Stakeholder Model

Definition; Foundation; Pros; Cons

Definition:

creates value for all constituents; provides profit as a means to the mission; stakeholders have intrinsic value

Foundation:

1. founder determines the purpose of the business

2. contains more optimistic view of human nature

3. work consciously for common good, instead of allowing the Invisible Hand to just do its thing

Pros:

1. fewer distorted incentives (just money) - e.g. org leaders would probably less tempted to cut corners, stuff profits, etc.

2. reflects changing social expectations

Cons:

1. stakeholder conflicts - org has to balance between stakeholders, and find the optimization - who’s going to pay? E.g. if you want better customer service, your employees will have to work harder.

2. difficult to measure value creation for all stakeholders - unless you measure these things and reward them, your company is no different than anybody else

3. erode ownership rights - If you buy a share of something, you want to have say in it

Business’ purpose is to provide goods and services and meaningful work

Profit is a unique capability vs. as singular purpose - It’s a means of service to investors and society

Stakeholder oriented CSR

Strength

1. Cost, risk reduction(eg. diversity, environment)

2. competitive advantage: attract&retain employees, customers & investors; enchanced creativity  & innovation

3. reputation & Legitimacy: philanthropy & transparancy:

4. synergistic value creation(eg. enhanced communities= better employee pool)

Stakeholder oriented CSR:

skeptical view (doane, vogel)

1. Friendly face of Capitalism (no large scale change)

2. shareholder-owned corp cannot act outside of self-interest:        a. tradeoff-profit vs principles/social goals; b. market failures: short-term stock market pressures, consumers:value > values, govt's conflict:higher ethical standard vs lower to attract foreign investment.

3. there is no market for virtue.

4. no better or worse financialy: lack of consumer knowledge, nich market, other profitable models;

5. responsible firms: difficult to distinguish; lack of consistency

6. it is admirable, but dont expect rewards

Globalization

Pros, Cons (undone)

Pros:

1. efficient wealth creation due to specializatoin

Cons:

1. disruption to the domestic job wealth distribution (disappearing middle class)

Marketing as a Vocation

1. cumulative & unintended effects

a. promotes narcissism, objectification & dissatisfaction;

b. eploits real need for identity and fulfillment

c. influences (not reflect)social value: works unconsciously, and functions as myth/story; and creates social norm;

d. anti-democratic: happiness & liberty through consumption

1. our modern theology: to achieve a good life.

2. create consumers: a. production to consumer capitalism; b. information to persuasion: create needs; c. material goods to novelty & insatiability;

3. consumer vs. christian virtues

a. see the world thru consumption

Finance / Share Holder Wealth Model (Friedman & Rodgers)

Definition; Foundation; Pros; Cons

Definition:

Public companies should maximize profit for shareholders (long-term)

Stakeholders have instrumental value – any manager would consider the stakeholders when making decisions because that will lead to long-term wealth. E.g. Cyprus being a great place to work, running a food drive, etc. because they know it will maximize the value in the end. 

Foundation:

Free markets/”Invisible Hand” = most social good – it's either the free hand of the market or the boot of the government

Private ownership rights vs. “Collectivism” - Shareholders should have control over what the company do

Managers should not give away money needlessly, they have a fiduciary duty to protect the shareholders - The belief is that shareholders are rational and that they want to make money

Pros:

1. Simpler metric to measure

2. There are social benefits to making profit:

- Jobs, taxes, investors, etc. - For every job that’s created, more jobs are created because of trickle down economy

- Taxes get paid - Investors (who are not evil) are rewarded  – e.g. a shareholder has his child’s college fund in the stock market, so they are depending on it to do well

Cons:

1. Debatable social outcomes - e.g. wages may sometimes lag profits and productivity – wages are not increasing in proportion to productivity or share price

2. Shareholders don't act on rational motivations alone - People want to invest in companies whose mission they believe in as well as those that will just “do well”

3. This goal might seem contrary to the company's mission statement – if it’s not stated in the mission statement, why should investors consider that as a choosing criteria?

Cultural Globalization:

Americanization Perspective

Definition and How it Impacts (P.Zachary)

Big American companies and American products are having a negative impact on cultures and the world

Impact:

Monoculture – we all become the same

Identity in values – people change their values e.g. people become more individualistic e.g. individualism, inequality, consumerism

Health - e.g. weight could become a worldwide problem

Environment - What happens when everyone starts eating hamburgers? We need more cows, more methane, more climate change.

Loss of languages - more people speaking English

Backlash and resistance (Singapore, France, Canada, etc.)

