Business and Society Quiz

Business and Society

• Business is an organization that makes a product or service for profit.
• Society is formed by individuals and the structures they create.
• Companies like Amazon combine business and society for greater profits.

Stakeholders and Shareholders

• Stakeholders are individuals or groups affected by a company’s decisions, policies, or operations.
• Shareholders are a type of stakeholder who own shares in a company.
• Stakeholders believe companies should benefit society, fulfill societal needs, and be accountable to stakeholders.
• Shareholders believe the company is owned by its owners, the purpose is to make profit, managers are agents of shareholders, and shareholder interests are prioritized.

Types of Stakeholders

• Market Stakeholders: directly involved in the company’s operations, including employees, shareholders, customers, suppliers, retailers, and creditors.
• Non-market Stakeholders: indirectly involved in the company’s operations, including communities, government, competitors, the general public, business support groups, and NGOs.
• Internal Stakeholders: individuals within the organization, such as employees and managers.
• External Stakeholders: individuals or groups outside the organization, such as customers, suppliers, and government agencies.

Stakeholder Power

• Voting Power: Shareholders can influence decisions through voting rights.
• Economic Power: Suppliers, customers, etc. can leverage economic power by adjusting their engagement with the company.
• Legal Power: Government through regulation and laws.
• Informational Power: Customers, activists, etc. can wield influence via information and publicity.

Stakeholder Analysis

• Identify relevant stakeholders.
• Understand the interests of each stakeholder.
• Assess the power of each stakeholder.
• Determine the likelihood of stakeholder coalitions forming.

Stakeholder Interests and Power

• Employees (Market): Fair pay, safe work environment, secure employment. Power lies in publicity, strikes, and union bargaining.
• Shareholders (Market): Return on investment (ROI) and stock value. Power lies in voting rights and accessing company information.
• Suppliers (Market): Regular orders, prompt payment, ethical treatment. Power lies in withholding orders and supplying competitors.
• Customers (Market): Value for money, safe and reliable products, accurate information. Power lies in switching to competing brands.
• Government (Non-market): Economic development, social improvements, tax revenue. Power lies in regulation, laws, and permitting business activity.
• Competitors (Non-market): Fair competition, cooperation, and new customer acquisition. Power lies in government influence and legal actions.
• General Public (Non-market): Protection of social values and minimized risks. Power lies in public pressure, government influence, and social commentary.

Consumer Perception

• Many consumers believe businesses should achieve goals while improving society and the environment.
• 42% of consumers would avoid buying products from environmentally irresponsible companies (ESG rules).
• 65% of consumers would switch to a competitor that is environmentally friendly.

Shareholder Rights and Corporate Governance

• Shareholders are investors who own a corporation through stock ownership.
• Shareholders can be individual (Main Street investors) or institutional (Wall Street investors).
• Public Limited Company: Shares offered to the public, listed on stock exchanges, and subject to demanding document filing requirements.
• Private Limited Company: Shares not offered to the public, limited number of shareholders, less stringent document filing requirements.

Objectives and Legal Rights of Shareholders

• Objective: Increase in stock price (capital gain) and ROI through dividends.
• Legal Rights: Receiving dividends, voting on board members, major mergers/acquisitions, bylaw/charter changes, selling shares, receiving financial reports, and suing the company and officers.

Corporate Governance

• The process of controlling and governing a company through internal systems, balancing diverse interests.
• Shareholders → Board of Directors → Top Management
• Board of Directors: Typically 9-11 members, average tenure of 8-10 years, may include CEOs, major shareholders, bankers, etc.
• Board of Directors Duties: Establishing corporate decisions, developing strategies and policies, protecting stakeholder interests, evaluating management performance, and selecting top-level personnel.

Corporate Governance Systems

• One-tier system (common in US): One board combining executives and supervisors (e.g., Amazon).
• Two-tier system (common in some EU countries): Two separate boards, a supervisory board and an executive board.

Explore the relationship between business and society through stakeholders and shareholders. This quiz covers essential concepts, definitions, and types of stakeholders in a corporate context, providing insight into how companies interact with their environments.