BUS 101 1st Edition Lecture 3 Outline of Previous Lecture - Section 2: Democracy, Business, and Intro to Stakeholder/ Stockholder Democracy – self governmento People are the governmento Types of governmento Problems with the economic systemo Two pillars of capitalism Business and innovationo New Producto Barriers to Entryo Post-war capitalistico Government is reactive Stakeholder/ Stockholder Theoryo Father of Stakeholder Theoryo Father of Stockholder TheoryCurrent Lecture- Section 3: Stakeholder/ Stockholder Theory Intro to Stakeholder/ Stockholder Theoryo Facts of Stake/ Stocko Stakeholder/ Stockholder considerationso Others affected by marketo Business to other stakeholders tend to be one-sided Government involvemento Mission statement of governmento Why middle aged, single men are not the only workers, if most productive? Why companies should adopt stakeholder theoryo Coping strategyo Self interesto Social contracto Fundamental fairnessThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Section 3: Stakeholder/ Stockholder Theory Intro to Stakeholder/ Stockholder Theoryo Facts of Stake/ Stock Stakeholder assumes profits are the most important facet of business Hayek represents the Liaise-faire position Freeman’s stakeholder theory is foreshadowed by the evolution of 20th century government regulation Milton’s objective: US protects from foreign takeover- Maximize shareholder wealth and obey laws- If legal and leads to profits, you should do ito Stakeholder/ Stockholder considerations Stakeholders- Consider: financial, legal, and ethical affects to investors, customers, employees, suppliers, society and market- Markets unable to regulate themselves, offer regulation to protect all involved Stockholders- Consider: Financial and legal affects to investors- Profit – How does decision affect bottom line? Is it efficient?o Others affected by market Suppliers do not need much regulation- Transactional relationship – supplier is a business market leverage equal, business and suppliers on level playing field. Don’t need government to regulateo Business to other stakeholders tends to be one-sided Most cannot bargain; take it or leave it; no market leverage Paradox – espoused free market, must be able to have negotiation and leverage- Most important thing until it happens to them- Dictate free market capitalism and have ability to negotiate Government involvemento Mission statement of government Foster, create, protect, and maintain life, liberty, and the pursuit of happiness What type of society do we want to live in? o Why middle aged, single men are not only workers, if more productive? Society creates norms, don’t want personal benefits only Business is part of society – for profit Profit exclusivity – only profits count and matter- Nature of profit in both stakeholder and stockholder theories Profit Primacy – profit is most important, not only thing that is important Why should companies adopt stakeholder theory?o Coping strategy Business decision and social expectations conflict, government intervention is likely Must act is ways that won’t attract government intervention, curb perceived abuses of larger corporations To avoid government regulation, be able to identify and be proactive with change, leading the cause instead of not adapting - Creating your own solutions to problems is better than having the government create regulations to fix your problemso Self interest Ultimate goal is to make money- Making money is not the exclusive goal, but first goal Is it legal? Does it maximize shareholder value? Business relationships are competitive- Supplier sells high, buyer buys low- Goal: continuous and ready supply of goods- Long term relationship- Assurance of a customer Collaborative – enhances self interest- Satisfy and enlist support of stakeholders – create relationship so all can win over a period of timeo Social contract Business responsible to achieve basic goals, has social responsibility- Method of property tenure and means of organizing economic life Corporate system, major social institution- Government serves regulatory role as means to advance social expectations Overlaps with coping strategies Capitalism – innovation, value creation, exchange- Competition follows, adds to innovationo Fundamental fairness Most philosophical – social contract, legalistic reliance and market Coping, expect underlying rules to govern contexts- If law did not support poverty rights or contract obligation, no reason to enter into market activities Fairness required to maintain market- Must extend to all market participant – make