Cultural Globalization:

Cultural Exchange Perspective (P. LeGrain)

Definition and How it Impacts

American influence is overstated

Many countries are prevelant in American media, apparel, food – e.g. Levis are French, not American.

Brands are superficial vs. cultural. - e.g. you can wear Nike and eat McDonald’s and still not change your culture.

Adaptation is required. Businesses have to adapt to the culture.

Change is constant and mixing is good, not damaging

- English is being learned not as a replacement for but along with native language

- The real influencers are not so much media or cultural products as much as they are liberalism, science, immigration, and technology (all good things)

- What people really want is the right to choose, change, and define themselves

Globalization: A Skeptical View (W. Berry)

Concerns, Impact, Suggested Remedy

Corporate Dominance:

- Absentee corporation vs local business – people in a boardroom won’t make decisions as well as the farmer who shakes your hand and looks you in the eye because they don’t have to live with the consequences
- Artificial wealth by means of destruction of real wealth
 

Impact:

- Damage to local livelihoods – If the tariffs don’t happen, the New Balance factory employees will be in trouble
- Influence (ignorance) on gloval working conditions – if we don’t know, we’re ignorant, and if we’re ignorant, we lose influence in how things are produced around the world
- Environment – it can’t be good to ship stuff all over the world
- Vulnerability – if a country only specializes in one thing (e.g. timber) and doesn’t focus on the other things they need (e.g. food), then they face famine

Remedy:

Local “subsistence” and “Protectionism” - Let’s take care of ourselves first, then help the world

Def: use science to manage company; efficiency > human capacity

Pros: highly efficient at least in short-term. Con: strife, stultification, absentee, lack of meaning; inhumane.

Pay Disparities

pros, cons

pro: 1. to attract good candidates;

2. align with shareholder interests

3. wages set by market: small pool, high demand

4. merit based (executive paied by stock share)

5. unequal doesnt mean unfair

6. meritorious justice is good for society:

a. rewards achievement; incentive to move up

b. encourages personal choice & responsibility

c. fairness--minimizes govt. role in re-distribution

Cons: 1. pay alone to attract candidates;  2. misaligned incentives with shareholders; 3. doesn't sound like a merit pay: a. sole cause of rise in profit & share price? b. undervalue other contributors.

4. egalitarian & needs based justice & govt needed to protect vulnerable.

5. possible link with growing socia inequality

1. nature serves human interest: human has dominion;

2. markets & techonology tend to solve problems

1. antropocentrism=arrogant: seek only for short-term self-interest

2. market and tech tend to create problems

3. moral consideration for nature:beyond human interest

4. nature as locus of value: intrinsic value; ethic derived from observing nature

1. Bible supports both sides

2. nature: God called nature good;nature is part of covenant; nature is possibly included in redemption

3. Human: central to Biblical drama; God gives human dominion and Stewardship to rule and serve;

use of carbon offsets or emission neutralization

(greening/sustainable)

def,pro,con. and types

def: a reduction of co2 in order to compensate for the emission elsewhere

pros:

1. driven by market: i'ts voluntary instead of mandatory

2. provide positive contributions: a. incentive based; b. encourage innovation/fund projects/efficiency.

Con:

1. potentially deceptive (greenwashing);

2. removes stigma from polluting;

 3. purchase way out of sin

4. undermines obligation for shared sacrifice

5. debatable benefits: economics

Types: Carbon offsets. Renewable energy credits

Cradle to Cradle approach,

Cradle to Cradle approach

def, pro,con

def:a biomimetic approach to the design of products. it suggest industry to use materials that are nutreual and natural which can be circulating in a healthy metabolism.

pros:

1. eco-effective: start to be eco from the beginning of the process.

2. eliminate waster (waster=food); use renewable assets

cons:

high requirement in tech and material

no.

1. people are blinded to the ethics of a situation

a. cognitive bias: sympathy/empathy

b. abstract & future costs vs. concrete & immediate benefits

c. motivated blindness(slef-interest)

d. people should be highly awared to be ethical

e. people are vulnerable

f. orgs are pooorly organized for prevention

2. personal fudge factors:

a. 'a lot of people cheat a little'

3. authority: willing to obey order > being ethical and sympathy

4. specializatoin in jobs=fragmentation in responsibility

1. decreasing the fudge factor:

a. reminders; rest& reflection

 2. mustbe actively managed: understading existing org culture

3. communicate & reward ethics

4. create paperwork and programs:

a. clarify purpose and mission

b. strategy

c. ethical leadership/department

d. govt ethic program

e. reward system