Individual Presentation - Business Article

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The Corporation and
its Stakeholders

Chapter 1

What we will talk About today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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Case: Uber’s App-On Gap

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Please read the case now

What we will talk About today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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Some Basic Definitions

  • Business: Any organization engaged in making a product or providing a service for a profit
  • Society: Human beings and the social structures they collectively create
  • Business and society are highly interdependent

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General Systems Theory (GST)

  • Origin in Biology

  • Adapted to Management Theory

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General Systems Theory (GST)

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Business and Society: An Interactive System

What we will talk About today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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Consider Two Questions

  • What is the purpose of the modern corporation?
  • To whom, or what, should the firm be responsible?

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Two contrasting views:

  • “Ownership Theory of the Firm”
  • Firm is the property of its owners (shareholders)
  • Owners’ interests ace all others
  • Purpose of the firm is to maximize profits

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Two contrasting views:

  • “Stakeholder Theory of the Firm”
  • Firm exists to create value for society
  • Profit important, but other important value is created as well
  • All stakeholder concerns must be considered

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Milton Friedman on Self-Interest and the Profit Motive

Part 1 and Part 2

Please get together with a partner to discuss:

  • In brief, how would you describe Milton Friedman’s position?
  • Is Friedman advocating the Ownership Theory or the Stakeholder Theory?
  • Do his arguments make sense to you?
  • Do you think most businesses are run according to the ideas that he promoted?

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Stakeholder Theory: Arguments in favor

  • Descriptive
  • This is how companies really work
  • Instrumental
  • It’s a more effective corporate strategy
  • Normative
  • It is the right thing to do

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What we will talk about today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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The Stakeholder Concept

  • Stakeholder: Entities that affect - or are affected by - an organization’s actions
  • Stake: an interest in - or claim on - a business enterprise
  • Businesses are embedded in stakeholder networks

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Note: Stakeholder
vs. Stockholder

  • Stakeholder NOT the same as stockholder
  • Words sound similar but are not the same
  • Stockholders are only one kind of stakeholders

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Market vs. Non-Market Stakeholders

  • Market stakeholders

  • Nonmarket stakeholders

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Market Stakeholders

  • Market stakeholders engage in economic transactions with the company as it carries out its primary purpose of providing goods and services

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Nonmarket Stakeholders

  • Nonmarket stakeholders do not engage in direct economic exchange with the firm – but are affected by or can affect its actions

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Internal vs. External Stakeholders

  • Internal Stakeholders are employed by the firm

  • External stakeholders are not directly employed by it

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Who are CSUSB’s stakeholders?

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Who are CSUSB’s stakeholders?

What we will talk About today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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Stakeholder Analysis

  • Part of every manager’s job
  • Identify relevant stakeholders and analyze their interest and power
  • Asks 4 questions:

Who are the relevant stakeholders?

What are the interests of each stakeholder?

What is the power of each stakeholder?

How are coalitions likely to form?

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Stakeholder Salience and Mapping

  • Salient – stands out from a background, is seen as important, or draws attention
  • Stakeholders stand out (i.e., are salient) when they have power, legitimacy, and urgency
  • Stakeholder map: graphical representation of the relationship of stakeholder salience to a particular issue
  • Stakeholder map enables managers to see quickly how stakeholders feel about an issue

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Stakeholder Map: Should company close underperforming plant?

What we will talk About today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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The Corporation’s
Boundary-Spanning Departments

  • Boundary-spanning departments: departments within an organization that span the company / society
  • Building positive relationships across organizational boundaries is a growing part of management’s role

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What we will talk About today

  • The relationship between business and society
  • The purpose of the modern corporation
  • Stakeholders: market vs nonmarket and internal vs external
  • Stakeholder analysis, stakeholder interests and power
  • How corporations organize to interact with stakeholders
  • Forces that reshape the business / society relationship

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The Dynamic Environment
of Business

  • The external business environment is ever changing
  • The purpose of the firm is not simply to make a profit, but to create value for all its stakeholders – a successful business must meet both its economic and social objectives
  • Six dynamic forces shape the business and society relationship:

Changing societal expectations

Growing emphasis on ethical reasoning and actions

Globalization

Evolving government regulations and business response

Dynamic natural environment

Explosion of new technology and innovation

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Questions
or Comments?

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Case: Uber’s App-On Gap

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Please discuss within your group