week 2 Flashcards
What makes them stakeholders? What is their “stake”?
An investment Exposure to risk A claim for consideration Capacity to benefit or be harmed Capacity to influence the firm
The relationship between companies and their stakeholders is a two-way street
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).
Stakeholder theory and its value to organisations can be explained in 3 ways
descriptive
normative
instrumental
explain descriptive stakeholder theory
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
Explain the normative stakeholder theory
Presumption that stakeholders have value (principle in practice – what’s best for all)
Focus on how firms should treat stakeholders
explain instrumental stakeholder theory
Examines stakeholder relationships and describes outcomes for particular behaviours
Increased profitability, growth, sustainability
Tests the connections between managing stakeholders and reaching business targets
explain the types of stakeholders
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
explain the four levels of social resposnisbility
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
define corporate citenzship
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
explain 4 social responsibility issues
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
explain friedman and Adam smith’s view of the importance of Stakeholder Orientation in Social Responsibility
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)
explain what is corporate governance
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
views of corporate governance
shareholder model
stakeholder model
explain the shareholder model
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
explain the stakeholder model
A broader view of the purpose of business
Includes satisfying concerns of primary stakeholders including employees, suppliers, regulators, communities and special interest groups
explain the role of board of directors
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
explain steps to implementinf a stakeholder perspective
assessing the cooperate culture
identifying stakeholder groups and issues
assessing organisational commitment to social responsibility
identifying resources and determine urgency
gaining stakeholder feedback
Causes of Unethical Behavior
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
explain foundatoinal values
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
explain misue of company resources
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
deception and lying can be broken into 3 types of lies
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
explain conflicts of interest
Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group
explain bribery
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
explain corporate intelligence
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
explain discrimination
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
explain sexual harrasment
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
to avoid sexual misconduct a firm needs
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
explain fraud
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)
explain consumer fraud
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
explain financial misconduct
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
2 types of insider trading
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
explain sustanability
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
