Social evaluations and value heterogeneity Flashcards
According to Martin, what are the steps firms should consider when dealing with social and political issues?
- Develop robust principles to guide choices
- address ethical issues early
- consistently communicate and implement choices
- engage beyond the industry to shape context
- learn from mistakes to make better choices in the future
What does it meant to develop robust principles?
Attempt to anticipate most likely to occur challenges to operations, and have principles to address them
What are the recommended steps for developing robust principles?
- understand salient social and political issues for your firm
- understand where issues may intersect with your business (and the implications of making decisions on those issues)
- listen to and understand the opinions of your employees (as they are often the root for firms stances)
What does it mean to address ethical issues early?
recommended for firms to anticipate, preempt, and shape ethical challenges
What does it mean to consistently communicate and implement choices?
communicate principles to all employees (who in turn communicate to customers), make principles part of everyday business making decisions
What does it mean to engage beyond industry?
Engage with civil society in order to affect change
What are the risks by not engaging beyond the industry?
- ad hoc responses due to an unpredictable enviro
- regulations are forced upon by an industry they failed to impact
- not being informed about new issues that effect their firm
What is core stigma?
The very nature of a firm is stigmatized.
What is the Friedman doctrine?
It is the social responsibility of business to use resources to make profit. Executives are employees of the owners of the firm, and have direct responsibility to stockholders
What is agency theory? What is the issue in it?
A “principal” hires an “agent” to do something. The problem is that the interests of the two do not always align
What is the solution to the problem in agency theory?
Create performance based initiatives; that is the better a company/ shareholders (principal) does, the better the executives (agents) get paid
What is the normative core of stakeholder theory?
Rejection of stockholder centric theory, for a stakeholder centric one to create a win-win for both stockholders and stakeholders
What is commensuration?
Comparison of different things using the same metric. Ex. Compare a banana, plan, and couch based on price
What is ESG?
Environment, social, and governance. A collection of indicators and metrics to allow stakeholders (mostly shareholders) to make comparisons between firms
What was an assumption about ESG that porter would make?
The pattern of imitation, when one firm began pursuing a high ESG score, other firms would follow
What is the issue with ESG scores?
They don’t tell the whole story, as companies can offset weaknesses in their score with other points (ex bad environment with increases in diversity)
What is a stigma?
A negative social evaluation (of a firm)
What are the 3 types of stigma?
Core, event, by association
What are ways to counteract core stigmatization?
- dilution: operate in multiple industries to make stigma less a core part of identity
- information control: reduce reaction by hiding presence in market or obscuring information about the market
- stigma reduction: change perceptions of taint from the stigma
What is event stigma?
Taint produced by a specific event, usually a scandal
What is a counter action to event stigma?
Cleaning out: removing all employees associated with the event/ scandal
What is stigma by association?
Stigma transfer between entities (ie stigma of one entity effect another)
How do you counter act stigma by association?
Sever ties with the controversial entity
What is the homogenization of society?
An old liberal idea that societies would become more and more similar as we imitated each other
