Stakeholders Flashcards
Business ethics according to Crane and Matten
Is the study of business situations, activities and decisions where issues of right and wrong are addressed.
Where the law ends.
Grey areas of business
Grey areas emerge
Globalisation - different countries, cultures, laws, regulations and systems, geographical barriers
Different ideas of what is right/wrong
Morality
Concerned with the norms values and beliefs embedded in social processes which define right and wrong for an individual / community
Friedman’s three part argument
1 only human beings have a moral responsibility for their actions
2 corporation managers responsibility is to act solely in the interest of shareholders
3 social issues and problems are the proper province of the state rather than corporate managers
Business reasons for CSR
Extra and/or more satisfied customers
Employees may be more attracted/ commutes
Legislation
Long term investment that benefits Corp
Moral reasons for CSR
Corporate activity has social and environmental impact
Corporations are powerful and should use this power responsibility
Corporations rely on the contributions of a wide set of stakeholders not just shareholders
CSR - carol pyramid
Carroll’s CSR pyramid
Top
Philanthropic responsibilities - desired by society
Ethical responsibilities - expected by society
Legal responsibilities - required by society
Economic responsibilities - required by society
CSR criticism
Vague - ill defined - (Votaw)
Elusive concept -(Preston)
Lacking dominant paradigm (jones)
Stakeholder theory
Any group or individual who can affect or is affected by the achievement of the orgs objectives (Freeman)
Firm stakeholders
Gov Shareholders Competitions Customer Employees Civil society Suppliers
A network approach follows this - where it’s in larger scale and customer 1 more affected ban customer 2 etc
Forms of stakeholder theory
Donaldson and Preston
Normative
Instrumental
Descriptive
Normative
Provide reason for why corps should take into account stakeholders interest
Interprets the function at the corporation, including the identification of moral or philosophical guidelines for the operation and management of corps
Without normative claims stakeholder theory collapses
Stakeholder is anyone with interest, identified by their specific interest and interests are of intrinsic values
Descriptive
Ascertains whether and how corporations actually do take into account stakeholders interests
Describes and explains specific corporate characteristics and behaviours: eg describes the nature of the firm, the ways managers think about managing, how board members thinks about interests of Corp and how some corps are actually managed
Instrumental
Attempts to answer the question of whether it is beneficial for the corporation to take into account stakeholders interests
Examines connections between the practice of stakeholder management and the achievement of various goals
Statistics etc - instrumental studies have tended to generate ‘implications’ suggesting that adherence to stakeholders principles and practice achieves conventional corporate performance objectives as well or better than rivals
In order to manage stakeholders you must find out
Who are they
What are their ends
What are their means
Froman
Corporate accountability: firm as political actor
Corporate accountability refers to whether a Corp is answerable in some way for the consequences of its actions
Firms have begun to take on role of political actors - taken up role of previous done by govs cause of - gov failure - increased power and influence of corps
Problems: who controls corps? Who are they accountable to? Key to this is transparency
Corporate citizenship (CC) - three perspectives
The limited view equates CC to corporate philanthropy (Carroll pyramid)
The equivalent view of CC equates to CSR
The extended view of CC acknowledges the extended political role of the Corp in society
Limited view
Main stakeholder- local comms, employees
Motivation - philanthropic and economics where citizenship is strategic
Moral grounding - reciprocity - putting something back
Equivalent view
Main stakeholder - broad range
Motivation - mixed economic, legal, ethical, philanthropic
Moral grounding - duty of responsibility and avoid hard to society
Extended view
Main stakeholder - broad range of citizens, society in general
Motivation - political
Moral grounding - grounding is not moral, but comes from the changes in the political arena
3 main problems of ST as an ethical theory
Identification and definition
Vagueness and over breadth
Balancing of stakeholder interests in decision making
Identification and definitions (orts and strudler)
If one cannot define stakeholder then any coherent theory collapses
Either broad/ narrow are helpful
Broad been criticised on grounds of unworkability
Narrow definitions of stakeholder - consistent with expanded theory of the firm
- people considered inside the boundaries of business
- purpose: to contest the strict financial ownership theory of the firm
- who is the stakeholder? Shareholders employees creditors
Broad -
- potentially useful approach to business strategy
- what groups of people are to be considered outside business boundaries
- purpose: invoked for strategic reasons, instrumental management approach
Who is a stakeholder - everyone
Vagueness and over breadth (Orts and Strudler)
Stakeholder theory’s as a business ethics approach requires to identify stakeholders and to balance their interests:
- vague concepts - being a stakeholder is a matter of degree - having one interests balanced is a matter of degree
Vague in terms of how to identify and balance goals for success
Inclusive(broad) definition of stakeholders can help mapping stakeholders and their interests
Balancing shakeholder requests
- unrealistic endeavour
- no common measure, no quantifiable information (shareholders wish to retire in wealth versus employees wish to feed children)
- how to balance interest according to which criteria
- it requires more than balancing interests
Stakeholder management approaches (Mitchell et al)
Power - ability of one entity to influence behaviour of another
Legitimacy - generalised perception or assumption that actions of an entity are desirable, proper or a appropriate within some socially constructed system of norms values and beliefs
Urgency - calling for immediate or pressing attention
Legitimacy + power = authority
Stakeholder ambiguity and complexity
A situation where various stakeholders (ie greater complexity) with disparate goals demand and opinions interpret the same Situation differently (ie ambiguity)
Shell example
Wanted to dispose obsolete lol storage facility in Atlantic after detailed environmental impact assessment
Protest from green peace (with questionable science); boycotts, political instability in UK
Eventually recycled onshore after pressure, bad publicity for management/ policy makers
Myopia of moral philosophy - Stark
2 problems
1 disagree ethical behaviour is always in the companies best interest
2 acts motivated by self interest cannot truly be ethical
Jamali
CSR highlight subjective and doesn’t allow for a universallyo applicable modification
Because of the level of abstraction if the word social, managers have problems evaluating how their organisation can contribute to the well being of society as a whole
Corporations must be viewed as operating at the centre of a “Network of interstellar stakeholders that create, sustain and enhance value creating capacity”.
Jamali
Org factors affecting ethical behaviour
Crane and Matten Organisational culture (influences values and beliefs, set out right from wrong) Corporate internal decision structure (directs corporates decisions with predetermined goals
gsk philanthropic
Biggest philanthropic biggest donation
£500 million worth of drugs
£500 million to distribute
Affects and affected by stakeholder theory (freeman)
Principle corporate rights - corporations has the obligations not to violate right of others
Principle of corporate effects - companies are responsible for the effect of their actions on other
Corporate social responsiveness
Reaction (Corp denies any responsibility) Defence (admits responsibility but fights it, doing least possible) Accommodation (accepts responsibility and does what’s demanded) Pro action (go beyond industry norms and anticipates future expectations)
Why business ethics is needed
Business has significant societal power
Businesses have resources that can contribute to society
Mispractice has potential to inflict tremendous harm
Demands for business ethics are increasing
Few businesses are knowledgable about business ethics
High profile ethical violations
