Stakeholders & CSR Flashcards
Shareholder Primacy
Company operates to maximizes shareholder value
Became main operating style in the 90s
Stakeholder theory
Ed Freeman
Creating value for all the people involved/interested in a company’s success
CEO leads stakeholders
Shareholders invest in companies
Consumers support
Employers carry out work
Vendors provide resources
Outside world
Company Examples
Whole Foods: More organic food; provide better food & care for environment
The Container Store: Helps organization boxes/tools/products be available to consumers
Key aspects: 1 great person = 3 good people, 68% women (like to hire their customers), take care of vendors
HP: Early 20th century company that was stakeholder based
“Respected the people” -> Success based on how well employees worked
Luke’s Lobster: Sustainable seafood; “personality & purpose” need to be in a business
Eastman: Sustainable chemical manufacturer (safe for user & environment)
Short Term
Short sighted decisions
Long term
Time needed for companies to get the shareholders they deserve
Impact of Stock Options on CEOs and Companies
Right to buy stocks later at today’s price
Gave shareholders more power over CEOs
CEO’s pay tied to share price -> began to focus on shareholders’ priorities
Ways to address issues (according to documentary)
Restructure corporate governance to focus on the long term
Overhauling legislation to enforce the social and environmental duties of corporations
Improving the diversity of board members
Corporate Social Responsibility (CSR)
When a business views itself as a member of society that has implicit social/environmental obligations
Ensures a company engages in ethical practices/policies beyond legal standards (company mission)
Leaders opt to do good as they do well
4 categories of CSR
Environmental
Ethical/Human Rights
Philanthropic
Economic
Sustainability/sustainable development
Maintaining/improving the state of desirable conditions over the long term
Replacement Rate & Formula
% of a worker’s pre-retirement income that is paid out by a pension program after the worker retires
Gross Income (retired) / Gross Income (pre-retirement)
Systems Thinking
Investigating what set of factors and interactions are contributing to or could contribute to a possible outcome
Triple Bottom Line (Triple P)
Measure that accounts for an org’s results in terms of its effects on
People, Planet, & Profits
Stakeholders
Any person with an interest or concern in a business
Externalities
A cost/benefit caused by a producer that’s not financially incurred/received by that producer
Greenwashing
Half or pretend-performing CSR methods to cover up ethical problems for the sake of public relations
Stakeholder mapping/analysis
Who are they?
What stake do they have by supporting/resisting?
What do supporters/resistors lose/gain?
What types of power do supporters/resistors have?
What strategies can be used to keep/win over support?
Case: P&G
How can companies achieve a balance between social responsibility and profit seeking objectives?
Sachets are nigh-impossible to recycle in a cost-effective way (easier to bury/burn)
Anything P&G can do to address the issue will take lots of time, R&D, and research -> will lose out on max profit à doing nothing is the best way to continue to maximize profit
Gov’ts could step in and ban sachets to stimulate change -> could spur advancement quicker
Maximizing shareholder value vs stakeholder theory
Stakeholder better in long run & benefits more; Shareholder benefits few by a lot
Why there is disagreement: Contradict each other; profits seen as most important
Traditional CSR vs. Creating Shared Value (CSV)
Traditional CSR:
Reduce negative impact
Cost focused
Redistribute created value
Creating Shared Value (CSV)
Create positive impact
Profit focused
Expand the total pool of economic and social value
Types of Purpose
Purpose as a disguise: Covers up misconduct (fraud)
- Theranos (“change the world”)
- FTX (“effective altruism”)
Purpose on the periphery: Doing good is kept separate from the core business
Purpose as a win-win: Economic and social benefits intersect (only when they intersect)
Deep Purpose: Deep commitment to both economic and social benefits (has trade-offs)
- Gotham Greens (recognizes ironic packaging but also aims to stop using it)
Environmental Social Governance (ESG)
Environmental: Conservation of the natural world
Social: Consideration of people & relationships
Governance: Standards for running a company
Non-financial metrics
Not required or universally standard (yet) -> companies could “cherry pick” (greenwashing)