week 2

Question 1

What makes them stakeholders? What is their “stake”?

Answer 1

An investment
Exposure to risk
A claim for consideration
Capacity to benefit or be harmed
Capacity to influence the firm

Question 2

The relationship between companies and their stakeholders is a two-way street

Answer 2

Stakeholders provide tangible and intangible resources critical to a firm’s success.

“…the 21st Century is one of ‘managing for stakeholders.’ The task of executives is to create as much value as possible for stakeholders without resorting to trade-offs. Great companies endure because they manage to get stakeholder interests aligned in the same direction” (Freeman, 2015).

Question 3

Stakeholder theory and its value to organisations can be explained in 3 ways

Answer 3

descriptive
normative
instrumental

Question 4

explain descriptive stakeholder theory

Answer 4

Focuses on actual behavior, addressing decisions and strategies in stakeholder relationships

Describes the organization, the way it works, and its impact on the wider environment

“The company does a lot of things for reasons besides profit motive. We want to leave the world better than we found it.” Tim Cook, CEO of Apple

Question 5

Explain the normative stakeholder theory

Answer 5

Presumption that stakeholders have value (principle in practice – what’s best for all)

Focus on how firms should treat stakeholders

Question 6

explain instrumental stakeholder theory

Answer 6

Examines stakeholder relationships and describes outcomes for particular behaviours
Increased profitability, growth, sustainability
Tests the connections between managing stakeholders and reaching business targets

Question 7

explain the types of stakeholders

Answer 7

Primary stakeholders: those whose continued association is absolutely necessary for a firm’s survival
- Employees, customers, investors, governments, and communities

Secondary stakeholders: do not typically engage in transactions with the firm and are not essential to a firm’s survival
- Media, trade associations, and special interest groups

Question 8

explain the four levels of social resposnisbility

Answer 8

philanthropic - giving back to society
ethical - following standards of acceptable behaviour as judged by stakeholders
legal - abiding by all laws and government regulations
economic - maximising shareholder wealth

Question 9

define corporate citenzship

Answer 9

Degree to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their stakeholders

Dimensions
Strong sustained economic performance
Rigorous compliance
Ethical actions beyond what the law requires
Voluntary contributions that advance the reputation and stakeholder commitment of the organization
Reputation: Actions. Intentions. Policies. Choices. Consequences. All influence stakeholder perceptions of being a good corporate citizen

Question 10

explain 4 social responsibility issues

Answer 10

Degree to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their stakeholders

Dimensions
Strong sustained economic performance
Rigorous compliance
Ethical actions beyond what the law requires
Voluntary contributions that advance the reputation and stakeholder commitment of the organization
Reputation: Actions. Intentions. Policies. Choices. Consequences. All influence stakeholder perceptions of being a good corporate citizen

Question 11

explain friedman and Adam smith’s view of the importance of Stakeholder Orientation in Social Responsibility

Answer 11

Friedman’s view - Stakeholders do not have any role in requiring businesses to demonstrate responsible and ethical behavior

Adam Smith’s view - Values that a firm should adopt to produce in a more socially responsible way correlates with the needs and concerns of the stakeholders

Legal and economic responsibilities compliance versus being ethical (and philanthropic)

Question 12

explain what is corporate governance

Answer 12

Formal systems of accountability, oversight, and control
Accountability
How closely workplace decisions align with a firm’s strategic direction
Oversight
A system of checks and balances to minimize opportunities for misconduct
Control
The process of auditing and improving organizational decisions and actions

Question 13

views of corporate governance

Answer 13

shareholder model

stakeholder model

Question 14

explain the shareholder model

Answer 14

Shareholder model
Founded in classic economic precepts
Maximizing wealth for investors and owners
Focuses on developing and improving the formal system for maintaining performance accountability between top management and shareholders

Question 15

explain the stakeholder model

Answer 15

A broader view of the purpose of business
Includes satisfying concerns of primary stakeholders including employees, suppliers, regulators, communities and special interest groups

Question 16

explain the role of board of directors

Answer 16

Holds final responsibility for its firm’s success, failure, and ethicality of actions
Have a fiduciary duty
The global financial crisis motivated many to demand greater accountability from boards
In reality, boards rarely manage but instead monitor executive decisions
Trend toward “outside directors” chosen for their expertise, competence, and ability to improve strategic decision making

Interlocking directorate: Board members linked to more than one company
Issues of executive compensation

Question 17

explain steps to implementinf a stakeholder perspective

Answer 17

assessing the cooperate culture

identifying stakeholder groups and issues

assessing organisational commitment to social responsibility

identifying resources and determine urgency

gaining stakeholder feedback

Question 18

Causes of Unethical Behavior

Answer 18

Meeting overly aggressive financial or business objectives (helping the company)
Meeting schedule pressures (ie cutting corners with safety)
Helping the organization survive
Rationalizing that others do it
Resisting competitive threats
Saving jobs

