Stakeholders & CSR

Question 1

Shareholder Primacy

Answer 1

Company operates to maximizes shareholder value

Became main operating style in the 90s

Question 2

Stakeholder theory

Answer 2

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

Question 3

Company Examples

Answer 3

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)

Question 4

Short Term

Answer 4

Short sighted decisions

Question 5

Long term

Answer 5

Time needed for companies to get the shareholders they deserve

Question 6

Impact of Stock Options on CEOs and Companies

Answer 6

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

Question 7

Ways to address issues (according to documentary)

Answer 7

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

Question 8

Corporate Social Responsibility (CSR)

Answer 8

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

Question 9

4 categories of CSR

Answer 9

Environmental

Ethical/Human Rights

Philanthropic

Economic

Question 10

Sustainability/sustainable development

Answer 10

Maintaining/improving the state of desirable conditions over the long term

Question 11

Replacement Rate & Formula

Answer 11

% 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)

Question 12

Systems Thinking

Answer 12

Investigating what set of factors and interactions are contributing to or could contribute to a possible outcome

Question 13

Triple Bottom Line (Triple P)

Answer 13

Measure that accounts for an org’s results in terms of its effects on

People, Planet, & Profits

Question 14

Stakeholders

Answer 14

Any person with an interest or concern in a business

Question 15

Externalities

Answer 15

A cost/benefit caused by a producer that’s not financially incurred/received by that producer

Question 16

Greenwashing

Answer 16

Half or pretend-performing CSR methods to cover up ethical problems for the sake of public relations

Question 17

Stakeholder mapping/analysis

Answer 17

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?

Question 18

Case: P&G

Answer 18

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

Question 19

Maximizing shareholder value vs stakeholder theory

Answer 19

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

Question 20

Traditional CSR vs. Creating Shared Value (CSV)

Answer 20

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

Question 21

Types of Purpose

Answer 21

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)

Question 22

Environmental Social Governance (ESG)

Answer 22

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)