Chapter 1: The Corporation and Its Stakeholders
Abstract
Business and the society are interrelated enterprises that work together to achieve their desired goals and objectives. Members of the society engage in business activities in their daily endeavors through being social. We engage between each other through products and currencies in which we interact with each other. All over the world, organizations are created by human beings, which make it relative to the society, but separated by boundaries. As mentioned in the textbook “business activities impact other activities in society and actions by various social actors and governments continuously affect business.” Theories have been used to explain the interdependence between the society and businesses.
According to the traditional Ownership Theory, the firm is the property of the owners, the shareholders. The main purpose of the firms is to maximize the returns on shareholder capital because their interests take precedence over all other interests. On the other end, the stakeholder theory of the firm argues the corporation serves a broader purpose, to create value for society. Must make profit for owners to survive and creates other kinds of values too. Corporations have multiple obligations; all stakeholder groups must be taken into account. Supporters of the stakeholder theory of the firm make three core arguments for their position: descriptive which is a more realistic description of how companies really work, instrumental is more effective corporate strategy and normative is that stakeholder management is the right thing to do. The term stakeholder is not the same as a stockholder. The words sound very similar but are not the same. Stockholders are one of several kinds of stakeholders.
Different Kinds of Stakeholders
Stakeholder groups can be divided into two categories, market stakeholders and non-market stakeholders. Market stakeholders are sometimes referred to as primary stakeholders because of their primary purpose of providing society with goods and services. Non-market stakeholders are people that do not engage in direct economic exchanges with the firm and sometimes called secondary stakeholders.
Stakeholder Analysis
Stakeholder Analysis is part of every manager’s job and asks 4 questions about whom, what and how. The relevant stakeholders are some businesses that sell directly to the public and will have retailers. A certain stakeholder may not be relevant to a particular decision or action. Analyzing stakeholder interests include addressing what the groups concerns are and what relationship is expected from the firm. Stockholders have an ownership interest and they expect to receive dividends and capital appreciation. Customers are interested in gaining fair value and quality in goods and services they purchase. Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome. There are 4 types of stakeholder power: voting, economic, political and legal. Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests. Coalitions are very dynamic and can change at any time and are increasing international. International alliances coupled with media interest can be a very power strategic force for companies.
Stakeholder Salience and Mapping
Stakeholders stand out to managers when they have power, legitimacy and urgency. Managers can use the salience concept to develop a stakeholder map which is a picture representation of the relationship of stakeholder salience to a particular issue. A stakeholder map is a useful tool, because it enables managers to see quickly how stakeholders feel about an issue. Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management’s role. The external environment of business is dynamic and ever-changing. The purpose of the firm is not to just make a profit, but to create value for all of its stakeholders. A successful business must meet both its economic and social objectives.
Key Terms
Key Terms
- Textbook definition
- Online dictionary definition
- Personal definition
- Society
- Refers to human beings and the social structures they collectively create; specifically refers to segments of humankind, such as members of a particular community, nation or interest group.
- An organization to which people who share similar interests can belong
- A social group having cultural and economic interests
- Stakeholder Analysis
- An analytic process used by managers that identifies the relevant stakeholders in a particular situation and seeks to understand their interests, power and likely coalitions.
- Stakeholder analysis is a term that refers to the action of analyzing the attitudes of stakeholders towards something (most frequently a project). It is frequently used during the preparation phase of a project to assess the attitudes of the stakeholders regarding the potential changes.
- Ways a manager identifies a stakeholder’s level of involvement and how they can influence the project.
- Stakeholder map
- A graphical representation of the relationship of stakeholder salience to a particular issue.
- Stakeholder Mapping is a process and visual tool used in strategy and in particular in stakeholder analysis to clarify and categorize the various stakeholders
- Stakeholder mapping is part of stakeholder management that is visual and allows you to see a visual of a stakeholder’s level of interest
- Business
- An organization that is engaged in making a product or providing a service for a profit.
- An organization or enterprising entity engaged in commercial, industrial or professional activities.
- Main activity in life you do to earn money
- Stakeholder power
- The ability of one or more stakeholders to achieve a desired outcome in their interactions with a company. The five types are voting power, economic power, political power, legal power, and informational power.
- Stakeholder power is an element of analyzing how certain people use powers and authority to affect policy formulation and implementation in institutions. It is useful in identifying the top achievers and the under achievers and in highlighting the challenges that need to be faced in order to develop capabilities and tackle inequalities.
- People working towards a share goal, contribute to the company and make profits
Internet Resources
Bloomberg Business Week: Provides information about what is happening in the business world, published monthly and discusses updated information about companies, finance and technology.
