{"id":3018,"date":"2015-06-17T18:16:16","date_gmt":"2015-06-17T18:16:16","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterybusiness1xngcxmaster\/?post_type=chapter&#038;p=3018"},"modified":"2015-10-05T21:11:10","modified_gmt":"2015-10-05T21:11:10","slug":"stakeholder-theory-and-corporate-social-responsiblity","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/chapter\/stakeholder-theory-and-corporate-social-responsiblity\/","title":{"raw":"Reading: Stakeholder Theory and Corporate Social Responsiblity","rendered":"Reading: Stakeholder Theory and Corporate Social Responsiblity"},"content":{"raw":"<h2>Stakeholder Theory<\/h2>\r\nInstead of starting with a business and looking out into the world to see what ethical obligations are there, stakeholder theory starts in the world. It lists and describes those individuals and groups who will be affected by (or affect) the company\u2019s actions and asks, \u201cWhat are their legitimate claims on the business?\u201d \u201cWhat rights do they have with respect to the company\u2019s actions?\u201d and \u201cWhat kind of responsibilities and obligations can they justifiably impose on a particular business?\u201d In a single sentence, stakeholder theory affirms that\u00a0those whose lives are touched by a corporation hold a right and obligation to participate in directing it.\r\n<h3>Corporate Social Responsibility<\/h3>\r\nAs a simple example, when a factory produces industrial waste, a CSR perspective attaches a responsibility directly to factory owners to dispose of the waste safely. By contrast, a stakeholder theorist begins with those living in the surrounding community whose environment might be poisoned and begins to talk about business ethics by insisting that they have a right to clean air and water. In other words the community members are stakeholders in the company and their voices must contribute to corporate decisions. It\u2019s true that they may own no stock, but they have a moral claim to being involved\u00a0in the decision-making process. This is a very important point. At least in theoretical form, those affected by a company\u2019s actions actually become something like shareholders and owners. Because they\u2019re touched by a company\u2019s actions, they have a right to participate in managing it.\r\n\r\nWho are the stakeholders surrounding companies? The answer depends on the particular business, but the list can be quite extensive. If the enterprise produces chemicals for industrial use and is located in a small Massachusetts town, the stakeholders include:\r\n<ul>\r\n\t<li>Company owners, whether a private individual or shareholders<\/li>\r\n\t<li>Company workers<\/li>\r\n\t<li>Customers and potential customers of the company<\/li>\r\n\t<li>Suppliers and potential suppliers to the company<\/li>\r\n\t<li>Everyone living in the town who may be affected by contamination from workplace operations<\/li>\r\n\t<li>Creditors whose money or loaned goods are mixed into the company\u2019s actions<\/li>\r\n\t<li>Government entities involved in regulation and taxation<\/li>\r\n\t<li>Local businesses that cater to company employees (restaurants where workers have lunch, grocery stores where employee families shop, and similar)<\/li>\r\n\t<li>Other companies in the same line of work competing for market share<\/li>\r\n\t<li>Other companies that may find themselves subjected to new and potentially burdensome regulations because of contamination at that one Massachusetts plant<\/li>\r\n<\/ul>\r\nThe first five on the list\u2014shareholders, workers, customers, suppliers, and community\u2014may be cited as the five cardinal stakeholders.\r\n\r\nIn an abstract sense, it\u2019s probably true that everyone in the world counts as a stakeholder of\u00a0any sizable\u00a0factory\u2014we all breathe the same air, and because the global economy is so tightly linked, decisions made\u00a0in a boardroom in a small town on the East Coast can end up costing someone in India her job.\r\n\r\nOnce a discrete set of stakeholders surrounding an enterprise has been located,\u00a0stakeholder ethics may begin. The purpose of the firm, underneath this theory, is to maximize profit on a collective bottom line, with profit defined not as money but as human welfare. The\u00a0collective bottom line\u00a0is the total effect of a company\u2019s actions on\u00a0all\u00a0stakeholders. Company managers, that means, are primarily charged not with representing the interests of shareholders (the owners of the company) but with the more social task of coordinating the interests of\u00a0all\u00a0stakeholders, balancing them in the case of conflict, and maximizing the sum of benefits over the medium and long term. Corporate directors, in other words, spend part of the day just as directors always have: explaining to board members and shareholders how it is that the current plans will boost profits. They spend other parts of the day, however, talking with other stakeholders about\u00a0their\u00a0interests: they ask for input from local environmentalists about how pollution could be limited, they seek advice from consumers about how product safety could be improved, and so on. At every turn, stakeholders are treated (to some extent) like shareholders, as people whose interests need to be served and whose voices have real power.