Title: Stakeholder Theory of the Modern Corporation R' Edward Freeman
1Stakeholder 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
2CORPORATE BEHAVIOR FORCING CHANGE
- EXTERNALITIES
- Tragedy of the Commons Freerider
- MORAL HAZARD
- Passing on the cost of pollution
- MONOLOPLY
- Strive to avoid competition
3REASONABLE 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
4DOCTRINE 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
5CRITICAL QUESTION
- WHO IS A STAKEHOLDER?
- IS THERE RANKING OF STAKEHOLDER INTERESTS?
6Business 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
7Challenges 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
8CRITICAL QUESTION
- Can Morality Be Legislated?
9The 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
10MITIGATION
- Policy in Place
- Assigned Responsibility for Enforcement
- Control of Deviants
- Communicated to Organization
- Control (Audits/Monitoring)
- Appropriate Discipline
- Respond Appropriately if Violation Occurs
11a 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
12The 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.
13QUESTIONS 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?
14AUTHORS 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.