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The Corporation and Its Stakeholders

Chapter. 1. The Corporation and Its Stakeholders. Business and Society The Stakeholder Theory of the Firm Stakeholder Analysis and Engagement The Dynamic Environment of Business. Figure 1.1 Business and society: An interactive system. Society. Business.

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The Corporation and Its Stakeholders

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  1. Chapter 1 The Corporation and Its Stakeholders Business and Society The Stakeholder Theory of the Firm Stakeholder Analysis and Engagement The Dynamic Environment of Business

  2. Figure 1.1Business and society: An interactive system Society Business © 2005 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill

  3. Arguments for the stakeholder theory of the firm • Descriptive • Says that the stakeholder view is simply a more realistic description of how companies really work. • Instrumental • Says that stakeholder management is more effective as a corporate strategy. • Normative • Says that stakeholder management is simply the right thing to do.

  4. The Stakeholder Concept • A stakeholder refers to persons or groups that affect, or are affected by, an organization’s decisions, policies, and operations. • Two types of stakeholders • Market stakeholders • Nonmarket stakeholders

  5. Market Stakeholders • Those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services. • Employees • Stockholders • Customers • Suppliers • Retailers/Wholesalers • Creditors

  6. Figure 1.2 Market stakeholders of business Stockholders Distributors, Wholesalers, Retailers Employees Business firm Customers Creditors Suppliers

  7. Nonmarket Stakeholders • People or groups who—although they do not engage in direct economic exchange with the firm—are affected by or can affect its actions. • Communities • Activist Groups • Media • Business Support Groups • Governments • The General Public

  8. Figure 1.3 Nonmarket stakeholders of business Governments General Public Communities Business firm Business Support Groups Activist Groups Media

  9. Stakeholder analysis asks four 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?

  10. Exhibit 1.Ba Market stakeholders: Nature of interest Stakeholder Wishes To: Stakeholder

  11. Exhibit 1.Bb Market stakeholders: Nature of interest Stakeholder Wishes To: Stakeholder

  12. Exhibit 1.Bc Market stakeholders: Nature of power Stakeholder Influences Company by: Stakeholder

  13. Exhibit 1.Bd Market stakeholders: Nature of power Stakeholder Influences Company by: Stakeholder

  14. Exhibit 1.Be Nonmarket stakeholders: Nature of interest Stakeholder Wishes To: Stakeholder

  15. Exhibit 1.Bf Nonmarket stakeholders: Nature of interest Stakeholder Wishes to: Stakeholder

  16. Exhibit 1.Bg Nonmarket stakeholders: Nature of power Stakeholder Influences Company by: Stakeholder

  17. Exhibit 1.Bh Nonmarket stakeholders: Nature of power Stakeholder Influences Company by: Stakeholder

  18. Figure 1.4 Forces that shape the business and society relationship Evolving Government Regulation of Business Growing Emphasis on Ethical Values Globalization Business and its Stakeholders Changing Societal Expectations Explosion of New Technology Dynamic Natural Environment

  19. The relationship of business to its stakeholders has changed over time: • Inactive Companies ignore stakeholder concerns. • Reactive Companies act only when forced to do so. • Proactive Companies try to anticipate stakeholder concerns. • Interactive Companies actively engage with stakeholders in an ongoing relationship of mutual respect, openness, and trust. Proactive Interactive Reactive Inactive

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