Corporate Governance
to remove the opportunity for employees to make unethical decisions
The formal system of accountability and control of ethical and social responsible behavior
1. preventing and detecting misconduct
2. investigating and disciplining
3. for recovery and con
Stakeholder
customers, investors, employees, and many others who have a stake or claim in some aspect of a company's product, operations, market, industry
influenced by business but also have the ability to influence business - two way relationship
two types: primary
Primary Stakeholder
continued association is absolutely necessary for a firm's survival; these include employees, customers, investors, and shareholders as well as governments and communities that provide infrastructure
2ndary stakeholder
do not typically engage in transactions with a company and thus are not essecncial for suvival.
ie media, trade associations, special interest groups
stakeholder interaction model
there are two way relatinoships between the firm and a host of stakeholders. this approach recognizes other stakeholders and explicitly acknowledges the dialog that exist between a firm's internal and external environment
stakeholder orientation
degree to which a firm understands and addresses stakeholder demands
1. organization wide generation of data about stakeholder groups and assessment of the firm's effect on these groups
2. the distribution of this information throughout the firm (via news
Generation of Data about stakeholder steps
1. identify the stakeholders that are relevant to the firm by the power that each enjoys as well as the ties between them
2. characterize the concerns about the business's conduct that each relevant stakeholder group shares by formal research surveys, or
corporate citizenship
used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders
4 interrelated dimentions
1. strong sustained economic performance
2. rigorous compli
reputation
organization's greatest intangible asset with tangible value
a single negative incident can influence perception of a company instantly and for years
organization does not control reputation directly, its actions, choices, behaviors, and consequences do i
shareholder model of corporate governance
founded in classic economic precepts including goal of maximizing wealth for investors and owners.
Corporate governance: focus on developing and improving performance accountability between top management and shareholders
Drive firm's decisions toward ser
stakeholder model of corporate governance
this approach entails creating governance systems that considers stakeholder welfare in tandem with corporate needs and interests
managers must determine which stakeholders areprimary (due to limited resources) and then implement the apppropriate corporat
executive compensation
One view: center on the relationship between the highest paid executive and the median employee wage in the company. If the ratio is perceived too large, employees are not being compensated fairly, or executive salaries represent an improper use of compan
Social responsibility vs business ethics
social responsibility can be viewed as a contract with society wheras business ethics involves carefully thought out rules of business conduct that guide decision making
Steps of social responsibility
1. legal: abiliding all laws
2. economic: maximizing stakeholder wealth or value
3. ethical: following standards of acceptable behavior as judged by stakeholders
4. philanthropic: giving back to society
Accountability
refers to how closely workplace decisions are aligned with a firm's stated strategic direction and its compliance with ethical and legal considerations
tells stakeholder why and how the organization chooses and achieves its goals
Oversight:
provides a system of checks and balancesthat limit employee and managers opportunities to deviate from policies and strategies... prevents unethical activities
Control
process of auditing and improving organizational decisions and actions
Implementing A Stakeholder Perspective
Step 1: assessing the corporate culture
2: indentifying stakeholder groups
3: identifying stakeholder issues
4: assessing organizational commitment to social responsibility
5: identifying resources and determining urgency
6: gaining stakeholder feedback
Step 1 assessing the corporate culture
- purpose is to identify mission, value, and norms that are likely to have implications for social responsibility. particularly values and norms that specify stakeholder groups and issues that are most important to the organization.
-Can be found in missi
Step 2 Identifying stakeholder groups
-important to recognize stakeholder needs, wants, and desires
-managers can identify relevant stakeholderse who may be affected by or may influence the development of organizational policy
-Stakeholders have the most power when their own survival is not r
Step 3: identifying stakeholder issues
Together, step 1 and 2 lead to the identification of the stakeholders who are the most powerful and legitimate.
The level of power and legitimacy determines the degree of urgency in addressing the needs
This step consists in understanding the nature of th
Step 4: assessing organizational commitment to social responsibility
brings the first three stages together to arive at an understanding of social responsibility that specifically matches the organization of interest.
The general definition will then be used to evaluate current practices and to select concrete social respo
Step 5: Identifying resources and determining urgency
two criterias: 1. level of financial and organizational investment required by different actions 2. urgency when prioritizing social responsibility challenges.
ie when a challenge is viewed as significant + stakeholder pressures on the issue is expected =
Step 6: gaining stakeholder feedback
1. Satisfaction or reputation surveys: general assessment of the firm and its practices
2. stakeholder generated media such as blogs website podcasts, and newsletters: gauge perception of the firm's contributions
3. formal research using focus groups, obs