Business Ethics - Stakeholder Relationships, Social Responsibility, and Corporate Governance (Part 1) PDF

Business Ethics Stakeholder Relationships, Social Responsibility, and Corporate Governance (Part -1) Dr. Rudaba UL MULK [email protected] Learning Objectives Identify stakeholders’ roles in business ethics Shareholder view vs. stakeholder view Types of stakes Intera...

Business Ethics Stakeholder Relationships, Social Responsibility, and Corporate Governance (Part -1) Dr. Rudaba UL MULK [email protected] Learning Objectives Identify stakeholders’ roles in business ethics Shareholder view vs. stakeholder view Types of stakes Interactions between a company and Its primary and secondary Stakeholders Examine the relationship between stakeholder orientation and social responsibility  Stakeholders Define Ethical Issues in Business Stakeholders – Those who have a “stake” or claim in some aspect of a company’s products, operations, markets, industry, and outcomes Customers Shareholders Employees Government Communities Suppliers Agencies  Stakeholders Define Ethical Issues Descriptive – Focuses on the firm’s behavior; addresses how decisions are made for stakeholder relationships (approach acknowledges that every stakeholder group has its own interests ) Instrumental – Describes what happens if firms behave in a particular way (performance consequences for firms of highly ethical relationships with stakeholders) Normative – Identifies ethical guidelines that dictate how firms should treat stakeholders (approach that most closely aligns with R. Edward Freeman's initial description of stakeholder theory)  The Impact of a Strong Organizational Culture Business and selected stakeholder relationships If sheer numbers of relationships and interactions are an indicator of complexity, it is easily seen that business’s current relationships with different segments of society constitute a truly complex macroenvironment. Today, managers must deal with these interfaces on a daily basis and the study of business ethics is designed to improve that understanding. (Carroll et al. 2018, pg. 9) Social environment factors, business criticism, and corporate response (Carroll et al. 2018, pg. 11) Some legal and claimed moral rights today Social environment factors, business criticism, and corporate response (Carroll et al. 2018, pg. 11) Social environment factors, business criticism, and corporate response  Elements in the social contract Laws and regulations spell out the “rules of the game” for business for which they are held accountable. Shared understandings, on the other hand, are more subtle and create room for misunderstandings.  Social contract If these shared understandings were spelled out, a company might adopt the following hypothetical principles as part of its social contract with consumers: - We believe that the interests of our company and our customers are best served through a sustainable practice of capitalism—economically, morally, environmentally, and socially. - We believe that our customers and our company owe each other an equal duty of transparent, authentic, and accountable communication. Social environment factors, business criticism, and corporate response In summary, factors in the social environment have formed a backdrop against which criticism of business has developed and flourished. This helps explain why we have a societal environment that is encouraging criticism of business. Some of these same general trends are bound to continue but may be moderated if economies improve. (Carroll et al. 2018, pg. 9)  The production view of the firm Source: Freeman (1984) Simply ‘doing business’/Family-dominated business Successful business = owner-manager-employee worry about satisfying just 2: suppliers (take raw materials) OR customers (make profit) The managerial view of the firm More complicated view Separation of ownership and control Owners and employees have stakes too Owners get returns as dividends/capital appreciation in market Employees get wages, benefits, job security Source: Freeman (1984)  The management view of the firm The production view of the firm Turbulence External Internal change change  Internal and external change Internal change Changes are internal to the conceptual system that the Managerial view represents Reassess current objectives/policies in light of new demands by groups Occurs in the current ‘filing’ system - Does not challenge our conceptual map of the world External change Change that affects the very nature of Figure 2 (MV); that originates under the ‘environment’ label Affects ability to cope with internal change  Source: Freeman (1984) Internal & External change When enough external changes have occurred, we must abandon the theory => new concept explaining both IC + EC required Slow incorporation EC EC: E.g.: Governments (e.g new rules), Competitors, Consumer advocates, environmentalists  Source: Freeman (1984) So how do we deal with the problem of external environment?  The Stakeholder View of the firm Map of the firm which takes into account all of those groups/ individuals that can affect or are affected by the accomplishment of organisations purpose (stakeholder) Categories Source: Freeman (1984)  From shareholder view to stakeholder view Source: Freeman (1984) Shareholders are only one group amongst many Must understand the strategy & ethical responsibilities for each group Must integrate these into our models – think about effects Stakeholder: Any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization. Types of stakes  Stakeholders Define Ethical Issues in Business Identifying Stakeholders Primary stakeholders – Those whose continued association and resources are absolutely necessary for a firm’s survival – Employees, customers, and shareholders, as well as the governments and communities that provide necessary infrastructure Secondary stakeholders – Stakeholders who do not typically engage directly in transactions with a company and are therefore not essential to its survival – Media, trade associations, and special interest groups Stakeholder interaction model – This approach recognizes other stakeholders and explicitly acknowledges that dialogue exists between a firm’s internal and external environments. Interactions Between a Company and Its Primary and Secondary Stakeholders The stakeholder view of the firm Social primary and secondary Stakeholders (people and organisations involved in your business) Indirect/derived+ Direct + Maybe extremely influential Most influential (NMPs: nonmarket players) PETA UK | LinkedIn THANK YOU!