Fortune: A bi-weekly magazine and home of Fortune 500. The magazine and website discuss the world of business, investments, career management and small business information
*Note: I find it very interesting and did not know that both of these organizations started within weeks before or after the great stock market crash of 1929
Wall Street Journal: Daily newspaper discussing business and economics. It has several regularly scheduled sections and features designated to a certain day of the week. It is the largest in the United States by Circulation.
Discussion Case: A Brawl in Mickey’s Backyard
- The focal issue on this case centers on a conflict between real estate developer SunCal and the Walt Disney Company. The issue is that the pricing of the housing around Disney Land is far too expensive for the employees of Disney Land and can’t afford to stay there.
- The relevant market stakeholders in this case are Disney World and SunCal and the non-market shareholders are the employees.
- Walt Disney Company is against SunCal’s proposed development and thinks that the land should be only used for tourism only.
Disney Employees are for because they need affordable housing near work
SunCal- (Of Course) in favor of because they want to build condominiums and set a low percentage aside for below market rate apartments
Affordable Housing Advocates were for because it included for a percentage of the units to be priced below the market and housing in Anaheim is very expensive
- Disney employees and unions representing them (M to Disney; NM to SunCal) – political power (protest skit in front of City Hall is aimed at influencing Council members). Normally, employees and unions have economic power, but in this instance their adversary is not their employer (Disney).
Disney company (NM to SunCal) – political power (as a major taxpayer, can influence local politicians); legal power (to block SunCal on the grounds that development would violate local ordinances restricting development in the resort area)
Chapter 3: The Corporations Social Responsibilities
Abstract
Corporate Social Responsibility (CSR) has gradually become part of the vision and mission of several organizations. Apart from their economic responsibilities to the shareholders, companies today have responded to the concerns of their stakeholders including their hosting communities on the need for social responsibility. Even though most of the corporate social responsibility activities do not have economic models, they have been incorporated with economic objectives in order to maintain the economic and social objectives and primary missions of organizations. This papers examines how social responsibility has grown to help businesses in their economic endeavors in the business world today.
Themes
Arguments against Corporate Social Responsibility
According most of the arguments in this chapter, the major responsibility of businesses is to use their available resources effectively and participate in the activities that are aimed at increasing the profits for the company. According to most shareholders of different companies, they need the highest possible returns on their investment capitals. Some people maintain that by focusing on social goals, businesses might divert their attention to social activities, which might deprive the society of the important goods and services that they need from these companies. The major arguments made in this chapter against Corporate Social Responsibility include imposing unequal costs among competitors, lowering the profits and economic efficiency of the company due to increased costs in participating in such activities, and imposition of hidden costs, which are passed on to the beneficiaries such as the stakeholders including customers since most of these social activities are not self-sustaining.
The Aspects of Social Responsibility and Corporate Power
The legal, economic, and social obligations of corporations have the ability to determine the influence that corporations have in the society. Most corporations today have a higher social influence than governments because of their economic power. Since the beginning of the 20th century, the idea of social responsibility has significantly taken its effect in the United States. The idea evolved from both stewardship and strategic responsiveness to understanding business ethics that are ultimately found in the culture and practice of corporate citizenship (Lawrence, Weber, Kahn, 2013). In order to ensure that all the stakeholders and shareholders of corporations enjoy the existence of these corporations in the society, managers need to practice the balance between economic, social, and legal obligation and reduce inclination toward either obligation.
Most of the successful corporations today have very strong corporate powers. In some cases, some corporations have outputs, which are equal to the output of an entire country. For instance, the economic output of Toyota Motors and Hong Kong are equal. Just like government departments, corporations create jobs, offer well-being to the members of the society, offers goods and services including entertainment and healthcare as well as food. Their resources are influential in the things of interest to their stakeholders such as managing the political terrain. This is only possible through the corporate power, which is consistent with the fulfillment of social and economic obligations of the corporations. However, there are both sides of corporate power. Since bigger corporations can provide more resources, produce at lower costs, and plan for the future effectively, they have advantages over small businesses.
Key Terms
- Book Definition
- My Interpretation
Corporate Power:
- The capability of corporations to influence government, the economy, and society, based on their organizational resources
- The intentional or incidental ability of a business enterprise to play significant role in every aspect of the society including the social, economic, and legal perspectives.
Corporate Social Responsibility
- 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
- Since corporations operate within the society, they need to be sensitive of the needs of these societies. CSR is the act of giving back to the community for their support. For instance, Coca-Cola is a MNC, which has some of the CSR activities including water harvesting and dam maintenance in countries such as India. Such activities are aimed at ensuring continuity in the relationship between the interdependent companies and the society.
