Lecture 2: The Responsibility of Leaders I: Shareholders vs. Stakeholders

Question 1

Which types of responsibilities are there? And explain them.

Answer 1

1) Causal responsibility (Infant spilling milk, not intentionally )

2) Role responsibility (Taylor works at the shop and his role is to make sure nothing gets broken. He broke the vase during a burglary attempt by throwing the vase at the burglar to protect himself and the shop. )

3) Moral responsibility (Saving a drowning person)

4) Remedial responsibility (Helping people in third world countries)

5) Legal responsibility (Parents are legally responsible for their child)

Question 2

What is the core idea of the stakeholder approach?

Answer 2

Manager’s responsibility is to balance the rights and interests of all stakeholders.

Question 3

Explain the shareholder approach.

Answer 3

The responsibility of managers “is to conduct business in accordance with [the shareholders] desires”.

Question 4

Which roles can a manager have?

Answer 4

1) Economic actors (Every manager is expected to base decisions on economic factors)
2) Company leaders (Top managers are entrusted with managing enormous assets to meet the expectations of multiple parties)
3) Community leaders (Some top managers have enormous power inside and outside the firm)

Question 5

What are Friedman’s arguments?

Answer 5

1) If you sign a contract, you should respect it
2) Managers sign a contract saying they will serve the interest of the shareholder
3) Therefore: Managers should serve the interest of shareholders
4) Often the interest of shareholders is maximizing profit
5) Therefore: often, the responsibility of managers is to maximize profit.

Question 6

What are the constraints of the shareholder approach?

Answer 6

1) Property rights are not absolute
2) The law is a constraint
3) But managers cannot and should not act instead of governments

Question 7

What is the difference between normative and descriptive? And give an example.

Answer 7

Descriptive = Factual (The GDP of the Netherlands is 912.2 billion)
Normative = Norms and values (Companies should offer minimum wage)

Question 8

According to Milton Friedman … should be respected.

Answer 8

Property rights

Question 9

What is the difference between the ethical stakeholder view and the strategic stakeholder view?

Answer 9

Ethical stakeholder view = balancing rights and interests of all stakeholders
Strategic stakeholder view = Devoting resources and paying attention to stakeholders tends to be
profitable