Unit 1 Lecture 2 PDF

Unit 1 Introduction to business decision making Lecture 2 Stakeholders, perspectives and corporate responsibility DPBS 1100/BMGT1300 Business Decision Making  Introduction All decisions, including business decisions are driven by outcomes eg. deciding where to...

Unit 1 Introduction to business decision making Lecture 2 Stakeholders, perspectives and corporate responsibility DPBS 1100/BMGT1300 Business Decision Making  Introduction All decisions, including business decisions are driven by outcomes eg. deciding where to enroll for university may depend on our unique set of personal goals and aspirations and similarly, firms may have a unique set of expectations for new employees All decisions, including business decisions, involve a context where current circumstances may influence the type of decision made, options, and anticipated outcomes eg. deciding where to enroll for university depends on whether there are geographic constraints, such as the decision to move from Singapore to New South Wales and similarly, deciding which markets a business will enter depends on whether there are barriers to entering that market  Business decisions are different While the basic elements of business decision making have similarities with individual decision making, there are some fundamental differences Most importantly, firms and other organisations are not individuals and managers are not supposed to be making decisions that are self serving Managers act upon a network of interrelated groups of people, which are often referred to as stakeholders A business’s stakeholder is anyone who has an impact on business decisions or is in turn impacted by its decisions  Stakeholder approach Stakeholders are a large community that is composed of various interrelated groups of human and non-human entities  Classifying stakeholders Stakeholders can be classified based on their proximity to the core activities of the business and include: Organisational stakeholders - managers, employees and investors responsible for governing the organisation (often seen as internal to the business as they are able to directly influence decision making) Market stakeholders - customers, suppliers and competitors Societal stakeholders - community groups, government, physical environment (and those who represent the interests of the physical environment) and community groups such as non-government organisations (NGOs) Market and societal stakeholders are considered as external to the business as they impact decision making less directly  Qantas Airways Limited stakeholder interactions Qantas as a publicly listed company has several shareholders, including Pendal Group, Alliance Bernstein LP, Northcape Capital LP, and Qantas executives and employees Qantas’s customers include travellers, executives, government departments (eg. Department of Defence) Source: https://www.theguardian.com/business/2023/feb/23/qantas-lower-fares-record-profit-alan-joyce Qantas return to profit must now be followed by a cut in fares https://www.smh.com.au/business/the-economy/qantas-return-to-profit-must-now-be-followed-by-a-cut-in-fares-20230223- p5cmze.html  Qantas Airways Limited stakeholder interactions Qantas has over 25000 employees across a range of roles including pilots, flight attendants, maintenance engineers, sales staff, and IT specialists and many employees such as maintenance engineers, have specialised skills that have contributed to the airline’s reputation for safety and customer service Suppliers to Qantas include Airbus Industries, which supplies aircraft and components; Sydney Airports (and other airports where Qantas has landing rights); IBM, which supplies IT; Tata Consulting Services, which supplies IT services, and dNata, which supplies catering and other services  Qantas Airways Limited stakeholder interactions Qantas has a number of government and regulatory stakeholders including the Australian Competition and Consumer Commission (ACCC), Civil Aviation Safety Authority (CASA), and the International Civil Aviation Organization (ICAO - a specialised agency of the United Nations) Representing Qantas employees are several trade unions including the Licensed Aircraft Engineers Association; Australian Services Union; Transport Workers Union; Flight Attendants’ Association of Australia; Australian and International Pilots Association  Qantas Airways Limited stakeholder interactions Qantas has numerous local community stakeholders, including those in Australian capital cities but also more widely in places like Tuvalu, where communities are already experiencing the effects of global warming and rising sea levels (ironically partly due to aviation emissions) Finally, in a move aimed at mitigating these kinds of negative effects on future generations, Qantas has partnered with Greencollar, Australia's largest environmental markets investor, natural resource manager and conservation- for-profit organization to work with landholders to regenerate bushland and ecosystems across Australia  Better business decision making More effective business decision making considers four perspectives - corporate responsibility, economics, business law and management A corporate responsibility focused normative approach (what the business ought to do) directs attention to how managers can make decisions that are responsible for every stakeholder including the long term sustainability of the physical environment and society, which also informs the instrumental aspects of a business decision (how the business needs to behave) Better decisions will emanate from the identification of stakeholders and their rights, interests, motivators and values held  Better business decision making To consider multiple