Mid Term Flashcards
Define business.
Any organization that is engaged in making a product or providing a service for profit.
Business is the most _________ ___________ in the world.
dominant institution
Business and society are highly ___________.
Interdependent
Define society.
Human beings & the social structures they collectively create.
Define stakeholder theory
Corporations serve a broad public purpose. To create value for society.
What theory states “corporations have multiple obligations & all stakeholders’ interest must be taken into account”.
Stakeholder Theory
Ownership Theory is also called…
Property or Finance Theory
Define ownership theory
The firm is seen as property of its owners and the owners interest is paramount. It takes precedence over others’ interests.
The 3 core arguments for the stakeholder theory are:
Descriptive, instrumental, and normative.
Descriptive argument:
More realistic description of how companies really work.
Instrumental argument:
More effective corporate strategy.
Normative argument:
Stakeholder management is the right thing to do.
What is a stakeholder?
Persons or groups that affect or are affected by an organization’s decisions, policies, and operations.
What is a stake?
An interest in - or claim on - a business enterprise.
Define market stakeholder.
Those that engage in economic transactions with the company as it carries out its purpose of providing society with goods/services.
Define non-market stakeholder.
People or groups who - although they do not engage in direct economic exchange with the firm - are nonetheless affected by or can affect its actions.
Define internal stakeholders.
Employees and managers that are “inside” the firm. They contribute effort and skill usually at a company worksite.
Give some examples of internal stakeholders.
Employees, Managers
Define external stakeholders.
Those who - although they may have important transactions with the firm - are not directly employed by it.
Give some examples of external stakeholders.
Stockholders, Customers, Creditors, Suppliers, Wholesalers/Retailers.
Define salience.
Stands out from the background, seen as important, draws attention.
3 factors of salience.
Power, Legitimacy, Urgency
Define General Systems Theory.
It’s biology. It argues that all organisms are open, and interact with their external environments. Although most organisms have clear boundaries, they can not be understood in isolation, but only in relationship to their surroundings.
Examples of Market stakeholders:
Employees, Managers, stockholders, customers, creditors, suppliers, Wholesalers/retailers.
Examples of Non-market stakeholders:
Government, communities, non-governmental organizations, business support groups, media, competitors.
Define public issue.
Any issue that is of mutual concern to an organization and one or more of its stakeholders.
What is a mixture of people’s’ opinions, attitudes, & beliefs about what constitutes reasonable business behavior?
Stakeholder Expectations
Performance Expectation Gap
The gap between what the firm wants to do or is doing and what the stakeholders expect.
Environmental Analysis
The method managers use to gather information about external issues and trends, so they can develop an organizational strategy that minimizes threats & takes advantage of new opportunities.
Environmental Intelligence
The acquisition of information gained from analyzing the multiple environment affecting organizations. May be done informally or as a formal management process.
Competitive Intelligence
The systematic & continuous process of gathering, analyzing, & managing external information about the organization’s competitors that can affect the organization’s plans, decisions, & operations.
5 steps of issue management.
- identify the issue
- analyze the issue
- generate options
- take action
- evaluate results
4 Stages in the business-stakeholder relationship.
- Inactive
- Reactive
- Proactive
- Interactive
Inactive relationship:
Companies ignore stakeholder concerns.
Reactive relationship:
Companies act only when forced to do so, and then in a defensive manner.
Proactive relationship:
Companies try to anticipate stakeholder concerns
Interactive relationship:
Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, & trust.
Effective global leadership on public issues requires 3 basic capabilities.
1) understanding of changing business context
2) ability to lead in the face of complexity
3) Connectedness - the ability to engage with external s/h in dialogue & partnership.
Corporate Social Responsibility
To act in a way that enhances society and it’s inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment.
Responsibility means to _________ __________.
pledge back.
A ____________ firm is one which finds ways to meet each of its critical responsibilities and develops strategies to enable the obligations to help each other.
Successful
Corporate power:
The capability of corporations to influence government, the economy, and society, based on their organizational resources.
Positives of a big corporation:
- has more resources
- can produce at a lower cost
- plans further into the future
- brings new economic opportunities & technologies to developing societies
Negatives of a big corporation:
- they can influence politics
- shape tastes
- dominate public disclosure
- they can move production (hurts unions)
- fix prices, squash competition
Iron Law of Responsibility
Says that in the long run, those who do not use power in ways that society considers responsible will tend to lose it.
