5. Stakeholders, Social Responsibility, Corporate Governance

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Questions and Answers

What is the primary focus of corporate social responsibility (CSR)?

Creating a framework for ethical business practices (correct)

Reducing operational costs through efficiency

Maximizing profits for shareholders

Addressing social issues without any financial implications

How does stakeholder theory relate to a corporation's social responsibility?

It recognizes that various stakeholders have interests that may impact ethical decisions. (correct)

It suggests that stakeholders should not influence corporate decisions.

It articulates a method for maximizing profits over social concerns.

It limits the responsibilities only to shareholders.

Which of the following best defines corporate citizenship?

The practice of public relations to improve brand image

A corporation acting as a responsible member of society with social and environmental responsibilities (correct)

The sole focus on profit generation for shareholders

A corporation's commitment to obey laws only

Which statement accurately reflects the role of corporate governance in ethics?

It structures ethical guidelines and ensures compliance with laws. Signup and view all the answers

What argument did Friedman present regarding corporate social responsibility?

Corporate social responsibility should always align with shareholder interests. Signup and view all the answers

In the context of a corporation's values, how are beliefs influential?

They shape individual and collective ethical behavior in business. Signup and view all the answers

What strategy is commonly used by corporations to build their brand identity?

Personifying the brand using recognizable characters Signup and view all the answers

Why is a culture of ethics considered crucial for sustainable excellence in corporations?

It fosters trust and accountability among stakeholders. Signup and view all the answers

Which of the following best describes why businesses have social responsibilities?

To address issues of right and wrong beyond mere profitability. Signup and view all the answers

What is corporate citizenship primarily concerned with?

Active participation and accountability in societal issues. Signup and view all the answers

How does stakeholder theory influence corporate social responsibility?

It emphasizes the importance of addressing the needs of all stakeholders. Signup and view all the answers

Which aspect is NOT a part of corporate social responsibility?

Exclusive profit maximization. Signup and view all the answers

What does the concept of shared value represent in business ethics?

Generating economic value in a way that also creates value for society. Signup and view all the answers

Which of the following accurately describes a role of corporate governance in ethics?

To ensure accountability and ethical decision-making frameworks. Signup and view all the answers

What is a primary challenge when applying business ethics in an international context?

The diversity in cultural, legal, and ethical expectations. Signup and view all the answers

Which principle is essential for understanding corporate accountability?

Openly sharing decision-making processes with stakeholders. Signup and view all the answers

What is the primary focus of the stakeholder approach in business ethics?

To recognize the corporation's obligations to various groups Signup and view all the answers

Which principle states that corporations must respect the rights of others?

Principle of corporate rights Signup and view all the answers

What key aspect differentiates stakeholders from shareholders in a corporation?

Stakeholders can include anyone affected by the corporation's actions Signup and view all the answers

How does the stakeholder view of the firm depict shareholders?

As one among many groups with legitimate interests Signup and view all the answers

In the context of corporate social responsibility, what does the stakeholder approach highlight?

The interconnectedness of various groups affected by corporate actions Signup and view all the answers

What is meant by corporate citizenship in the stakeholder approach?

The expectation that corporations act responsibly in the community Signup and view all the answers

Which of the following best describes the relationship between stakeholder orientation and corporate social responsibility?

Stakeholder orientation enhances the understanding of social responsibilities Signup and view all the answers

How does corporate governance relate to ethics and social responsibility?

Corporate governance structures dictate ethical behavior and accountability Signup and view all the answers

Study Notes

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.

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.

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.

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.

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Description

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.