interests there needs to be reference to multiple perspectives into better business decision making In respect to corporate responsibility, it is “what the business ought to do” and how attention is directed towards increasing the benefit and reducing the harm caused by the business decision across stakeholders  Better business decision making The second is the economic perspective that investigates the buying, selling and production that lies central to business activity These actions operate within markets and through an understanding of economic fundamentals such as satisfying unlimited wants from limited resources, the dynamic nature of markets and how stakeholders might be affected by business decisions  Better business decision making This understanding of economics assist in determining whether the stakeholders enable or constrain business activity and the extent to which it will inform normative (how we ought to act) decision making Tasks for business decision makers include identifying consumers, competitors, settling upon the most suitable business structure, determining the operations process required to produce the good/service  Better business decision making The third perspective is business law that examines the contracts, laws and other regulations that provide license for some business activities (and restrictions for others) and gives insight into how the legal environment informs instrumental considerations into the decision making process In some cases, the stakeholder must establish legal relationships with others and in others each stakeholder must interact with the government, as the government provides the legal framework for it to function Key to the business decision making process is although the law permits a certain action is it always the best business decision  Better business decision making The types of law address competition in markets, human rights, contracts, intellectual property, consumer protection, employment and taxation The law will intersect with business decision making and there are times when the limitations of the law will be apparent such as when instrumental and normative considerations collide and the latter may direct decision making to go beyond the minimum legal requirements  Better business decision making The final perspective is that of management where their decisions will occur within complex situations and that this will occur often More effective managers will integrate knowledge from a number of sources and where the outcome unknown they may seek to engage management consultants who may have expertise in navigating a more appropriate course to a better decision  Corporate responsibility Corporate responsibility (CR) or more often Corporate social responsibility (CSR) is the idea that a business has a responsibility to the society that exists around it Businesses that embrace CR are typically organised in a manner that empowers its decision makers to act in a socially responsible way to positively impact the world It is a form of self-regulation that can be expressed in initiatives or strategies, depending on an organisation’s goals  Corporate responsibility Many businesses communicate CR efforts to external and internal stakeholders through corporate social responsibility or sustainability reports There are various examples of what “socially responsible” means from organisation to organisation Businesses are often guided by a concept known as the triple bottom line, which dictates that a business should be committed to measuring its social and environmental impact, sustainability efforts, and profits The adage “profit, people, planet,” known as the “three P’s,” is often used to summarise the driving force behind the triple bottom line https://www.qantas.com/au/en/about-us/our-company/in-the-community/sustainability-at-qantas.html  Corporate responsibility Businesses of course need to be profitable to remain viable, but that is rarely a business’s core purpose Businesses, and indeed all organisations, exist to solve problems and improve lives, according to Professor R. Edward Freeman, who is widely considered to be the ‘father’ of corporate responsibility and stakeholder theory  Corporate responsibility Source: http://stakeholdertheory.org/about/ Changing the story of business and stakeholder theory – R Edward Freeman https://www.youtube.com/watch?v=aoTkczBXwsY  Corporate responsibility Ethics has to be an integral of business management. Business management should not include unethical or illegal methods to be able to succeed. Business management is not as simple as obtaining revenue. “Businesses need to abide by fair policies and their owners have to be ethical in dealing with their customers”. While illegal practices in business management may result in positive results at first, eventually the business is bound to fail. Business ethicist - Robert Solomon Many organisations are now taking the idea of ‘purpose’ seriously, and have developed ‘statements of purpose’ that capture the response to the question; “What’s the unique contribution our organisation is here to make?” and considered whether this purpose is shared amongst their core stakeholders, including employees  Corporate responsibility Taronga Zoo a statutory authority owned by the people of NSW (government) – this is its statement of purpose and sustainability strategy Source: https://taronga.org.au/sites/default/files/2021-10/Taronga_Sustainability_Strategy_2021_2025.pdf  Corporate responsibility Unilever – its statement of purpose and the Unilever Compass Source: https://www.unilever.com.au/planet-and-society/  Corporate responsibility and stakeholders An organisation's ripple effect can provide a broader view of its actions and