Primary Stakeholders

Those whose continues association is absolutely necessary for a firm's survival; these include employees, customers, investors, and shareholders, as well as the governments and communities that provide necessary infrastructure.

Secondary Stakeholders

Do not typically engage in transactions with a company and thus are not essential for its survival; these include the media, trade associations, and special-interest groups.

Stakeholder Interaction

Two-way relationships between the firm and a host of stakeholders. In addition to the fundamental input of investors, employees, and suppliers, this approach recognizes other stakeholders and explicitly acknowledges the dialog that exists between a firm's internal and external environments.


The extent to which a stakeholder can gain access to coercive, utilitarian, or symbolic means to impose or communicate its views to the organization; power may be coercive, utilitarian, or symbolic.

Stakeholder power- elements

a. Coercive: physical force, violence, or some type of restraint.
b. Utilitarian: Financial or material control, such as boycotts, that affect a company's bottom line
c. Symbolic: use of symbols that connote social acceptance, prestige, or some other attribute.

Reputation Management

The process of building and sustaining a company's good name and generating positive feedback from stakeholders----most reputations take a long time to build or change---not handling a crisis situation to the satisfaction of stakeholders can damage a firm's reputation---affected by both market and workplace factors.

Rep. Mgmt Components

Identity: How the organization wants to be viewed by stakeholders
Image: How stakeholders evaluate the company and their impressions of various aspects
Performance: actual interaction between company and its stakeholders
Reputation: Collective view of all stakeholders resulting from interaction of image and performance.

What is social responsibility?

The adoptions by a business of a strategic focus for fulfilling the economic,legal,ethical, and philanthropic responsibilities expected of it by its stakeholders

To what kinds of organizations does SR apply?

Big Organization, Small Organizations, Sole Proprietorship. --- all kinds

4 Dimensions of SR

Economic Responsibilities, Legal Responsibilities, Ethical Responsibilities, Philanthropic Responsibilities

What characterized SR in the 1940's?

Economic dominance of US corperation: didn't have to answer much for their actions.
Total autonomy of TMT, some personal community involvement.

What is the glue that holds companies together?


What is social capital?

-Social capital is the result of a concerted effort to develop stakeholder relationships.
-An asset, which resides in relationships that is characterized by mutual goals and trust.
-Facilitates smooth internal and external transactions and processes.

RDAP Scale: Reactive

Deny Responsibility/Does less than required performance/Ex:Exxons refusal to continue oil spill clean-up after certain date.

RDAP Scale: Defensive

Admit responsibility,but fight it/ Doing the least that is required/ Valero Energy's claim that it meets federal regulations, and therefore community complaints are not legitimate.

RDAP Scale: Accomodative

Accept Responsibility/Doing all that is required/ GM promise of job security if productivity gains were realized.

RDAP Scale: Proactive

Anticipate Responsibility/ Doing More than is required/ Xerox's sharing of product with suppliers and taking suggestions before production.

What is the RDAP scale?

A scale that provides a method for assessing a company's strategy and performance with each stakeholder.

What is Corporate Governance?

--The formal system of oversight, accountability, and control for organizational decisions and resources.

Corp. Gov: Oversight

The system of checks and balances that limit employees' and managers' opportunities to deviate from policies and codes of conduct.

Corp. Gov.: Accountability

Relates to how well the content of workplace decisions is aligned with a firm's stated strategic direction.

Corp. Gov.: Control

Involves the process of auditing and improving organizational decisions and actions.

Stakeholder Model

-Considers interests of employees, suppliers, gov. agencies, communities, and other groups with which the firm interacts.
- Assumes a collaborative and relational approach to business.
-Focuses on continuous improvement, accountability, and engagement with internal and external constituents.
-Good governance is the driving force.

Shareholder Model

-Maximizes wealth for investors and owners
-Develops and improves the formal system of performance accountability between management and the firm's shareholders
-Makes decisions based on what is ultimately best for investors
-Focuses on aligning investor and management interests

Why didn't governance exist prior to the 20th century?

Because the "captains of the industry" had ownership investment and managerial control over their businesses... Because the owner of the firm was the same person who made the strategic decisions.


Owners-- only own the business


Executives-- only run the business.

Board of Directors

Have legal responsibility for firm's resources and decisions.
- Appoint top exec. officers
- Maintain a fiduciary duty
- Monitor decisions made by managers on behalf of the company
- Growing interest in hiring "outside directors" to bring in more independent thought and action.

Executives: Why is high compensation bad?

No exec is worth millions of dollars regardless of investor return, and sometimes the CEO is making more money than the company is, or is making a significant dent in the company's profits. The avg. CEO salary is up to 344 times the avg. workers salary.

Future of Corp. Governance: Boards

- Boards will be held responsible for developing company purpose statements that cover stakeholder interests.
- Boards will be required to perform self-assessments
- Board Member selection process will become increasingly formalized
- Boards will need to work as teams
-Board membership will require more time
-Focus will move from a shareholder model to a stakeholder model

Clayton Antitrust Act

Prohibits Price Discrimination-- Limits mergers and acquisitions that have the potential to stifle the competition or create a potential monopoly.
Ex) AT&T buying T-Mobile.

Costs of regulation are...

Steadily increasing as business become more complex.
(GOV)-- Administrative spending patterns of federal regulatory agencies
--Staffing levels of fed. regulatory agencies
(BUS'S)-- Expenditures in compliance with regulations
--Workplace and hiring
-- Product Quality and Safety

benefits of regulation

Greater equality in the workplace
Safer workplaces
Resources for disadvantaged societal members
Safer products
More information about products
Greater product variety
Cleaner air and water
Preservation of wildlife

Why Deregulate?

-Removal of all regulatory authority
-Belief that less government intervention -allows business markets to work more -effectively
-Many industries have been deregulated.
-Electric utilities
-Critics of deregulation cite higher prices and poorer service/quality.


The process of persuading public and/or government officials to favor a particular position in decision making.
Takes place directly or through trade orgs.

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