Week 1- Business Purpose Flashcards
What are some of the perspectives of shareholder perspective theory?
1- Organisations have an economic responsibility to maximise their profits:
2- Shareholders only provided capital because they expect a higher return than elsewhere.
3- Successful businesses find it easier to raise new capital, attract new employees and new opportunities.
What are some of the beliefs of Freidman (1970)?
His belief was that the ‘The business of Business is Business.”
The manager is the agent of the individuals who own the corporation. It is the managers’ responsibility to act solely in the interests of shareholders.
Social issues and problems should be addressed by the state rather than corporate managers.
What are some of the beliefs of Jensen and Meckling (1976)?
Shareholders own the corporation
Managers are delegated decision-making authority by the shareholders and thus ‘agents’ of the shareholders.
As agents, they are obliged to conduct business in accordance with shareholders desires.
What are the implications of the shareholder approach?
It can cause agency problems which include:
1- Excessive incentives
2- Increased risk
3- Short term thinking
What is the definition of a stakeholder?
Any identifiable group or individual who can affect the achievement of an organisation’s objectives or who is affected by the achievement of an organisation’s objectives.
What are the levels of stakeholder governance?
1- Enlightened shareholder value
2- Pluralistic stakeholderism
What is enlightened shareholder value?
Recognition that the relationship between companies and their stakeholders is mutually beneficial.
What is pluaralistic stakeholderism?
The welfare of each group of stakeholders is relevant and valuable regardless of its effect on the value of shareholders.
They cannot avoid the consequent responsibilities- that might mean putting the interests of others over their own interests.
What does enlightened shareholder value consist of?
All groups hold a stake in the organisation and are mutually dependent upon each other.
Encourages all stakeholders to work towards a common goal rather than the maximisation of their own interests.
Organisational purpose is delivered by:
1- Reconceiving products and markets
2- Redefining productivity in the value chain
3- Enabling local cluster development.
What are the steps to achieve success in ESG and B corporations?
1- Every corporation to publish a Purpose Statement = Mission statement- short statement of why an organisation exists.
2- Develop integrated reporting
3- Legal responsibility
What is stakeholder mapping?
Stakeholder mapping is used in strategic decision making to identify stakeholder power and level of attention stakeholders may pay to strategic decisions.
What variables does stakeholder mapping focus on?
1- Power- the ability of individuals /groups to influence the strategic direction of the organisation.
2- Attention- the level of attention a stakeholder pays to an individual company.
Core purpose and values can be broken down into what components and briefly define these components?
Mission- the enduring set of principles that forms the base of a firm’s identity and guides its strategic decision making. “Why do we exist?”
Values- What do we believe in? How will we believe?
Vision- the desired future state of an organisation. “What do we want to be?”
Strategy statement- what our competitive game plan will be
What are the types of purpose?
1- Competence
2- Cultural
3- Cause
