BA 310 Mod 4 Ch 3 Stakeholders and Corporate Social Responsibility Objectives 1 Explain the concept of stakeholders 2 Describe the difference between immoral amoral and moral managers 3 Define power urgency and legitimacy with respect to stakeholder theory 4 Describe the concept of trust with stakeholder groups 5 Define triple bottom line reporting 6 Define a benefit corporation and the criteria to be classified as a B Corporation 7 Explain the concept of suppliers as stakeholders and its relationship to outsourcing 8 Identify the different stakeholders that could exist for a company 9 Define corporate social responsibility and discuss its components 10 Explain the role of corporate reputation in an organization 11 Explain the role of corporate philanthropy in an organization 1 What is a Stakeholder A A Berle 1931 Stated that all of the powers that are given to a corporation are to be used to create benefits in the interest of the shareholders individuals who own stock in a company Argued that managers should consider themselves trustees and guardians of investments made by the shareholders Stakeholder Theory Development Dodd Argued E Merrick that corporations are allowed to become legal entities because they serve a purpose to the community instead of just providing opportunities for financial gain by its owners Friedman Social Responsibility of Business is to Increase its Profits Argued that social responsibility is a fundamentally subversive ideal and that the only social responsibility a manager has is to enhance the level of profitability of the firm Milton Edward that stakeholders were any individuals or groups that can impact or be impacted by the actions of the firm Broadened definition of stakeholder to encompass any individuals or groups that have a vested interest in the operations of the firm Freeman Believed The stakeholders any group that has a vested interest in the operations of the firm Traditional included employees suppliers stockholders customers the government local communities and society as a whole stakeholders 2 Moral Management and Stakeholders Managers can be classified based on three types of moral values immoral does not care how his her decisions impact the stakeholders and actions actively counter to what is the right and ethical thing to do Recent examples Ken Lay Enron Bernie Ebbers WorldCom and Dennis amoral ethically neutral does not focus proactively on ethical issues nor does he she try to purposely go against the social and legal norms that are expected of the firm by society Example police department having stringent height and weight requirements for moral those decision makers who understand the importance and relevance of considering ethical issues when they are making decisions Proactive in presenting ethical leadership to the firm s employees and other Kozlowski potential applicants stakeholders 1 BA 310 Mod 4 Ch 3 Stakeholders and Corporate Social Responsibility 3 Identifying Importance of Stakeholders High priority stakeholders have the following three attributes to which the organization can influence or impose its will on the power the extent stakeholder group legitimacy the assumption that the actions of the corporation are desirable proper or appropriate within the limits of the corporation urgency the degree to which the issues raised by the stakeholder must be dealt with in a time sensitive manner Stakeholder Impact on Organization Stakeholders establish expectations about corporate performance Stakeholders experience the effect of corporate behaviors Stakeholders evaluate the effects of corporate behaviors on their interests Stakeholders act upon their interests expectations experiences and evaluations 4 The ability to Build Trust with the Stakeholders trust considered a moral exchange between the stakeholders and the managers of the firm Three elements of trust affect the relationship between stakeholders and the firm rational prediction of outcomes emotion clear moral element Stakeholders enhance their trust in a firm if they become more optimistic that the results of the actions of the firm will have a positive impact on their needs and expectations Stakeholders will also strengthen their level of trust the more they become vulnerable by the actions of the firm and become more emotional than rational A relationship between the stakeholders and the firm built on trust strengthens both parties level of cooperative behavior Four dimensions can enhance the level of trust between the stakeholders and the firms ability based on the firm s level of expertise competence and product development economic success of the firm benevolence based on the level of information that is dispersed from the firm integrity based on perception of how the firm is performing in its function of keeping its promises and the ability to demonstrate to the stakeholders its law abiding behavior information quality evaluated based on the level of objectivity and intelligibility the firm s corporate social responsibility and amount of in the Expands traditional financial reporting to include environmental and social reporting i ii iii iv i ii iii i ii iii iv 5 Triple Bottom Line Reporting People Planet Profits 6 The Benefit Corporation 7 Stakeholders Suppliers A new type of corporation that address issues related to financial social and environmental objectives Also known as the B Corporation Three required criteria i ii iii Must meet social and environmental standards Must meet higher legal accountability standards Must build business constituencies for public policies that support sustainable business Highly ethical corporations will also expect their suppliers to be ethical Example Intel s Supplier Ethics Expectations Supplier must be in strict compliance with the law Supplier must have respect for competition Supplier must not have any actual or perceived conflicts of interest with any other party outsourcing assigning a function or task that was previously done within a company to an external third party A highly ethical company will also insist that its outsourcing partners also engage in ethical practices This becomes more difficult when dealing with outsourced companies that are not American due to their foreign business culture child labor issues discriminatory behavior sub standard wages 2 BA 310 Mod 4 Ch 3 Stakeholders and Corporate Social Responsibility 8 Types of Stakeholders Customers Four critical areas in firm and customer relationship