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6 Principles of Stakeholders Theo

ry
• Principle of Entry & Exit –.
• Principle of Externalities
• Principle of Agency –
• Principle of Governance – .
• Principle of Contract Cost –.
• Principle of Limited Immortality – .

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 Theories of CSR
• Instrumental Theories (Maximization of
shareholder values)
• Political Theories(Use Corporate power
responsibly)
• Integrative Theories (Public Responsibility)
• Ethical Theories (Social Responsibility as an
ethical obligation)

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 Three main focal aspects of
discussion
• Meeting long term profits objective
• Using Business power in a responsible way
• Integrating Social Demand

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 Component of CSR
• Carroll 1991
• 1 Economic
• 2 Legal
• 3 Ethical
• 4 Philanthropic Responsibilities

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• Business Perspective
• Stakeholders
• Business
Environment
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 Business perspective
• Traditional view
– Business as economic institution
– Business as socio-political institution

• System view
– Business as multipurpose institution

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 Traditional perspective
• Business as economic institution
Business as economic entity that interacts with
society only through transaction in the
marketplace

• Business as socio-political institution

Business as sociopolitical entity that interacts with
society through complex interaction for
increasing wealth and prosperity of society

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 Business as an economic
institution

Price & Product Choice of

Quality employees

Business Firm

Quantity of Use of
output resources

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 Business as sociopolitical
institution
Changes in Increased Govt.
International Intervention:
Ideologies & • Statutory Law
Environment • Admnistrative Law
Values

Increased Influence
Upgrading of Business Firm of external or public
Ethical Standard Interest Group

Improved Changing Att.of Increased Importance

Communication&
Increased Impt of Society toward of Internal
Media Business Stakeholder Group

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 System Perspective
Business as a living organization that interacts
with and affected by environment for
economic and social motive ( multipurpose
motive ) by using the limited resources

Key To Survival is
Capacity to adapt efficiently the changing
condition posed by the environment

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 Business as Multipurpose
Institution
Economic Response

Market: Efficiency Market

Process
Competition Government: Business:
• Political Action • Economic
• Legislative Act • Social
• Judicial Action • Political
Stakeholder: • Regulatory Act
Expectation Equity
Public Policy
Process
Sociopolitical Response
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 Stakeholder

any person, group or organisation

who can be positively or negatively
impacted by, or cause an impact on,
the actions or activities proposed
 Stakeholders
Individuals and groups with a
multitude of interests, expectations,
and demands as to what business
should provide to society
 What Is a Stakeholder?
• Stakeholders are those who have a stake or claim in
some aspect of a company’s products, operations,
markets, industry and outcomes
– Customers – Investors
– Employees – Suppliers
– Government agencies – Communities
• Stakeholders can influence and are influenced by
businesses
 Origins of the Stakeholder
Concept
What is a stake?
An interest or a share in an undertaking and can be
categorized as:
Interest Right Ownership

Legal

Moral
Origins of the Stakeholder
Concept
What is a stakeholder?

An individual who possesses a stake

 Stakeholders
All
Allgroups affected
groups affected
bybyaacorporation’s
corporation’s
decision
decision and policy
and policy

Primary
Primary Secondary

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 Who Are Business
Stakeholders?
Government Employees

Business

Community Owners

Consumers
 Primary Stakeholder
Employees
(union)
Skill
Wholesaler
Distribution Capital Shareholder
Retailer

Compete Business Lend Money

Competitor Creditor
Money Material

Customer Supplier

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 Nature of Interest and Power
Interest Power
Shareholder - Return/Dividend - Exercising voting right
- Capital Gain - Exercising right to inspect
book and record
Employee - Stable employment - Strike
- Fair pay - Union bargaining power
- Safe and comfortable - Publicity
Creditor - Repayment of loan - Calling in loan
- Interest -Take over loan’s collateral
Supplier - Regular order - Refusing to meet order
- Paid promptly - Supplying to competitor
Distributor - Good product quality - Buying from competitor
- High reliable product - Boycotting company
Customer - Fair exchange - Purchasing from competitor
- Safe & reliable product - Boycotting company
Competitor - Be profitable -Forcing to”keep up”
- Gain a larger market - Charge lower price

