Stakeholder Theory of the Modern Corporation R. Edward Freeman - PowerPoint PPT Presentation

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Stakeholder Theory of the Modern Corporation R. Edward Freeman

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Title: Stakeholder Theory of the Modern Corporation R. Edward Freeman


1
Stakeholder Theory of the Modern CorporationR.
Edward Freeman
  • Management has a fiduciary responsibility to
    stakeholders
  • Corporations a tool for immortality
  • Corporations status changed
  • Privity of Contracts
  • Employment Law
  • Public Policy and Law

2
CORPORATE BEHAVIOR FORCING CHANGE
  • EXTERNALITIES
  • Tragedy of the Commons Freerider
  • MORAL HAZARD
  • Passing on the cost of pollution
  • MONOLOPLY
  • Strive to avoid competition

3
REASONABLE PLURALISM
  • MEASURE AFFECT ON STAKEHOLDERS BY
  • Doctrine of Fair Contracts
  • Feminist Standpoint Theory
  • Ecological Principles
  • Ask Questions
  • Corporation ought to be governed by
  • Managers ought to act.
  • WHERE DO WE FIND BACKGROUND DISCIPLINES
    Business, Social Science, Religion

4
DOCTRINE OF FAIR CONTACTS
  • The Principle of Entry and Exit
  • Clearly defined entry, exit and renegotiations
    conditions
  • The Principle of Governance
  • Rules of the game set by unanimous consent
  • The Principle of Externalities
  • If effected person want can be renegotiated
  • The Principle of Contracting Costs
  • Shared cost of contracting
  • The Agency Principle
  • Must act in the interest of all stakeholders
  • Principle of Limited Immortality
  • Continued existence of Corporation is in all
    stakeholders interests

5
CRITICAL QUESTION
  • WHO IS A STAKEHOLDER?
  • IS THERE RANKING OF STAKEHOLDER INTERESTS?

6
Business Ethics and Stakeholder AnalysisKenneth
Goodpaster
  • Stakeholder Paradox
  • Fiduciary duty to stockholders
  • Make stakeholders quasi-stockholders in their own
    right
  • Stakeholder Analysis
  • Fact Gathering
  • Analysis (Strategic Stakeholders)
  • Synthesis (Multi-fiduciary
  • Choice(Why Chosen)
  • Action

7
Challenges of Stakeholder Perspective
  • Ruder Decide based on the decent thing to do
    and what ought to be done.
  • Public obligations takes away from private nature
    of the corporation
  • Agent-Principal relationship

8
CRITICAL QUESTION
  • Can Morality Be Legislated?

9
The New U.S. Sentencing Commission Guidelines
A Wake-up Call for Corporate AmericaDalton,
Metzer, and Hill
  • Formula used to determine justice. A multiplier
    used to establish penalty
  • Nature of the Crime
  • Amount of Loss
  • Amount of Planning
  • Culpability Score
  • Size of Organization
  • Level in Organization
  • (Officer/Janitor)
  • Past Crimes
  • Past History

10
MITIGATION
  • Policy in Place
  • Assigned Responsibility for Enforcement
  • Control of Deviants
  • Communicated to Organization
  • Control (Audits/Monitoring)
  • Appropriate Discipline
  • Respond Appropriately if Violation Occurs

11
a society without any objective legal scale is a
terrible on indeed. But a society with no other
scale but the legal one is not quite worthy of
man either.. Life organized legalistically has
shown its inability to defend itself against the
corrosion of evil.Alexander Solzhenitsyn
12
The Parable of the SadhuBowen H. McCoy
  • Once in a lifetime trip to the Himalayas. Travel
    a well used trail
  • Found a half naked holy man in the snow
  • Do you take him back to a village? Do you care
    for him? Both option would cause you to loose the
    opportunity to make your once in a life time
    climb.

13
QUESTIONS RAISED?
  • Is no single person responsible when there is a
    group?
  • Do we make decisions based on ethnic
    considerations?
  • Can a superordinate goal allow for moral
    slippage?
  • Is their an institutional or group ethic strong
    than an individual ethic?
  • How much effort is enough to satisfy your moral
    obligation?

14
AUTHORS OBSERVATIONS
  • Organizations without a history of mutually
    accepted shared values tend to come apart during
    stress.
  • People in touch with core values can deal with
    change, ambiguity, stress, and tough times.
  • People tend avoid the ambiguous yet that is what
    tends to be the most rewarding
  • Individuals need organizational support to act
    morally.
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