Stakeholder theory

Question 1

What is Stakeholder Theory?

Answer 1

Firm exists for the benefit of the owner OR firm exists for the benefit of all it touches.

• Shareholders should be the sole concern in decision making.
• Profitability should be optimized.
• Other stakeholders will benefit if long-run profitability is sustained.
• Social responsibility to stay within law and ethical custom.
• Idea of social responsibility is fundamentally subversive to goal/role of business leadership and stewardship.
• Undermines profit motive and confuses leadership’s obligations

Question 2

What are Stakeholder Issues: Suppliers?

Answer 2

Social responsibility is increasingly required.
- Customers want to purchase products that reflect their values.

• Customers’ preferences often involve inputs to products.
  Desire for social responsibility subjects suppliers to higher standards while treating them fairly.

Question 3

What are some Practices Audits?

Answer 3

• Ethical treatment of employees (conditions, pay, hours, etc.) is evaluated.
• Child labor is unacceptable.
• Physical and mental health of employees are concerns for customers.
• Customers watch for ethical environmental practices.
• Firm’s attitude to customer data security is important.
• Existence and extent of ethics policies are important.

Question 4

What are some Outsourcing Practices?

Answer 4

• Can be cost, talent, or focus driven.
• Reason for outsourcing is a key issue.
  - Labor and quality are often misjudged.
  - Can result in bad PR if quality is not carefully evaluated.
  - Outsourcer’s value set should mirror the client’s.

Question 5

What is Fair Trade Case?

Answer 5

• Standard was set to benefit suppliers.

- Retailers collect the majority of the premiums.

Question 6

Customer stake revolves around four phases, what are they?

Answer 6

• Manufacturing
• Sales
• Distribution
• Service

Question 7

What is the manufacturing phase of customer stake?

Answer 7

• Assumption of safety and quality
• Long history of defects tests leadership and customer’s trust
• Successful outcome with presence of principles and values
• Unprincipled reactions lead to lost of trust

Question 8

What is the Sales phase of customer stake?

Answer 8

• No misleading behavior
• Investment brokerages acted without ethics or principles throughout history
• Ranks as one of the least trusted industries

Question 9

What is the Distribution and Service phase of customer stake?

Answer 9

• All about follow-through

- Attitude toward customer after sale equals the leadership’s emphasis as a stakeholder priority.

Question 10

What are some examples of Conflicting Stakeholder Interests?

Answer 10

Owners - Profit Driven
Customers - Price / promise driven
Employees - reward / recognition driven