\r\n\r\nIn many cases transparency is an important value for those promoting stakeholder ethics. The reasoning is simple: if you\u2019re going to let every stakeholder actively participate in a corporation\u2019s decision making, then those stakeholders need to have a good idea about what\u2019s going on.\r\n\r\nWhat\u2019s certain is that stakeholder theory obligates corporate directors to appeal to all sides and balance everyone\u2019s interests and welfare in the name of maximizing benefits across the spectrum of those whose lives are touched by the business.\r\n\r\nConsider the role concept of social responsibility had on Starbucks as you watch this video:\r\n\r\nhttps:\/\/youtu.be\/_Z9es2kXLlY\r\n\r\n&nbsp;\r\n\r\n&nbsp;\r\n\r\n&nbsp;\r\n<h2>Check Your Understanding<\/h2>\r\nAnswer the question(s) below to see how well you understand the topics covered in this section. This short quiz does <strong>not<\/strong> count toward your grade in the class, and you can retake it an unlimited number of times.\r\n\r\nUse this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.\r\n\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/185\r\n\r\n&nbsp;","rendered":"<h2>Stakeholder Theory<\/h2>\n<p>Instead of starting with a business and looking out into the world to see what ethical obligations are there, stakeholder theory starts in the world. It lists and describes those individuals and groups who will be affected by (or affect) the company\u2019s actions and asks, \u201cWhat are their legitimate claims on the business?\u201d \u201cWhat rights do they have with respect to the company\u2019s actions?\u201d and \u201cWhat kind of responsibilities and obligations can they justifiably impose on a particular business?\u201d In a single sentence, stakeholder theory affirms that\u00a0those whose lives are touched by a corporation hold a right and obligation to participate in directing it.<\/p>\n<h3>Corporate Social Responsibility<\/h3>\n<p>As a simple example, when a factory produces industrial waste, a CSR perspective attaches a responsibility directly to factory owners to dispose of the waste safely. By contrast, a stakeholder theorist begins with those living in the surrounding community whose environment might be poisoned and begins to talk about business ethics by insisting that they have a right to clean air and water. In other words the community members are stakeholders in the company and their voices must contribute to corporate decisions. It\u2019s true that they may own no stock, but they have a moral claim to being involved\u00a0in the decision-making process. This is a very important point. At least in theoretical form, those affected by a company\u2019s actions actually become something like shareholders and owners. Because they\u2019re touched by a company\u2019s actions, they have a right to participate in managing it.<\/p>\n<p>Who are the stakeholders surrounding companies? The answer depends on the particular business, but the list can be quite extensive. If the enterprise produces chemicals for industrial use and is located in a small Massachusetts town, the stakeholders include:<\/p>\n<ul>\n<li>Company owners, whether a private individual or shareholders<\/li>\n<li>Company workers<\/li>\n<li>Customers and potential customers of the company<\/li>\n<li>Suppliers and potential suppliers to the company<\/li>\n<li>Everyone living in the town who may be affected by contamination from workplace operations<\/li>\n<li>Creditors whose money or loaned goods are mixed into the company\u2019s actions<\/li>\n<li>Government entities involved in regulation and taxation<\/li>\n<li>Local businesses that cater to company employees (restaurants where workers have lunch, grocery stores where employee families shop, and similar)<\/li>\n<li>Other companies in the same line of work competing for market share<\/li>\n<li>Other companies that may find themselves subjected to new and potentially burdensome regulations because of contamination at that one Massachusetts plant<\/li>\n<\/ul>\n<p>The first five on the list\u2014shareholders, workers, customers, suppliers, and community\u2014may be cited as the five cardinal stakeholders.<\/p>\n<p>In an abstract sense, it\u2019s probably true that everyone in the world counts as a stakeholder of\u00a0any sizable\u00a0factory\u2014we all breathe the same air, and because the global economy is so tightly linked, decisions made\u00a0in a boardroom in a small town on the East Coast can end up costing someone in India her job.