are stakeholders
What are their ends
What are their means
Corporate accountability
Refers to whether the corporation is responsible in some way for the consequences of its actions
Become more vexed due to Privatisation, gov failure and rising power
Accountability should be more visible to those with a sake in the corporation e.g car manufacturers
Increasingly accountability and transparency are being treated as a necessity not just a normative point of view
What are the 3 views of corporate citizenship
Limited- cc with philanthropy
Identifies the philanthropic role of business in community
Strong focus on local communities as main stakeholders
Equivilent- cc with CSR
Extended- acknowledges extended political role of the corporation in society
Social- providing
Civil- enabling
Political- channeling
What is the descriptive stakeholder theory
Attempts to ascertain whether corporations actually do take into account stakeholder interests
Theory is used to describe and explain specific corporate characteristics and behaviour May be used to describe Nature of the firm The way managers think about managing How some corporations are managed
What is instrumental stakeholder theory
Attempts to answer whether it is beneficial for the corporation to take into account stakeholder interest
Examines connections between stakeholder management and achievement of goals
What is normative stakeholder theory
Used to provide reason why corporations should consider stakeholder interests
Used to interpret the function of the corporation, including the identification of moral and philosophical guidelines for the operation and management of corporations
Stakeholder theory is useful for strategic but not moral thinking- what are it’s 3 mains problems
1) identification and definition
- narrow and broad
Broad can almost be anyone
2) vagueness and overbredth
Vauge in terms of how to identify and balance
Broad definition can help map stakeholders but what then
3) balancing interests
- unrealistic endeavour
- evil v good
- no common measure
What are normative stakeholders?
The organisation has a moral obligation to
What are derivative stakeholders
Can either harm of benefit the organisation but the organisation has no moral obligation
Donaldson reading
Confusion about the nature and purpose of stakeholder theory
Much of what passes as stakeholder theory is implicit rather than explicit
What is carols and buchholtz definition of CSR
CSR encompasses the economic, legal, ethical and philanthropic expectations on organisations by society at a given point in time
What do Crane and matter identify as a potential limitation of CSR?
Doesn’t adequately address the problem of two responsibilities conflict e.g plant closure and balancing economic responsibility with ethical responsibility to provide secure jobs
What is the definition of corporate social responsiveness
The capacity of a corporation to respond to social pressures
What 3 elements presented by wood can be used to measure corporate social performance
Social policies- states the companies values, beliefs and goals
Social programmes- activities measures and instruments implemented to achieve social policies
Social impacts- can be traced by looking at concrete changes in the organisation
Why do stakeholders matter?
Freeman
Legal perspective
Sake can be legally protected
Economic perspective
Externalities- problems outside contractual relationships e.g those whose business activity may rely on the existence of another firm e.g a local shop
Agency problem
Why should short term interests prevail over those with long term stakes?
What is the new role for management
Managers have to take into account the rights and interests of all legitimate stakeholders
Managers must balance the fudicary relationship of shareholders with stakes of other actors
Stakeholder democracy
corporate governance
What is stakeholder democracy
Supported by freeman
Stakeholder board of directors who’s can influence corporate decisions
German model- 50% of board are representatives of employees
What does hertz say about democratic power
There is more power in an individuals choice as a consumer than an ballot box
What is the definition of transparency and why do corporations need to become more trnnsparent
The degree to which corporate decisions, policies, activities and impacts are acknowledged and made visible to relevant stakeholders
What do Donaldson and Preston say about normative stakeholder theory
Provides the fundamental basis for stakeholder theory and includes the acceptance of the following ideas
- stakeholders are persons or groups with legitimate interest
The interests of all stakeholders are of intrinsic value - each stakeholder group merits considereation for its own stake and not merely because of its ability to further the interests of some other group
What does Jamali (2008) say about CSR
Highly subjective and does not allow for a universally applicable definition
Vauge and intangible term that can mean anything to anybody
What does Jamali say about a stakeholder approach
Orgs are expected to manage responsibly an extended web of stakeholder interest across increasingly permeable organisation boundaries and acknowledge a duty of care for traditional interest groups and silent stakeholders
What does Jamali say about the benefits of a stakeholder approach
Makes commercial sense, allows he firm to maximise shareholder wealth while also increasing total value added - Friedman and stark myopia
Instrumental stakeholder theory assumes the corporation is an instrument for wealth creation with CSR conceived as a strategic tool to promote economic interests
Why does Jamali find organisations find themselves constrained
Limited resources and bounded rationality and thus prioritise stakeholders by instrumental and normative considerations
What does Jamali say distinguishes CSR from st
CSR identifies what responsibilities to fulfill, stakeholder theory addresses the issue of whom a business should be accountable to
What does the stakeholder theory attempt to do?
Looks at various groups to which the corporation has a responsibility
What do Orts and Strudler (2009) say about stakeholder theory
ST has become a vampire in the field of business ethics
Claims that stakeholder theory is providing a framework for business ethics are seriously overblown
At most stakeholder theory may prove useful for identification of some relevant interests that maybe a source of ethical claims
What are the issues with identification and definition
If one can not define stakeholder then any coherent theory collapses
Stakeholder is used to mean almost anything the author decides
Neither broad or narrow are helpful in the realms of business ethics
Broad versions are unworkable
Narrow don’t include key stakeholders
What are the issues with vagueness and overbredth
Stakeholder theory argues interests must be balanced
Having ones interests balanced are simply a matter of degree
Vaugeness impedes rather than advances progress
Broad versions may include people that should not be considered
What are the issues of balancing
What advice is given to help balance interests… none
Must assign stakeholders equal weight
What about those that have larger stakes
The idea of balancing interests is too thin and unrealistic
VW
CSR mask for hostility
CSR parades. Virtue but internal standards slup
Is CSR just a smokescreen
Why do stakeholders matter
Legal perspective - stake can be protected
Economic perspective
- externalities- outside contractual relationships
Agency problem- short term interests of owners v long term interests of managers
What’s the problem
Most of us have a tendency to assume too quickly that a group had a particular attitude or set of values
What are the managerial implications of ST
Responsibility of managers to select activities and direct resources to obtain benefits for legitimate stakeholders
Who are the legitimate stakeholders?
Firm as a contract view excludes those that may hold quasi contracts
Excessive tendency to adopt definition such as anything influencing or influenced by has resulted in excessive breadth of identification
What are the moral reasons for CSR
Corporate activity has social and environmental impact
Corporations are powerful and should use this power responsibly
Corporations rely on the contribution of a wide set of stakeholders not just shareholders
