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MGMT 1040 (37)


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York University
MGMT 1040
William(bill) Woof

The Stakeholder Approach to Business Ethics Stake An Interest  ex: if a group decides to go out for dinner, each person has a stake in that decision A right  legal or moral rights A claim  believing something is owed to them or will be due Stakeholder An individual or group that has one or more of the various kinds of stakes in the organization Business stakeholders consist of anyone More popular: stockholders, employees, customers Not as popular: competitors, community, media, nature, suppliers Three Views of the Firm 1. Product View of the Firm Owners thought stakeholders only those that supplied resources or bought products or services; suppliers and consumers – early understanding. 2. Managerial View of the Firm When corporations grew, there was a separation of ownership from control. Businesses began to see other constituent groups were being affected as well. 3. Stakeholder View of the Firm As major internal and external changes occurred, managers were required to undergo a radical conceptual shift in how they perceived the firm and its multilateral relationships with constituent or stakeholder groups – idea of having a larger or wider view of the role in society. This view includes many different individuals and groups. Primary and Secondary Stakeholders Primary Stakeholders Have direct stake in the organization; are the most influential. Shareholders and investors Employees and managers Social Customers Local communities Suppliers and other business partners Natural environment Future generations Nonsocial Non-human species Secondary Stakeholders May be influential; but their stake in the organization is more indirect - PETA Can become primary through the media or special-interest groups Government and regulators Civic institutions Social pressure groups Social Media and academic commentators Trade bodies Competitors Environmental Interest groups Animal Welfare organizations Nonsocial Core stakeholders are essential for the survival of the firm Strategic stakeholders are vital to the organization’s success and the threats and opportunities the organization faces Environmental stakeholders are all others in the organization's environment that are not core or strategic A Typology of Stakeholder Attributes Legitimacy The perceived validity or appropriateness of a stakeholder’s claim to a stake Owners, employees, customers Power The ability or capacity to produce an effect – to get something done that otherwise may not be done Whether they have legitimacy or not, power means they affect the business Media, social activist group Urgency The degree to which the stakeholder claim on the business calls for the business’s immediate attention or response Something is critical and must be done Union strike, consumer boycott, social activist group picketing outside Proximity  Another study criterion that should be considered The spatial distance between the organization and its stakeholders If company is located near a lake, the lake is affected Stakeholder Approaches “Should we manage better? Or treat more ethically?” Strategic Views stakeholders as factors to be taken into consideration and managed while the firm pursues profits for its shareholders Managers take them into consideration because if they are upset, they may retaliate Instrumental view Multifiduciary Views stakeholders as more than just individuals or groups who can wield economics or legal power Holds management as a fiduciary (involving trust) responsibility towards stakeholders just as it has the same responsibility toward shareholders Stakeholder Synthesis This approach is preferred Holds that a business does have moral responsibilities to stakeholders but they should not be seen as part of a fiduciary obligation Not only fiduciary responsibility, but also ethical Values of the Stakeholder Model Descriptive Value Provides the language and concepts to describe effectively the corporation or organization in inclusive terms Allows us to have a better idea of how they function Instrumental Value Useful in portraying the relationship between the practice of stakeholder management and the resulting achievement of corporate performance goals Should lead to the achievement of traditional business goals – profitability, stability, growth Strategic management courses employ this model Normative Value Stakeholders are seen as posseting values irrespective of their instrumental use to management Moral/ethical view; emphasizes how stakeholders should be treated “The Principle of Stakeholder Fairness” Central importance in business and society Key Questions in Stakeholder Management 1. Who are our stakeholders? Generic categories; specific categories Stage is known as stakeholder identification Owners, employees, governments, customers, community, competitors, social activist groups (generic only) 2. What are our stakeholders’ stakes? Legitimacy, power, or urgency Identify the nature/legitimacy of a group’s stakes: Generic stakeholder – corporate
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