Business Ethics Ethical Decision Making and Cases Seventh
Business Ethics: Ethical Decision Making and Cases, Seventh Edition O. C. Ferrell University of New Mexico John Fraedrich University of Wyoming Linda Ferrell University of New Mexico Copyright © Houghton Mifflin Company For in-class note taking, choose Handouts or Notes Pages from the print options, with three slides per page. 1
Chapter 2 Stakeholder Relationships, Social Responsibility, and Corporate Governance Copyright © Houghton Mifflin Company 2 -2
Stakeholders Define Business Ethical Issues • Stakeholders – Customers – Investors – Employees – Suppliers – Government agencies – Communities Copyright © Houghton Mifflin Company 3
Stakeholder Types: Primary • Absolutely necessary for survival – Employees – Customers – Investors – Shareholders Copyright © Houghton Mifflin Company 4
Stakeholder Types: Secondary • Do not typically engage in transactions or title to the goods – Media – Trade associations – Special interest groups Copyright © Houghton Mifflin Company 5
Stakeholder Orientation • The degree to which a firm understands and addresses stakeholder demands. • Consists of three activities: – Generation of data about stakeholder groups – Distribution of this information throughout the firm – The firm’s response to this intelligence Copyright © Houghton Mifflin Company 6
Relationship Between Social Responsibility and Profitability • Social responsibility is the organization’s obligation to maximize its positive impact and minimize its negative impact on stakeholders. • Four levels of social responsibility: – – Economic Legal Ethical Philanthropic Copyright © Houghton Mifflin Company 7
Corporate Governance • Consists of the formal systems of accountability, oversight, and control. • Accountability – Alignment of decisions with strategic direction • Oversight – System of checks and balances • Control – Auditing and improvement Copyright © Houghton Mifflin Company 8
Corporate Governance • Shareholder model – Maximize wealth for owners and investors • Stakeholder model – Concerns of employees, owners, suppliers, government regulators, and communities taken into consideration Copyright © Houghton Mifflin Company 9
Corporate Governance • Fiduciaries – Persons placed in positions of trust to act in the best interest of the organization – Both directors and officers of corporations are fiduciaries for the shareholders Copyright © Houghton Mifflin Company 10
The Role of Boards of Directors • Ultimate responsibility for their firms’ success or failure, as well as their ethics and actions • Increased demands for accountability and transparency • Issues of executive compensation Copyright © Houghton Mifflin Company 11
Implementing a Stakeholder Perspective • • Step 1: Assessing the corporate culture Step 2: Identifying stakeholder groups Step 3: Identifying stakeholder issues Step 4: Assessing organizational commitment to social responsibility • Step 5: Identifying resources and determining urgency • Step 6: Gaining stakeholder feedback Copyright © Houghton Mifflin Company 12
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