Enlightened self-interest
- The view that holds it is in a company’s self-interest in the long run to provide true value to its stakeholders
- Every corporation has an enlightened self-interest, which is aimed to benefit the society and the corporation in different ways. The organizations gains by increasing its popularity and the society gains from the proceeds of these interests. The best example is used in the book about Avon, which collects money through its Cancer Foundation for cancer and tragic events victims.
Reputation
- The desirable or undesirable qualities associated with an organization or its actors that may influence the organization’s relationships with its stakeholders.
- Reputation builds the basis for success of a business. It contributes to the continued attachment between the stakeholders and the corporation. The activities done on by or on behalf of the organization by its agents influence the decisions of the stakeholders about the importance of continued relationships between the two entities.
Social enterprise
- A business that adopts social benefit as its core mission and uses its resources to improve human and environmental well-being.
- Even though these enterprises aim at earning profits, they do not emphasize on maximizing shareholder returns on investment, but on improving the well being of the members of the society.
“Timberland’s Corporate Social Responsibility—Under New Ownership”
- Timberland’s mission is to equip people to make a difference in their world by creating outstanding products and trying to make a difference in the community where it works. The company competes in a global economy. Through incentives such as using 4 percent of its operating income in charity, the company has gained corporate power, which it uses responsibly. For instance, the company successfully reduced carbon emissions by 38 percent in 2010 though installing LED lighting in stores across the U.S.
- Timberland balances its social and economic responsibilities through its various programs such as the annual Serv-a-Palooza event and sustainability goals, which are aimed at increasing profits and improving the well being of the members of the society. Some of the activities include creation of a new outdoor community gathering and performance space, building an outdoor classroom at a local elementary school, and improved the high school athletic facilities in New Market, New Hampshire which is where Timberland first started.
- The main argument against the company’s CSR initiatives is that, the company focuses more on social aspects of the community and neglects the economic obligations. On the other hand, proponents argue that the company is successfully implementing its self interest to create a rapport with the society. This improves reputation and consequently the economic obligation to the shareholders and social responsibility to the stakeholders
- If I were an executive of VF Corporation, I would support the continuation of these initiatives because they create a link between the stakeholders and the corporation, which in turn increases the return on shareholder capital
Chapter 10: Sustainable Development and Global Business
Abstract
Business practices today have become conscious of the need to conserve the natural environment. One aspect of the natural environment is its irreparability. While doing business in the local and global perspective, businesses are concerned about their existence tomorrow, which equally depends on the existence of the natural environment. Corporations strive to ensure that they have the best strategies to find alternatives to the naturally available resources, or work toward ensuring continuity of these naturally available resources. As mentioned in the book, “we don’t think of our own natural environment might be one of the largest determining factors in the future of doing global business.” Without the environment, there could be no continuity of business.
Sustainable development
While doing business, it is important to meet the needs of the present without compromising the ability of future access to the resources for meeting similar needs. Businesses have found ways of sustaining and staying afloat through using alternative resources or technology. In 1997, an international treaty was negotiated in Kyoto, Japan aimed at reducing the emissions of greenhouse gases. This was aimed at ensuring that business activities are sensitive of the natural systems. In rising to the challenge of depletion of natural resources, the industrial ecology has helped in ensuring that resources are utilized to give maximum satisfaction without have dire consequences on the environment.
Technology and Sustainability
In order to ensure sustainable development, corporations have engaged in long term partnerships aimed at transferring environmental technologies. Technology has shown evolving trends, which have been used to solve evolving trends in business activities. In most cases, businesses have become sensitive of the importance of embracing technology savvy production in order to increase profits and minimize the effects of production to the environment. Additionally, technology has become an alternative to the natural system, which ensures that the future generations will have similar or even greater opportunities to meet their business needs. In the future, given the prevailing technology and the available resources, production will be more reflective of sustainable development as corporations will be aimed at implementing alternative means of production in order to ensure continuity of business.
Key Terms
- Textbook definition
- Online definition
- My interpretation
Sustainable Development
- development that meets the needs of the present without compromising the ability of future generations to meet their own needs
- Recognizes that growth must be both inclusive and environmentally sound to reduce poverty and build shared prosperity for today’s population and to continue to meet the needs of future generations.