can be considered a little like throwing a stone in a pond, where each action has the potential to spread out like ripples across the social, political, economic and ecological spheres Each stakeholder may value the same issue in a different way eg. financial benefit may drive some stakeholders whereas for others it may be supply chain transparency and ensuring human rights Corporate responsibility and stakeholders Managerial decisions have a ‘ripple effect’ across society and actions taken by a business have the potential to spread out like ripples For example, in the POLITICAL sphere, a business organisation can create a ripple by influencing GOVERNMENTS to legislate for industry subsidies, for example for renewable energy creation or use A business organisation creates a positive ECONOMIC ripple in the form of jobs for the local community An organisation can create a positive or negative SOCIAL ripple through its Equity, Diversity and Inclusion (EDI) practices (or absence of practices) towards employees It can create a negative ENVIRONMENTAL ripple by creating waste in its manufacturing, transport and product packaging decisions Managers have agency when it comes to the negative and positive impact on other stakeholders  Corporate responsibility When making decisions that consider a business’s ripple effect, managers may begin by considering its values and goals When making decisions about what is best for the firm, managers can consider multiple preferences, including the preference to be a good citizen of the world and to be perceived by stakeholders that way Unfortunately, some managers conflate short term profits and shareholder return with value and success but according to the corporate responsibility literature, the primary purpose of a business should not be to make such profits and shareholder returns Businesses need profits to remain viable, but that should rarely be a its core purpose  Corporate responsibility and stakeholders The milk bought at the supermarket for example impacts the ecological sphere in several ways Apart from packaging, transport and waste, the methane emitted by cows is a major contributor to global warming so the farmer may decide to mitigate that impact by using the ‘super seaweed’ supplement developed by CSIRO in Australia that reduces such emissions Seaweed farm aims to reduce livestock methane emissions | ABC News https://www.youtube.com/watch?v=Z6am9JUhyno  Corporate responsibility The ESG (environment, society and governance) framework, whereby investors can choose to fund companies based on their impact on environment, society and governance is now prominent The framework helps with holding managers within companies accountable for their business practices, and helps investors to align their ethical standards and values with investment decisions and make positive impacts to the world  Corporate responsibility Benefit Corporations (or B Corp) were developed in the United States as a legal structure that expanded the responsibilities of a corporation, to include a consideration of the its impact on the environment and society, in line with an overarching goal of long term sustainable value for all stakeholders https://www.bcorporation.net/en-us/certification/ There is now a global certification scheme that verifies social and environmental performance, transparency and accountability and there are currently over 3500 certified B Corps in 75 countries In Australia there are over 275 certified B Corps, including T2 Tea, which sells tea, herbal infusions and tea accessories in stores across Australia and New Zealand and globally and T2 Tea’s stated purpose is: “Creating a generation of tea lovers to unite the world for good”  Corporate responsibility T2 Tea, which sells tea, herbal infusions and tea accessories in stores across Australia and New Zealand and globally and T2 Tea’s stated purpose is “Creating a generation of tea lovers to unite the world for good” T2 Tea, like all certified B Corp, were rated in categories of each of the following: Governance - which considered its mission, corporate accountability, ethics and transparency Workers - which considered wages, employee benefits, training, employee communication, job flexibility, and workplace health and safety Community - which considered job creation, diversity and inclusion, civic engagement and giving, and suppliers and distributors Environment - which considered land use and offices/ factories, production inputs, production outputs, transportation, distribution and suppliers, conservation and toxin reduction/remediation  Corporate responsibility T2 Tea’s espoused ‘values’ are: Courage - We empower: Be brave and take the lead Curiosity - We explore: Be open, learn, discover the unknown https://www.t2tea.com/en/au/explore-t2/explore-purpose.html Passion - We inspire: Love what you do and have fun Generosity - We share: Be kind and inclusive Creativity - We dream: Think big and make a difference Accountability - We deliver: Commit, collaborate and achieve By deciding to be a B-Corp and identifying its values that emphasise responsibility, the management of T2 made a conscious decision to demonstrate its commitment towards multiple stakeholders Corporate responsibility in business Kathmandu seeks to make its biggest statement through corporate responsibility. This includes protecting worker’s rights, better understanding its supply chain and minimising its waste to lower its environmental impact Management recognises the challenges it faces in this area and identifies a number of key focus areas https://www.facebook.com/kathmandu/videos/666103267356784/?_rd  Corporate responsibility in business Source : https://www.kmdbrands.com/communities-climate-circularity