5. Stakeholders, Social Responsibility, Corporate Governance

Chapter 2 - Framing Business Ethics

• Corporations have social responsibilities.
• Corporate social responsibility (CSR) is explored in terms of levels, strategies, and outcomes.
• Stakeholder theory of the firm is explained.
• Concepts of corporate citizenship, accountability, shared value, and transparency are applied to the political role of corporations.
• Implications of applying these theories and concepts to different international contexts are critically evaluated.

Key Concepts

• Corporate social responsibility (CSR)
• Stakeholders
• Corporate citizenship
• Corporate accountability
• Corporate transparency

Towards a Framework for Business Ethics

• Business ethics is the study of business situations, activities, and decisions where right and wrong are examined.
• Modern corporations have moral responsibilities similar to individuals.
• Key themes in business ethics include corporate social responsibility, stakeholder theory, and corporate accountability.
• The role of corporate citizenship is explored, which is a more recent concept.

Corporate Social Responsibility (CSR)

• Corporations have social responsibilities which are beyond simply making a profit.
• Four reasons why corporations have social responsibilities include: enhancing long-term revenues, reducing costs, managing risk and uncertainty, and maintaining social licence to operate.
• Externalities argument: corporations' social impacts can positively and negatively affect others and they are morally responsible for these impacts.

Corporate Social Responsibility (CSR) in an international context

• CSR is more prevalent in Western countries, where it is explicitly recognized as an activity.
• Other countries have implicitly acknowledged social responsibilities within their legal or institutional frameworks.
• Four aspects of CSR: economic, legal, ethical, and philanthropic are considered across different contexts.

Corporate Social Responsibility Strategies

• Companies prioritize CSR differently based on overall strategies
• Traditional CSR: a separate strategy of philanthropy
• Contemporary CSR: integrating CSR into company strategy

Ethical Dilemma 2 - When good results are bad results

• Professor Ballistico's ethical dilemma is described.
• Issues related to corporate social responsibility, especially in relation to high-stakes decision-making, are highlighted.

The Concept of Corporate Citizenship

• Corporate citizenship (CC) is a new approach to describing the social role of the corporation.
• CC considers the political roles of corporations.
• The implications of CC include corporate accountability and transparency.
• Differences and similarities in corporate governance between Anglo-American, European, and Asian contexts are acknowledged.

Stakeholder Theory of the Firm

• Stakeholders have legitimate interests in corporations.
• Stakeholder theory is concerned with responsibilities to various groups.
• Various definitions of stakeholders are examined.
• Different perspectives on stakeholders are included in a network model.

Stakeholder Theory Criticism

• Stakeholder theory criticism, highlighting issues like fiduciary duties of managers to shareholders, weakening stakeholder power, weakening the corporation, and changing capitalist principles, is discussed,

Ethical Issues in Corporate Governance

• Ethical issues in corporate governance include executive accountability and control, executive remuneration, and diversity on corporate boards.
• Stakeholder theory concepts of independence of non-executive directors, appointment process and duration, and available resources are assessed.

Executive Remuneration

• Ethical issues surrounding executive compensation, including excessively high pay, risk-taking, and short-term focused profitability, are considered.

Alternative Models of Corporate Ownership

• Different ways of holding corporations: state-owned, family-owned firms, cooperatives, and social purpose corporations.
• Differences are analyzed about the ethical implications of diverse ownership models, especially the impact of shareholder ownership.

Ethical issues in investment

• Ethical issues in financial markets (speculative investing, insider trading, high-frequency trading) and the roles of financial professionals and market intermediaries (accounting firms and credit rating agencies) are examined, along with potential for abuse of trust when corporate information isn't transparent, or easily available.

Shareholders and Globalization

• The impact of globalization on corporate governance, shareholder power, and accountability is evaluated.
• Multiple dimensions of stakeholder participation, especially including global shareholders and stakeholder activism are considered.

Corporate Governance Globally

• Diverse corporate governance frameworks across countries (Anglo-American, Continental European, and Asian) are examined.

Rethinking Corporate Governance

• Alternative ownership models for corporations (state, family, worker, cooperative) are examined, with emphasis on their potential to foster ethical practices.

Case 2 - American Apparel

• The history of business practices at a company in the US—American Apparel is explored through a business ethics lens, including its unconventional CSR strategy.

Ethics on Screen 6 - The Big Short

• The story of the 2008 financial crisis, starring real-life financial crisis characters as actors, explores the role of financial professionals and market intermediaries (including rating agencies and various institutions) are explored from an ethical stance.

Case 6 - Corporate Governance of Professional Football Clubs

• Issues of corporate governance and ownership in the context of professional football clubs, including increasing commercialization, financial instability, and the tension between owner, shareholder, and community interests within the sport industry, are considered.

The Role of Financial Markets and Insider Trading

• Financial markets and insider trading are evaluated, considering the ethical implications—like those emerging from the financial crisis of 2007-08—such as the role of regulators and accounting and other intermediaries.

Ethical Issues in Corporate Governance: Accountability and Transparency

• Critical evaluation of corporate accountability, transparency, and disclosure.

Ethical Issues In Corporate Governance: Compensation

• Analysis of executive compensation, including the ethical implications of incentives tied to stock performance.

Different Governance Models: Steward Ownership

• This outlines another stakeholder-centric model of corporate governance where economic rights are distinct from voting rights.

Different Governance Models: Cooperatives

• Cooperatives, as a form of ownership, are examined, highlighting various types and benefits.

Mapping Stakeholders: A Network Approach

• This outlines stakeholders in various tiers in a supply chain to illustrate corporate responsibility, and the ethical challenges they face as they are interconnected.

Identifying Stakeholders

• Different models are outlined regarding how stakeholders can be identified.

Responsibility and Agency

• Responsibility is defined in the context of accountability and duties to corporations.

The Moral Case for CSR

• Externalities: corporations have a moral responsibility for the negative impacts.
• Power: companies should act with responsibility.
• Dependency: firms are dependent on stakeholders' interests/goals for long-term survival.

The Responsible Business Initiative

• Key details of this Swiss Initiative, which had a focus and intent about responsibility and accountability for corporations to consider during their activities outside of the country, and the decision on whether to pass it are summarized.

Stakeholder Theory: Criticism

• Fiduciary duties to shareholders are negated.
• Stakeholder influence is weakened.
• Corporate strength is reduced.
• Long term character of capitalism changes.

Test your knowledge on corporate social responsibility (CSR) and its significance in today's business environment. This quiz covers essential concepts such as stakeholder theory, corporate governance, and corporate citizenship. Discover how ethical practices influence corporate culture and brand identity.