- The ability to produce goods and services with the aim of ensuring that the business will continue to produce similar or better products with the available resources. While organizations might be concerned about the future generations, the main aim of sustainable development is the continuity in production
Industrial Ecology
- Designing factories and distribution systems as if they were self-contained ecosystems, such as using waste from one process as raw materials for another
- Conceptualizes industry as a man-made ecosystem that operates in a similar way to natural ecosystems, where the waste or by product of one process is used as an input into another process
- Aims to reduce environmental stress caused by industry whilst encouraging innovation, resource efficiency, and sustained growth
Technology Cooperation
- long-term partnerships between companies to transfer environmental technologies to attain sustainable development
- effective cooperation between business or industry parties which develop, hold, and use environmentally sound technologies, and counterparts which wish to do the same for the purpose of business development
- Inter-business technological relationship aimed at ensuring that the environment benefits from the technological improvements on production without depleting the natural system.
Ecological Footprint
- the amount of land and water an individual or group needs to produce the resources it consumes and to absorb its wastes, giving prevailing technology
- Is a measure of human demand on the Earth's ecosystems
- Business aim to maximize production with the available resources. However, they are faced with the dilemma of extinction of the natural system. Production depends on the natural environment to maximize profits. Therefore, businesses strive to maximize their dependence on the natural ecosystem
Clean Cooking
- Household contribute to environmental degradation without knowing the consequences of their actions. Due to environmental unfriendly cooking practices, there are emissions that are dangerous to the environment. This provides a business idea to investors such as Suraj Wahab. This implies that individuals and organizations such as the United Nations have the interest of sustainable development through environmental conservation initiatives such “100 by 20”, which means that 100 million households adopt clean and efficient cook stoves and fuels by 2020.
Chapter 11: Managing Environmental Issues
Abstract
It is the joint responsibility of the government and corporations to ensure that there is sustainability for the planet and the business enterprises. Through its different departments, the government provides regulations, which are aimed at ensuring that, while businesses create and sustain profits, they should follow the government regulations, which when ignored, can lead to fines or termination. However, organizations that are aware of the environment are ecologically sustainable businesses. According to Ahmad, “it’s important that companies understand the advantages and disadvantages of different regulatory approaches, and how their business can best manage environmental issues where it’s in the best interest for the environment and the company.” This implies that while conducting business activities, it is equally important to take care of the environment, where the business operates.
The Role of the Government in Environmental Regulation
There have been different environmental degradation practices by corporations, which require regulation including water, air, and land pollutions. Due to emissions from factories during production, and waster depositions, the governments of different nations and environmental organizations have crafted laws that govern the business practices, especially those related to protection of the environment. In response, businesses have also embraced clean technology in their production, which provide environmental benefits and support sustainability. This also befits businesses through cost savings.
Key Terms
a. Textbook definition
b. Online definition
c. My interpretation
Chief Sustainability Officer (CSO)
- manager responsible for the organization’s sustainability activities and performance
- the executive in an organization that is in charge of the corporation's "environmental" programs
- These executives should put sustainable development as the core principle of organizational operations
Green Washing
- when an organization misleads consumers regarding the environmental benefits of a product or service
- where green marketing is deceptively used to promote the perception that an organization's products, aims or policies are environmentally friendly
- The public might lack the relevant information and knowledge to understand the insights of the organizational information about environmental issues. The government should step in to protect the public
Ecologically Sustainable Organization (ESO)
- a business that operates in a way that is consistent with the principle of sustainable development
- an organization whose operations are aimed at promoting sustainable development
- Being ecologically sustainable is what businesses strive for. Having organizations that focus on this illustrates their development in sustainability
Environmental Justice
- the efforts to prevent inequitable exposure to risk, such as from hazardous waste
- focus is on the fair distribution of environmental benefits and burdens
- Every member of the society has equal rights to healthy environments. Therefore, governments should strive to provide equal environmental conditions to all citizens through regulations on business activities
- Regulations are very important in protecting the environment. In developing countries, “laws are often weaker and regulations are poorly enforced” (Lawrence and Weber P.257). This has resulted in environmental degradation practices. While businesses aim at maximizing profits, the governments of different nations need to strengthen laws and regulations as well as their implementations in protecting the environment.
- Even though land and air pollution lead to global warming, which has several disadvantages, water pollution in this case was the most dangerous pollution. Water is widely used in all communities. Therefore, infecting water with chemicals such as Cyanide exposes the community to dangerous consequences
Works Cited:
Lawrence, Anne T., James Weber, and Lawrence Kahn. Business and Society: Bus Adm 200. New York, NY: McGraw-Hill Create, 2013. Print.Nisen, Max. "How Nike Solved Its Sweatshop Problem." Business Insider. Business Insider, Inc, 09 May 2013. Web. 01 June 2014.