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 Secondary Stakeholder
Local
Communities

General Skill, Central/Local

Environmen
t
Public Govt.
Opinion Regulation
Tax
Friendly
Services Business Hostile
Business Foreign Govt.
Support
Image,
Publicity Social
Demand

Media Social Activist

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 Nature of Interest and Power
Interest Power
Local Com. - Employ local residents - Restricting operating licenses
- Environment is protected - Lobbying government for
- Local area is developed regulation of the company
Social - Ensure that company - Publicizing the negative issues
Activist conform to legal and - Lobbying government for
ethical standard regulation of the company
Media - Keep the public informed - Publicizing the negative issues
on all issues
- Monitor the company
Business - Provide services and - Assist company in business
Support information endeavor & dev. effort
Government - Taxes - Regulation, licenses,& permit
- Economic development - Boycotting company
Foreign Gov. - Economic development - Permit to do business
- Social improvement - Regulation
General - Social value Protected - Support activist
Public - Prosperity for society - Condemn or praise company
- Risk minimized - Press government to act

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 Business Environment

• External environment
– Societal ( macro ), influence the entire
businesses in the same way and magnitude
– Stakeholders, do not influence the business in
the same way and magnitude
• Internal environment

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 Internal Environment
Identify strength and weaknesses for
responding to the external environment
• Corporate Structure
– The way of the corporation is organized in term of
authority, work and information flow, communication
• Corporate Culture
– The collection of beliefs, expectation and value, shared
by its members
– Produce norms that shape the behavior of employees
• Corporate Value
– Explain the action taken with respect to an issue
• Corporate Resources
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 External Environment
Identify opportunities and threats for
survival and future success
• Political relationship, Economic • Interest rate
processes, changes • Unemployment
• Stability of Government • Inflation,GNP
• Regulation & Legal • Poverty Rate, etc
aspect
• Social Value, etc
Politic Business Social
Firm • Demographic
• Life style
• Product & Process •
• Innovation Population Growth
• Age Distribution
• Scientific Discovery •
• Etc Social Value, etc
Technology

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 Business Interaction

Business
Firm

Government Society

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 Business Interaction
Market Non Market
Local Communities
Shareholder
Employee Central/Local Govt.

Creditor Foreign Govt.

Supplier Business Firm Social Activist

Distributor Media

Customer General Public

Competitor Business Support

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 Business Interaction
Business Consumer

Market

Monopoly
Oligopoly
Free Market

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 Free Market System

Business
Consumers
Firm

Good & Services Needs & Wants

Competitive
Price
Supply Demand
Voluntary
Exchange
Profit Satisfaction

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 Consumer Bill of
•
Right
Right to safety
• Right to be informed
• Right to choose
• Right to be heard

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 “The best consumer is the educated consumer.”

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 The Consumer Bill of Rights

In 1962, President John

Kennedy spoke to
Congress. This call to
action resulted in the
Consumer Bill of Rights.

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 John Kennedy, 1962

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 Consumer Bill of Right

• Right to safety

• Right to be informed

• Right to choose

• Right to be heard
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 The Right to Safety

Protection
against
dangerous goods
and services.

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 Safety Responsibilities

Use products and

services appropriately
and for their intended
purpose
Read and follow
directions

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 The Right to Choose
A selection of options
when purchasing
goods and services

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 Choice Responsibilities

Use purchasing power

to promote fair
business practices
Support laws that
encourage fair
competition in the
marketplace

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 Let’s talk about it…

How does advertising increase the consumer right

to choose?
How does advertising decrease the consumer
right to choose?

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 The Right to Be Informed
Reliable sources of
information about
product or service
performance, quality
and price

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 Informed Responsibilities
Seek information
before purchasing
Use information to
make decisions about
where and what to
purchase

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 Let’s talk about it…

There are many sources of consumer information.

When a consumer goes online, what criteria
should be used to identify reliable, honest product
information and ratings?