Enlightened Self-Interest
The firm leadership can see it is in the company’s self-interest in the long term to provide true value to its customers, to help its employees grow & behave responsibly.
Ethics
A conception of right & wrong conduct. Tells us whether our behavior is moral or immoral.
_________ deals with fundamental human relationships - how we think & behave toward others & want them to think & behave toward us.
Ethics
Ethical Principles
Guides to moral behavior
Business Ethics
Application of general ethical ideas to business behavior (not a special set of ethics)
Ethical ___________ is the concept which holds that ethical behavior should be defined by various periods of time in history! a society’s traditions, the special circumstances of the moment, or personal opinion.
Relativism
5 key reasons why a business should be ethical:
- to meet demands of business stakeholders
- to enhance business performance
- to comply with legal requirements
- to prevent or minimize harm
- to promote personal morality
Sentencing Guidelines
Provides a strong incentive for business to promote ethics at work. When a firm faces sentencing they are graded on whether the company has: (Established and communicates standards & procedures to reduce criminal conduct through training. High-level Officers are responsible for compliance. Monitor & audit systems to ensure compliance. Use disciplinary mechanisms to enforce standards) If they have, they usually get lesser sentences or lower fines.
Sarbanes-Oxley Act
Requires execs to vouch for the accuracy of a firm’s financial reports and requires them to pay back bonuses based on earnings that are later proven fraudulent. It also established strict rules for auditing.
4 reasons why ethical problems occur in business:
1) personal gain and self-interest
2) competitive pressure on profits
3) conflicts of interest
4) cross-cultural contradiction
International Monetary Fund (IMF)
World Bank’s sister organization. Also founded in 1944. It’s purpose is to make currency exchange easier for member countries so they can participate in global trade.
4 methods of ethical reasoning:
- Virtues
- Utilitarian
- Rights
- Justice
Virtues (E/R method)
Values and character are critical determining factors.
Utilitarian (E/R method)
- compares benefits & costs of a decision, policy or action.
- costs & benefits can be economic, social or human
Rights (E/R method)
- person or group is entitled to something or to be treated in a certain way
- examples of basic human rights are right to life, safety, and due process
Justice (E/R method)
Benefits & burdens are distributed equally, according to some accepted rule.
Corporate Culture
A blend of ideas, customs, traditional practices, company values, and shared meanings that help define normal behavior for everyone who works in a company.
Ethical Climate:
Unspoken understanding among employees of what is and is not acceptable behavior. (Multiple climates can exist in a company)
2 ethics approaches:
- compliance based - seeks to avoid legal sanctions, emphasizes threat of detection & punishment.
- integrity based - emphasis on employee responsibility for ethical conduct
Ethics policies & codes:
Significant differences among countries.
- U.S. - Instrumental, provide rules & procedures
- Japan- legal compliance & company values
- just having a policy won’t work! must be widely distributed & have associated training.
World Bank (WB)
Set up in 1944 to provide economic development loans to its member nations. Gets its funds from dues paid by its member countries & from money it borrows in the int’l capital markets. Imposes strict conditions (cut spending, devalue currency, increase exports, reduce wages)
Relationship between law & ethics:
- both define proper & improper behavior
- laws are society’s attempt to formalize ethical standards
- ethical concepts are more complex than laws
Voting power:
Means that the stakeholder has a legitimate right to cast a vote.
Economic power:
Customers, suppliers, & retailers have economic power with the company.
- suppliers: can withhold supplies or refuse to fill orders
- customers: May refuse to buy a company’s products or services
Political power:
Government exercising power through legislation, regulations, or lawsuits. Stakeholders can use it by organizing a protest of a certain company.
Legal power:
Bringing a suit against a company for damages, based on harm caused by the firm.
Informational power:
When stakeholders have access to valuable data, facts, or details. It can be used to persuade, mobilize, or threaten others.
Public policy
A plan of action undertaken by govt. officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens.
The systematic evaluation of an organization’s social, ethical, & environmental performance is a….
social audit
Sustainable development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
The amount of land and water a human population needs to produce the resources it consumes and to absorb its wastes, given prevailing technology is called_________ ___________.
Ecological footprint
Earth carrying capacity
The earth only has a finite amount of resources. The ecosystem is bound and is not growing.
Globalization:
The increasing movement of goods, services, & capital across national borders.
