MAN 4701 STUDY GUIDE 1 FALL 2014 The video cases are not testable This Study Guide applies to the text only Everything in the lectures is testable Approximately half the questions will be exclusively from the text and half specifically from the lectures THIS APPLIES TO ALL THREE TESTS You may answer the questions in bullet format but be sure to answer all parts of the question If the question says identify a list is sufficient if it says define or describe a brief definition is needed Chapter 1 Know the difference between the Stakeholder Theory of the Firm and the Ownership Theory Ownership theory of the firm sometimes also called property or finance theory the firm is seen as the property of its owners Maximize its long term value make most money it can for shareholders are agents of the shareholders and have no obligation to others owners interests are paramount and take precedence over the interests of others create value for society Other kinds of values such as professional development corps have multiple obligations and all stakeholders interest must be taken into account corporations serve a broad public purpose to Stakeholder theories of the firm o Descriptive argument the stakeholder view is simply a more realistic description of how companies really work o Instrumental argument stakeholder management is more effective as a corporate strategy o Normative argument stakeholder management is the right thing to do Know the differences between Market and Nonmarket stakeholders Market Stakeholders Those that engage in economic transactions with the company as it carries out its purpose of providing society with goods and services Stockholders invest in the firm and in return receive the potential for dividends and capital gains Creditors loan money Employees contribute their skills and in return get wages benefits opportunity for personal satisfaction and professional development people and groups who do not engage in direct economic exchange with the firm but are nonetheless affected by or can affect its actions Examples are the community various levels of NonMarket Stakeholders government nongovt orgs the media business support groups competitors and general public Nonmarket stakeholders aren t necessarily less important than others but some say they are critical for a firm s success or failure Know the sources of stakeholder power Voting power Economic power means that the stakeholder has a legitimate right to cast a vote Stockholders typically have voting power proportionate to the percentage of stock they own Vote on major decisions such as mergers acquisitions composition of the board of directors etc Customers suppliers and retailers with the company Suppliers can withhold supplies or refuse to fill orders if a company fails to meet its contractually responsibilities Customers may refuse to buy a company s products or services if they are too expensive poorly made or unsafe Employees can refuse to work under certain conditions can strike or slowdown Economic power often depends on how well organized a stakeholder group is Unions have more economic power lawsuits Govt acts directly while other stakeholders use their political power indirectly to urge the government to pass new laws or regulations based on harm caused by the firm Informational Power when they have access to valuable data facts or details The disclosure or nondisclosure of info can be used to persuade mobilize or threaten others Has become increasingly important When they bring a suit against a company for damages governments through legislations regulations or Legal Power Political Power Factors that influence stakeholder salience Stakeholders stick out to managers when they have power legitimacy and urgency o Legitimacy refers to the extent to which a stakeholder s actions are seen as proper or appropriate by the broader society o Urgency refers to the time sensitivity of a stakeholders claim the extent to which it demands immediate attention Chapter 2 Know the definitions of Public Issues and the Performance Expectations Gap Public Issues any issue that is of mutual concern to an organization and one or more of its stakeholders Sometimes called social issues Typically broad issues do or is doing and what the stakeholders expect Example Child labor laws Greater the gap greater chance at backlash from stakeholders The gap between what the firms wants to Performance expectations gap Know the steps in the Issues Management Process Identify Issue Anticipating emerging concerns sometimes called horizon issues Track the media experts views etc Rely on ongoing conversations with key stakeholders Analyze Issue Understand how the issue is likely to evolve and how it is likely to affect them Generate Options generating evaluating and selecting among possible options Requires complex judgments that incorporate ethical considerations the org s reputation and good name and other no quantifiable factors Take Action The organization must design and implement a plan of action Evaluate Results Continue to assess the results and make adjustments if necessary Must see it as a continuous process Know the Stages in the Business Stakeholder Relationship Inactive Companies simply ignore stakeholders concerns They believe that they can make decisions unilaterally without taking into the consideration of others Reactive only act when forced to do so and then in a defensive matter Proactive try to anticipate stakeholders concerns Use environmental scanning practices Often have specialized departments to manage stakeholders relationships Interactive companies actively engage with stakeholders in an ongoing relationship of mutual respect openness and trust The Drivers of Business Stakeholder Engagement Both have important and urgent goals both have a problem they want to be solved Motivation to participate and work together to solve the problem Organizational capacity to engage with one another support from top leadership and the funds with addition to stakeholders having a leadership that supports dialogue Chapter 3 Know what the text authors mean by Corporate Social Responsibility Means that a corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people their communities and their environment Know how the Principles that define the social responsibility of business have changed over time Corporate Social Stewardship acts of charity Corporate Social