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 The Right to Be Heard
Voice complaints
about products,
services and business
practices
Expect to have your
concerns addressed
by business and
government

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 Being Heard Responsibilities

Speak up when you

have a problem or
concern
Support rules and
regulations that are
consumer friendly

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 Let’s talk about it…

React—The right to be heard will disappear if

consumers do not use their voices.

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 The United Nations
Guidelines for Consumer Protection

In 1985 the United Nations

Assembly adopted eight
basic consumer rights.
These included the original
four consumer rights signed
into law by JFK, plus four
additional rights intended to
strengthen consumer
protection worldwide.

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 Consumer Bill of Right
Right to safety

Right to be informed

Right to choose

Right to be heard

The Right to Redress

The Right to a Healthy Environment
The Right to Service
The Right to Consumer Education

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 The Right to Redress
Fair settlement of
legitimate disputes

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 Redress Responsibilities

Ask for reasonable and

fair settlement

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 Let’s talk about it…

Consumer complaints are sometimes linked with

frustration and anger. Why is it important that
consumers not use anger when trying to settle a
dispute or complaint?

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 The Right to a Healthy Environment

Live and work in an

environment that
does not threaten
well-being
Business should not
pollute the air, earth
or water

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 Environment Responsibilities

Become aware of
environmental
concerns
Speak out for the
environment
Reduce individual
waste and pollution

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 The Right to Service
Be treated with respect
Business responds appropriately to
consumer needs

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 Service Responsibilities

Be polite and respectful

in return
Customer loyalty –
show appreciation by
frequenting businesses
that provide good
service

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 The Right to Consumer Education

Seek information
and skills needed
to make informed
decisions
Monitor new
rules and
regulations for the
marketplace
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 Consumer Education Responsibilities

Find and use consumer

information
Stay informed about
marketplace rules and
regulations
Carefully evaluate
consumer choices

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 Let’s talk about it…

React—As the marketplace becomes more

complex, consumer education is essential to
navigate and understand consumer rights and
responsibilities.

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 Business and Community

Request made to business

– Assistance for less advantages people
– Support for air and water pollution control
– Support for cultural and artistic activist
– Employment and advancement of minority and
women
– Assistance in urban planning and development
– Support of health care program
– Donation

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 Business and Government
Assure good and beneficial relations
between business ant its stakeholder

Regulating Empowering Controlling

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 Basic Strategies to Cope with
Environmental Changes

• Inactive Strategy
– Do nothing
• Reactive Strategy
– Environment changes first ant then organization
responds to it
• Proactive Strategy
– Organization initiates changes and than
environment altered
• Interactive Strategy
– Organization and environment are changing
simultaneously in the same direction

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Stakeholder “essentials”

Identify
Analyze

Engage
Manage
Need to know….
Who they are
What they think
What influence they have
How to engage them
How to inform
How to stay in touch
If things change
 Social Responsibility
Way a company views its duty or obligation to
make decisions that protect, enhance, and
promote the welfare and well-being of
stakeholders and society as a whole

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Approaches to Social Responsibility

Figure 4-6
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 The Reactive-Accommodative-
Proactive Scale
Rating Strategy Performance
Reactive Deny Doing less than
Responsibility required
Defensive Admit Doing the least that
responsibility, but is required
fight it

Accommodative Accept Doing what is

responsibility required
Proactive Anticipate Doing more than is
Responsibility required
 Approaches to Social Responsibility

Obstructionist approach – Companies choose

not to behave in a social responsible way and
behave unethically and illegality

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 Approaches to Social Responsibility

Defensive approach – companies and

managers stay within the law and abide
strictly with legal requirements but make no
attempt to exercise social responsibility

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 Approaches to Social Responsibility

Accommodative approach – Companies

behave legally and ethically and try to
balance the interests of different stakeholders
against one another so that the claims of
stockholders are seen in relation to the
claims of other stakeholders

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 Approaches to Social Responsibility

Proactive approach –
Companies actively embrace socially
responsible behavior, going out of their way
to learn about the needs of different
stakeholder groups and utilizing
organizational resources to promote the
interests of all stakeholders

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