<\/p>\n<p>Once a discrete set of stakeholders surrounding an enterprise has been located,\u00a0stakeholder ethics may begin. The purpose of the firm, underneath this theory, is to maximize profit on a collective bottom line, with profit defined not as money but as human welfare. The\u00a0collective bottom line\u00a0is the total effect of a company\u2019s actions on\u00a0all\u00a0stakeholders. Company managers, that means, are primarily charged not with representing the interests of shareholders (the owners of the company) but with the more social task of coordinating the interests of\u00a0all\u00a0stakeholders, balancing them in the case of conflict, and maximizing the sum of benefits over the medium and long term. Corporate directors, in other words, spend part of the day just as directors always have: explaining to board members and shareholders how it is that the current plans will boost profits. They spend other parts of the day, however, talking with other stakeholders about\u00a0their\u00a0interests: they ask for input from local environmentalists about how pollution could be limited, they seek advice from consumers about how product safety could be improved, and so on. At every turn, stakeholders are treated (to some extent) like shareholders, as people whose interests need to be served and whose voices have real power.<\/p>\n<p>In many cases transparency is an important value for those promoting stakeholder ethics. The reasoning is simple: if you\u2019re going to let every stakeholder actively participate in a corporation\u2019s decision making, then those stakeholders need to have a good idea about what\u2019s going on.<\/p>\n<p>What\u2019s certain is that stakeholder theory obligates corporate directors to appeal to all sides and balance everyone\u2019s interests and welfare in the name of maximizing benefits across the spectrum of those whose lives are touched by the business.<\/p>\n<p>Consider the role concept of social responsibility had on Starbucks as you watch this video:<\/p>\n<p><iframe loading=\"lazy\" id=\"oembed-1\" title=\"Starbucks and Consumer Pressure\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/_Z9es2kXLlY?feature=oembed&#38;rel=0\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<h2>Check Your Understanding<\/h2>\n<p>Answer the question(s) below to see how well you understand the topics covered in this section. This short quiz does <strong>not<\/strong> count toward your grade in the class, and you can retake it an unlimited number of times.<\/p>\n<p>Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.<\/p>\n<p>\t<iframe id=\"lumen_assessment_185\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=185&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_185\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n<p>&nbsp;<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3018\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Adaptation and revision. <strong>Authored by<\/strong>: Linda Williams and Lumen Learning. <strong>Provided by<\/strong>: Tidewater Community College. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA: Attribution-NonCommercial-ShareAlike<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Business Ethics. <strong>Authored by<\/strong>: Anonymous. <strong>Provided by<\/strong>: Anonymous. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/2012books.lardbucket.org\/books\/business-ethics\/s17-02-three-theories-of-corporate-so.html\">http:\/\/2012books.lardbucket.org\/books\/business-ethics\/s17-02-three-theories-of-corporate-so.html<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA: Attribution-NonCommercial-ShareAlike<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":124,"menu_order":15,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Business Ethics\",\"author\":\"Anonymous\",\"organization\":\"Anonymous\",\"url\":\"http:\/\/2012books.lardbucket.org\/books\/business-ethics\/s17-02-three-theories-of-corporate-so.html\",\"project\":\"\",\"license\":\"cc-by-nc-sa\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Adaptation and revision\",\"author\":\"Linda Williams and Lumen Learning\",\"organization\":\"Tidewater Community College\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by-nc-sa\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"dd0b2b58-bdfd-4a14-93f3-3738afab5fe4","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-3018","chapter","type-chapter","status-publish","hentry"],"part":85,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/chapters\/3018","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/wp\/v2\/users\/124"}],"version-history":[{"count":10,"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/chapters\/3018\/revisions"}],"predecessor-version":[{"id":5708,"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/chapters\/3018\/revisions\/5708"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/parts\/85"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/chapters\/3018\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/wp\/v2\/media?parent=3018"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/pressbooks\/v2\/chapter-type?post=3018"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/wp\/v2\/contributor?post=3018"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/wp-json\/wp\/v2\/license?post=3018"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}