Week 8 Flashcards
What is a stakeholder?
An individual or a group that, in the context of a specific situation, is either harmed by, or benefits from, the corporation, or whose rights the corporation should respect
what is stakeholder theory of the firm?
- created by Freeman in 1980s it states that he stakeholder approach starts by looking at various groups to which the corporation has a responsibility.
- The main starting point is the claim that corporations are not simply managed in the interests of their shareholders alone, but that there is a whole range of groups, or stakeholders, that have a legitimate interest in the corporation as well.
what is the CSR approach?
it strongly focuses on the corporation and its responsibilities, and its impact on society
what are the two principles Evan and Freeman said we can apply to determine who is a stakeholder?
- the principle of corporate rights, which demands that the corporation has the obligation not to violate the rights of others.
- the principle of corporate effect, says that companies are responsible for the effects of their actions on others
what is the traditional model of management and managerial capitalism?
where the company is seen as only related to four groups. Suppliers, employees, and shareholders provide the basic resources for the corporation, which then uses these to provide products for consumers. The shareholders are the ‘owners’ of the firm and consequently they are the dominant group whose interests should take precedence.
what is the stakeholder view of the firm?
here the shareholders are one group among several others. The company has obligations not only to one group, but also to a whole variety of other constituencies that are affected by its activities. The corporation is thus situated at the centre of a series of interdependent two-way relationships. This model forms the basis of our understanding of CSR.
what is the network model of stakeholder theory?
stakeholder groups also might have duties and obligations to their own set of stakeholders, and to the other stakeholders of the corporation. This gives rise to a network model of stakeholder theory.
what is Friedman’s stance on stakeholders?
a key objection of CSR has been that businesses should only be run in the interests of their owners. This correlates with the traditional stockholder model of the corporation, where managers’ only obligation is to shareholders. Stakeholder theory therefore has to provide a compelling reason why other groups also have a legitimate claim on the corporation.
what are the three forms of stakeholder theory according to Donaldson and Preston (1995)?
- Normative stakeholder theory—this is theory that attempts to provide a reason why corporations should take into account stakeholder interests.
- Descriptive stakeholder theory—this is theory that attempts to ascertain whether (and how) corporations actually do take into account stakeholder interests.
- Instrumental stakeholder theory—this is theory that attempts to answer the question of whether it is beneficial for the corporation to take into account stakeholder interests.
what is the salience of stakeholders?
Mitchell, Agle, and Wood (1997) suggest three key relationship attributes likely to determine the perceived importance/ salience of stakeholders, important when deciding which stakeholders are more likely to be able to influence the organization in some way. Likely to be important when organizations are in a position where they have to decide how to assign priority to competing stakeholder claims.
- Managers are likely to assign greater salience to those stakeholders thought to possess greater power, legitimacy, and urgency.
what are the three attributes of salience of stakeholders?
- Power. The perceived ability of a stakeholder to influence organizational action.
- Legitimacy. Whether the organization perceives the stakeholder’s actions as desirable, proper, or appropriate.
- Urgency. The degree to which stakeholder claims are perceived to call for immediate attention.
what are the 4 stakeholder groups?
marketplace, workplace, communities and environment
what is the marketplace about? what are the challenges and how do you overcome them?
- it covers the business end of the community, like consumers, shareholders (governance), suppliers, investors and competitors. the parties which have an interest in the financial success of the firm
CHAL: - However, Marketplace may expose corporate irresponsibility and lack of commitment to CSR:
- The Market can act as a social control of business, where
consumers can reward or punish corporations
SOL: - An appropriate corporate culture at board level can
result in effective board policies that govern the outlook,
running and organisation of the company
what is the workplace?
- employees are at the centre of CSR. A firm’s reputation rests on its treatment of employees, therefore CSR can attract talent and boost performance.
- Companies need employees to buy into CSR activities
- Employment is the fundamental social & economic role of business.
- Workplace issues are central to CSR: occupational
health and safety (physical and psychological), fair
pay and conditions, equal opportunities, fair process
and free association.
what is the overview of communities?
- Philanthropic community donations were amongst the
first forms of CSR and are usually the first
manifestations of a firm’s CSR agenda. - Communities have high legitimacy as corporate
neighbours, as they’re usually in need of support
