Week 2: Corporate Governance and Stakeholder Analysis Flashcards
Shareholder Theory
- Proposed by: Milton Friedman
- corporation’s only obligation = maximize profits for shareholders
- corporate social responsibility is the responsibility of the government
- investors and stakeholders should use their own resources to invest in CSR issues of their choice**
Stakeholder Theory
- needs and concerns of ALL stakeholders must be considered
- corporation should be thinking about the the long-term impacts on all parties involved in the business to be successful
Stakeholder impact analysis follows these steps
- Identify the stakeholders.
- Identify stakeholders’ interests and concerns.
- Identify what claims stakeholders are likely to make on the organization.
- Identify the stakeholders who are the most important from the organization’s perspective.
- Identify the resulting strategic challenges.
At the very minimum, the company needs to satisfy at least 3 stakeholders
- customers
- employees
- long-term shareholders
Companies need to balance:
short-term profits + long-term profitability (increased profits can meet the needs of employees who want better wages)
Consequentialist – Deliberative Process
making decisions by thinking of the consequences of your actions. “what kind of outcomes should i produce (or try to produce)?” = you’re thinking of what the result of your actions will be
Consequentialist – Focus
you’re focused on the future effects of an action + all the people who will be affected
Consequentialist – Definition of Ethical Conduct
the right thing to do is one that brings about the most beneficial or positive consequences and minimizes the negative ones
Consequentialist – Motivation
aim is to produce the most good
Duty – Deliberative Process
“What are my obligations in this situation, and what are things I should never do?” = doing your duty, regardless of the consequence
Duty – Focus
Looking at what you should do based on your pre-existing obligations and principles, and then deciding how those principles might apply to the current situation- looking at your pre-existing values and see what actions you can take based on those
Duty – Definition of Ethical Conduct
always doing the right thing
aka
never failing to do your duty
Duty – Motivation
regardless of whether you feel like doing something or not (motivation), you should still do what you know is the right thing to do (duty).
Virtue – Deliberative Process
- What kind of person should I be (or try to be)?
- What will my actions show about my character?
Virtue – Focus
trying to understand the character traits, both good (virtues) and bad (vices), that might be driving the people involved in a situation. It’s about looking at what kind of person someone is or could be, and how their personal qualities might be influencing their actions.
Virtue – Definition of Ethical Conduct
Doing whatever a fully virtuous person would do in the circumstances.
Virtue – Motivation
Aim is to develop one’s character.
Egoism – Contributors
Adam Smith and Milton Friedman
Egoism – Focus
Individual desires or interests
Egoism – Rules
Maximization of desires/self-interest
Egoism – Concept of human beings
Humans are actors with limited knowledge and objectives
Egoism – Type
Consequentialist
Egoism – Problems
if everyone tries to maximize their own self-interest, what is going to happen when one person
maximizes their self-interest at the expense of another’s?