Question 19

explain foundatoinal values

Answer 19

UNDERSTAND VALUES UNDERPINNING ETHICS: these values are widely used to evaluate ethical issues:

Honesty relates to truthfulness, integrity and trustworthiness.
Telling the truth to the best of your knowledge
Dishonesty: A lack of integrity, incomplete disclosure, or an unwillingness to tell the truth
Fairness: The quality of being just, equitable, and impartial
Integrity: Uncompromising adherence to ethical values
One of the most important terms relating to virtue
Lack of rules and poor enforcement lead to unethical behavior and therefore the “game” of business can hurt people

Question 20

explain misue of company resources

Answer 20

The leading form of observed misconduct
Can range from unauthorized use of equipment and computers to embezzling company funds
Time theft costs organizations hundreds of billions in lost productivity annually
Time theft is time that employees waste or spend not working during working hours

Question 21

deception and lying can be broken into 3 types of lies

Answer 21

Joking without malice

Commission lying is creating a false perception with words that deceive the receiver
Creating noise

Omission lying is intentionally not informing channel members of problems relating to a product that affects awareness, intention, or behavior

Question 22

explain conflicts of interest

Answer 22

Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group

Question 23

explain bribery

Answer 23

The practice of offering something in order to gain an illicit advantage
Different types of bribery
Active bribery: The person who promises or gives the bribe commits the offense
Passive bribery: An offense committed by the official who receives the bribe
Facilitation payments: Legal as long as they are small
Legality varies by nation

Question 24

explain corporate intelligence

Answer 24

The collection and analysis of information on
Markets
Technologies
Customers and competitors
Socioeconomic and external political trends

Trade secrets
Hacking
System hacking
Remote hacking
Physical hacking
Dumpster diving
Whacking
Phone eavesdropping
Social engineering (tricked into revealing info)
Password guessing
Shoulder surfing

Question 25

explain discrimination

Answer 25

Discrimination on the basis of race, color, religion, sex, marital status, sexual orientation, public assistance status, disability, age, national origin, or veteran status is illegal.
Discrimination on the basis of political opinions or affiliation with a union is defined as harassment.
Equal Employment Opportunity Commission (EEOC)
The Age Discrimination in Employment Act
Affirmative Action Programs
Efforts to recruit, hire, train, and promote qualified individuals from groups that have traditionally been discriminated against
A company can be sued for discrimination if it:
Refuses to hire an individual for discriminatory reasons
Unreasonably excludes an individual from employment
Unreasonably discharges an individual
Discriminates against an individual with respect to hiring, employment terms, promotion, or privileges

Question 26

explain sexual harrasment

Answer 26

A repeated, unwanted behavior of a sexual nature perpetrated upon an individual by another
Hostile work environment
The conduct was unwelcome
The conduct was severe, pervasive, and regarded by claimant as hostile/offensive
The conduct was such that a reasonable person would find it hostile or offensive
Inappropriate / Dual relationships
A personal, loving, and/or sexual relationship with someone with whom you share professional responsibilities
A key ethical issue in sexual harassment

Question 27

to avoid sexual misconduct a firm needs

Answer 27

Statement of policy
Definition of sexual harassment
Non-retaliation policy
Specific procedures for prevention
Establish, enforce, and encourage victims to report
Establish a reporting procedure
Timely reporting requirements to the proper authorities

Question 28

explain fraud

Answer 28

Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression is fraud.
 Most common activities include:
Marketing fraud
Puffery			- Implied falsity
Labeling issues 		- Slamming 
Consumer fraud (slide 18)
Accounting fraud (slide 19)

Question 29

explain consumer fraud

Answer 29

When consumers attempt to deceive businesses for personal gain
Price tag switching, item switching, or lying to obtain discounts
Collusion involves an employee who helps a consumer commit fraud
Duplicity involves a consumer duping a store
Guile is associated with a person who uses tricks to obtain an unfair advantage

Question 30

explain financial misconduct

Answer 30

The failure to understand and manage ethical risks was a key problem in the recent financial crisis
Many firms rewarded for risk-taking
Lenders encouraged lying on applications to secure loans
Difficult-to-understand financial instruments and murky accounting played roles
Government calls for reform
Stricter controls on hedge funds and other instruments
Dodd-Frank Wall Street Reform and Consumer Protection Act 2010
Greater transparency

Question 31

2 types of insider trading

Answer 31

Legal insider trading: Involves legally buying and selling stock in an insider’s own company, but not all the time

Illegal insider trading: The buying or selling of stocks by insiders who possess material that is not public

Question 32

explain sustanability

Answer 32

Assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles while maintaining the natural environment

Sustainable development has emerged as a major concern
Sustainable development: Meeting the needs of the present without compromising the ability of future generations to meet their own needs