Compulsory: Stakeholder Theory

Question 1

What are the two principles when it comes to determining who a Stakeholder is?

(Evans and Freeman 1993)

Answer 1

1) Principle of Corporate Effect: Corporations are responsible for the effects that their actions have on others. (outcome based)

2) Principle of Corporate Rights: Corporations have an obligation to not violate the rights of others. (duty-based)

Question 2

What is the definition of a Stakeholder?

according to Crane et al. 2019

Answer 2

an individual or 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

Question 3

What are the three stakeholder models (lens) for a firm to view to adopt? (Crane et. al 2019)

Answer 3

1) Traditional Mgmt model
2) Stakeholder model
3) Network model

Question 4

Explain what’s involved in the Traditional mgmt model of stakeholder theory

Crane et. al (2019)

Answer 4

1) Customers
2) Suppliers
3) Shareholders
4) Employees

Two-way relationship between shareholders but one way with the rest. Employees & Suppliers –> firm and Firm –> customers.

Question 5

Explain what’s involved in the Stakeholder model of stakeholder theory

Crane et al. (2019)

Answer 5

This model is more two-way relationships with all stakeholders

1) Customers
2) Suppliers
3) Shareholders
4) Employees

+
5) Government
6) Competitors
7) Civil Society

Question 6

Explain what’s involved in the Network model of stakeholder theory

Crane et al. (2019)

Answer 6

The Stakeholders of Stakeholders.

Customers, suppliers, shareholders, employees, government, competitors, civil society + their stakeholders in them.

Question 7

Why do stakeholders matter according to (Freeman 1984)?

Answer 7

They matter due to two perspectives:

1) Legal perspective:
- Legally binding contracts e.g. suppliers/employees
- Laws and regulations e.g. EU social contract rights about working conditions etc

2) Economic perspective:
- Agency problem: Freeman challenged the agency problem of managers solely focusing on shareholder maximisation by encouraging firms to consider various stakeholders which contribute to the firms long-term success and not short-term shareholder gains.

Question 8

What are the three stakeholder theories that Donaldson & Preston (1995) came up with?

Answer 8

1) Normative Stakeholder Theory
2) Instrumental Stakeholder Theory
3) Descriptive Stakeholder Theory

Question 9

What is Normative stakeholder theory about? & tagline

Donaldson & Preston (1995)

Answer 9

Providing a reason WHY corporations should take into account stakeholder interests

*Its the right thing to do

Question 10

What is Instrumental stakeholder theory about? & tagline

Donaldson & Preston (1995)

Answer 10

Whether it is BENEFICIAL for the corporation to take into account stakeholder interests

*Its the most beneficial thing to do

Question 11

What is Descriptive stakeholder theory about? & tagline

Donaldson & Preston (1995)

Answer 11

Ascertain whether (and how) corporations actually DO take into account stakeholder interests

*Its what the organisation did(n’t) do

Question 12

What does Orts and strudler (2009) state about stakeholder theory?

Answer 12

That “claims for stakeholder theory as providing a framework for business ethics are seriously overblown”

Question 13

What are the three weaknesses that Orts and Struddler (2009) identified that give challenges to applying stakeholder theory in practice?

Answer 13

1) Identification and definition of stakeholders

2) Vagueness and Overbreadth

3) How to balance interests in decision making

Question 14

Explain how Orts and Strudler (2009) suggested to address the Identification and definition of stakeholders weakness

Answer 14

They suggested for firms to adopt clearer criteria for identifying and defining stakeholders through either a Narrow/Broad approach.

• Narrow: Limited to those directly affected by business operations e.g. Shareholders, employees, suppliers and creditors. This contests strict financial ownership theory of the firm (i.e. shareholder primacy).
• Broad: Wider range of stakeholders such as Community groups, government. However, may include Vast number of stakeholders, which is unworkable?

Question 15

Explain how Orts and Strudler (2009) suggested to address the Vagueness and Overbreadth of stakeholders weakness

Answer 15

They suggested for firms to refine definitions that strike a balance between precision and inclusivity due to:

Vagueness leads to varied interpretations and practices while Overbreadth leads to Including too many stakeholders that become impractical to manage.

Question 16

Whats the difference between Identification and definition and Vagueness and Overbreadth weakness that Orts and Strudler 2009 came up with?

Answer 16

Identification and definitions is about who qualifies as a stakeholder to the firm whereas

Vagueness and Overbreadth refers to how precisely and practically these definitions are applied

Question 17

Explain how Orts and Strudler (2009) suggested to address the Balancing interests of stakeholders weakness

Answer 17

They suggested for firms to engage in more deliberate and inclusive dialogue with the stakeholders to aid the decision making process.

Allowing them to make a decision that aligns with the broader concerns of the stakeholders involved.

Question 18

What is the core idea of Stakeholder theory?

Answer 18

That businesses should aim for a balance between meeting needs of shareholders (shareholder primacy) and other stakeholders as Freeman 1984 advocated for stakeholder management approach.

This is because the company’s long-term success is tied to its ability to manage relationship with the various stakeholders.

Question 19

Key challenges of applying Stakeholder theory (pick 3):

Real-world examples (to back up):

Question 20

DO ONCE OTHER CHOICES ARE DONE :

Old exam q + assessment feedback review

Question 21

DO AFTER OLD EXAM AND EXAM FEEDBACK REVIEW DONE:

Alt exam q:

Answer: