M2 - U1 - Class 19 - Shareholders, Stakeholders and Society

Question 1

straw man

Answer 1

Straw man: An argument that misrepresents or distorts an opponent’s position to make it easier to refute

Question 2

evil genie

Answer 2

Evil genie: An argument that is no more (or less) problematic for any one argument than any alternatives

Question 3

what stakeholder theory is not

Answer 3

1. Stakeholder theory (ST) is an excuse for managerial opportunism
   2.ST cannot provide a sufficient specific objective function
2. ST is primarily concerned with distribution of financial outputs
3. All stakeholders must be treated equally
4. ST requires changes to law
5. ST is socialism and refers to the entire economy
6. ST is a comprehensive moral doctrine
7. ST applies only to corporations

Question 4

the debate still goes on

Answer 4

A company can make good-will expenditures “that are entirely justified in its own self-interest.” I see that as an extension of the most fundamental truth in capitalism, that in any voluntary exchange both parties benefit.

If we ignore Friedman’s crystalline perception — that profits are the driving focus — then the entire mission, good will included, falls apart.
When we turn the idea of profit into a callous slur, as Friedman’s laziest critics often do, we are demeaning the essential propelling force that enables all these interconnected good works to occur. (Ken Langone, Home Depot founder) → the force is profits

In 2013, I stood in front of Starbucks shareholders and posed this question: “What is the role and responsibility of a for-profit public company?” Friedman’s flawed answer is not his legacy. His legacy is the question itself — which today’s leaders must answer with a renewed commitment to balancing moral purpose and high performance.

I’ve asked this question since opening my first coffee shop in 1986. My answer, a rebuke of Friedman’s single-minded focus on profits, appeared in our company’s original mission statement: “We wish to be an economic, intellectual and social asset in communities where we operate.” We would do this not at the expense of profits, but to grow them. (Howard Schultz, Starbucks emeritus chairman)

Question 5

can corporations do both

Answer 5

Yes - Corporations can both maximize profits and serve stakeholder interests
Reputation, legitimacy, and images matter
The business case of CSR
Shareholder value principle is in decline
The Business Roundtable statement

No - Corporations inevitably harm stakeholders
Corporate wrongdoing is still rampant
Shareholder value principle is still predominant
The Business Roundtable statement is largely a window dressing

Question 6

The Wall Street Journal: Moreover, Shareholders: Top CEOs Say Companies Have Obligations to Society

Answer 6

“It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”

“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

Question 7

can stakeholder save society

Answer 7

Does stakeholder theory aim to solve all societal problems?
Is stakeholder theory better suited for solving societal problems than is shareholder value principle?
Meet the new boss
Are shareholders the only ones who are selfish and opportunistic?