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5 Cards in this Set
- Front
- Back
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Stakeholders |
Groups with an interest or claim in a company. They can be internal or external and make different contributions. The company must consider the Divergent nature of stakeholder interest and offer inducements to receive their continued support. Stockholders are arguably the most important group because they Supply the risk Capital necessary for business. Employees look to the company for compensation in exchange for labor. Managers are employees that enjoy substantial asymmetric information advantage that can lead to significant problems in the principal-agent relationship. Board of directors are supposed to Monitor and evaluate Senior Management and look out for the shareholders. Directors also enjoy asymmetric information advantage and risk becoming too close to managers which can lead to favoritism External stakeholders: Customers buy products prefer a variety of products and seek stable dependent relationship with the company they buy from. They also speak lower prices. If this satisfy the customer will stop buying. Suppliers also seek stable long-term relationships, but they also want higher prices from the company. If dissatisfied suppliers can stop supplying Creditors-they're essentially another supplier but one which applies debt capital and is paid in interest. The value stability and Improvement in credit quality. Unions are viewed as external stakeholders representing internal employees. They seek higher wages and compensation for their members. Their power to strike may be disruptive. Governments provide rules and Regulation and they expect compliance Local communities provide infrastructure and expect good citizenship The general public also provides National infrastructure to the firm in exchange for an increase quality of life due to the firm's existence. |
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Reconciling interest and the shareholder analysis |
The purpose of stakeholder impact analysis is to force the company to identify which stakeholder groups are most critical to the. 1 identify relevant stakeholders 2 identify the interest and concerns of each group 3 identify the demands of each group on the company 4 prioritize the importance of various stakeholders to the company 5 identify the Strategic challenges these conflicting demands pose The Dual goals related to Roic and growth also involve trade-offs. Access focus on growth would lead to investment and less attractive business lines and lower roic. Excess attention to maximizing roic could lead to ignoring growth opportunities that would produce future profits. Well not minimizing the real conflicts among stakeholders, all are served by the Dual focus on roic and growth. |
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The principal-agent relationship |
Arises when one group delegates decision-making or control to another group. The group receiving the power, the agent, generally has an asymmetric information advantage over the group making the delegation, the principal. The problem arises if the agent uses the information Advantage for their own interest to the detriment of the interest of the principal. Shareholders are principles, and management are agents. Senior executive officers delegate authority to additional officers who reported them. At each level of Delegation, additional layers of information asymmetry occur with the potential for more problems. Controlling principal-agent problems Printable should develop corporate governance procedures that guide the behavior of Agents by setting goals and principles of behavior, reduce the asymmetry of information, and lead to the removal of agent to misbehave violate ethical principles. Common examples of unethical Behavior Self-dealing when agents misappropriate corporate assets for personal use Information manipulation such as misleading financial information or hiding a health risk created by the Anti-competitive behavior in pursuit of Monopoly power Opportunistic exploitation of suppliers or distributors in violation of negotiated terms when they do not have the power to resist Substandard working conditions imposed on employees Environmental degradation of society's resources through pollution Corruption such as using bribery to gain illegal advantage |
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Roots of unethical Behavior |
Agents whose personal ethics are flawed Failure to realize that an issue may lead to an ethics violation Because your focus only on profit and growth Top management set unrealistic goals which lead to ethics violations I have to go leadership that sets the tone for acceptable behavior |
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Philosophies underline business ethics |
The Friedman Doctrine address is the social responsibility of business and concludes that the only social responsibility of a business is to increase profits within the rules of the game meaning through open and Fair competition without deception or fraud. Utilitarianism argues the business must weigh the consequences to Society of each of their actions and seek to produce the highest good for the largest number of people. Many times cost and benefit are difficult to measure It also fails to consider the justice of The Cure's when the greatest good for the money could come at the expense of a smaller group Patty and ethics argue that people are different from other factors of production. They are more than just economic input deserve dignity and respect. Wright's theories argue that all individuals have fundamental rights and Privileges and the pursuit of the utilitarians greatest good does not Trump use fundamental rights. Justice theories focus on adjust distribution of economic output. Justice is Matt if all participants would agree the rules are fair if the rules would be acceptable with a side under a veil of ignorance. |
