Stakeholders and CSR

Question 1

Who are Stakeholders?

Answer 1

Individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends

Question 2

What is Corporate Governance?

Answer 2

The structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation

Question 3

What is a single-tier structure?

where is it most commonly used?

Answer 3

• A majority of directors may be non-executives
• Non-executives represent the interests of shareholders
• choice of non-executives may be influenced by executives

(Typical structures in UK and USA)

Question 4

What is a two-tier structure?

where is it typically used?

Answer 4

• A Supervisory board represents a wider range of stakeholders
• A management board plans strategy and has operational control
• Major strategic decisions have to be approved by both boards

(Germany, France & Netherlands)

Question 5

What are the Advantages of the Shareholder Model?

Answer 5

• Higher rates of return
• Reduced risk
• Better decision-making
• Increased innovation and entrepreneurship

Question 6

What are the Disadvantages of the Shareholder Model?

Answer 6

• Diluted monitoring
• Vulnerable minority shareholders
• Short-termism

Question 7

What are the Advantages of the Stakeholder Model?

Answer 7

• Long-term horizons
• Less reckless risk-taking
• Better management

Question 8

What are the Disadvantages of the Stakeholder Model?

Answer 8

• Weaker decision-making
• Uneconomic investments
• Reduced innovation and entrepreneurship

Question 9

What are two key issues for the boards?

Answer 9

Delegation and Engagement

Question 10

What is delegation?

in terms of boards

Answer 10

Strategy can be delegated to management but it is easier to ensure other stakeholders are protected with a supervisory board

Question 11

What is Engagement?

in terms of boards

Answer 11

The board can engage in the strategic management process but board members may have sufficient expertise

Question 12

What internal aspects should organisations be responsible for?

(4)

Answer 12

• Employee welfare (medical care, financing etc)
• Working conditions (job security, safety, training etc)
• Job design (worker satisfaction over efficiency)
• Intellectual property (respecting private knowledge of individuals)

Question 13

What external aspects should organisations be responsible for?

(7)

Answer 13

• Environmental issues (pollution, energy conservation)
• Products (careless use of products by consumers)
• Markets/Marketing (advertising standards, target markets)
• Suppliers (trading fairly, blacklisting?)
• Employment (no discrimination, maintaining jobs)
• Community activity (involvement in local events)
• Human Rights ( child labour, unions, political regimes)