Public Responsibility and stakeholders

1. Public Responsibility and stakeholders BE- Session-5&6

2. Public Responsibility • Public policy limit the scope of managerial responsibility- primary and secondary areas. • Primary areas- organization's functional role and exchange with market • Secondary areas:- Impact of procurement, employment, neighborhood effect etc. • Managerial responsibility is not supposed to extend beyond secondary role. • Managers are not expected to improve social conditions rather they should comply with public policy – it is more than individual ethics and moral. • Public policy is given and define boundaries of corporate social responsibility – responding to policy. • Response process consists of different stages . A

3. Regulatory growth • First revolution was emergence of joint stock companies- agency theory • Second consists of regulatory regime- public policy response. • Social public affairs department- functions. B • Political action committees – to develop relation with policy makers. • Advocacy advertising- Using media to influence public policy

4. Stakeholder Theory • Corporations use generic types of business strategies. C • They target different groups of stakeholders. • Goals are determined accordingly. • Jonson & Johansson's stakeholders strategy. D • Fundamentals of stakeholder’s strategy- at the cost of share holders or as an economic entity.

5. Corporate restructuring • To overcome the shortcomings of agency theory.- ownership issue • Overcome managerial theory- do not keep slack distribute- distribute all profit- might adversely effect R&D. • Takeover results- good for the shareholders of the company taken over • Strategy of LBO- it takes care of draw backs of agency theory as well as managerial theory by increasing debt. Senior, subordinate debt and equity. • It save tax burden by interest deduction, reaped depreciation benefits- purchase value, ESOPs tax benefit if purchased by taking loan. • Redistribution argument – danger of bankruptcy

6. Social responsibility in Japanese firms • Life time employment, democratic decision making, low level of unionization, job rotation, long run perspective, easy access to capital and high education level- several factors to find reasons of more competitiveness' • Institutional finance – 30 percent of capital • Close bank ties. • Close relations between firms having backward and forward linkages. • Bank control under distress- F • High saving and low interest rates- tax incentives and depreciation allowance to encourage investment. • Social performance – G • Major emphasize on employees.- after paying minimum to share holders , maximum income for employees. • About 80 percent salary in bonus terms.