Managing International Business Responsibly

BUSM4692

Course Coordinator and Lecturer: Dr Kate Grosser

Offering Course Coordinator and Lecturer: Thanapat

Kijbumrung

2020 Semester 2: Lecture 4

Where we are in the course
• Introduction
1. Introduction: Course information, expectations and requirements (Week 1).
• Part one : Understanding CSR
2. Globalization and Corporate Social Responsibility (Week 2)
3. Essential Concepts, Models and Theories (Week 3)
4. International Business Stakeholders (Week 4)
• Part Two : Applying CSR with Stakeholders
5. Responsibilities to Stakeholders – Workplace (Week 5)
6. Responsibilities to Stakeholders – Marketplace (Week 6)
7. Responsibilities to Stakeholders – Community (Week 7)
8. Responsibilities to Stakeholders - Ecological Environment (Week 8)
• Part 3: Managing CSR
9. Responsible Business – Strategy (Week 9)
10. Responsible Business - Reporting and Auditing (Week 10)
11. Partnerships and Multi-stakeholder Governance (Week 11)
• Conclusion and Revision
12. Course review and the future of CSR (Week 12)

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Overview

Stakeholders:
• Maps
• Identification
• IT
• Ethics
• Conflicts
• Critical perspectives on stakeholder management: Power and inequality
Recap: CSR perspectives and stakeholders relations

• CSR Normative perspective - what companies should do to fit with values/norms of

society (e.g. found in CSR Principles) – stakeholder views are part of this

• CSR Integration perspective – how companies integrate social and environmental issues,
and societal values in to business operations (e.g. found in CSR reporting indicators and
certification schemes) – stakeholder relations are part of this

• CSR Instrumental perspective - how CSR can increase firm profits (e.g. socially
responsible investment criteria) – creating stakeholder value is part of this according to
Freeman

• CSR Political perspective – political role of business re social and environmental

issues/public goods (e.g. Multi-stakeholder initiatives) – stakeholder perspectives are part
of this
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Stakeholder maps

• ‘Multiple Stakeholder Orientation’ (one of 6 core characteristics of CSR (Crane et al. 2014))

• Freeman: CSR as ’Corporate Stakeholder Responsibility’

• Stakeholders: ‘any group or individual who can affect or is affected by the achievement
of the organisation’s objectives’ (Freeman 1984: 46)

• Freeman (1984) (Exhibit 3.1) – very basic stakeholder map for large International Business.

• Freeman, Dmytriyev & Strand (2017) (Figure 5.1, p. 113) recent basic stakeholder map but
divides primary and secondary stakeholders

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Stakeholder identification

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Freemand, Dmytriyev & Strand, 2017

Impact of IT
• The information exchange between the organisation and its stakeholders became
instantaneous, dynamic and open to a broad public.
• Advancements in technology have moved stakeholder theory to the very front page of the
managerial agenda

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Stakeholder identification

Firms have many stakeholders. Which stakeholder groups should managers pay attention to?
1. Power of the stakeholder to affect/influence the company
2. Legitimacy of the stakeholders relationship with the firm
3. Urgency of the stakeholders claim on the firm
• Together these explain why managers pay attention to particular stakeholders - stakeholder
salience. Possession of one, two, or three of these attributes?
• Dynamic: stakeholder power, legitimacy and urgency change in different situations (time and
space)
• Power defined as the most important factor for stakeholder salience (Parent and
Deephouse, 2007).
(Mitchell, Agle and Wood (1997))

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 Power
Dangero
Domin
us
ant

Urgency tive
Legitimacy
Defini

Depe
ndant

Adapted from Mitchell, Agle and Wood (1997)

Freemand, Dmytriyev & Strand, 2017

• Serving all your stakeholders is the best way to produce long term results and create a growing,
prosperous company ... Let me be very clear about this: there is no conflict between serving all your
stakeholders and providing excellent returns for shareholders. In the long term it is impossible to
have one without the other. (CEO of Medtronic, Bill George, 2004).

• The primary responsibility of the executive is to create as much value as possible for
stakeholders. Where stakeholder interests conflict, the executive must find a way to rethink the
problems so that these interests can go together, so that even more value can be created for each. If
trade-offs have to be made, as often happens in the real world, then the executive must figure out how to
make the trade-offs, and immediately begin improving the trade-offs for all sides. Managing for
stakeholders is about creating as much value as possible for stakeholders, without resorting to trade-
offs.
(p.116)

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Stakeholders theory as a theory of management

• Stakeholder vs shareholder theory? No conflict between shareholders and stakeholders.

– https://www.youtube.com/watch?v=_sNKIEzYM7M

• Corporate Stakeholder Responsibility - No conflict between shareholders and stakeholders? But is this
true in short-term market context?
• https://www.youtube.com/watch?v=7hfyfn_6fz8

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Managerial model versus stakeholder model of firm
Managerial model of the firm
Main interest group Owners (shareholders, investors)
Legitimacy of stake Property rights
Role of stakeholders Apart from owners, stakeholders
are a means to maximize the firm’s themselves with legitimate
goals
Goal of management Maximizing value and return for
the owners of the firm
Role of management Agent of the owners
Social responsibility Individual (owners)
From Crane, Matten and Spence (2014, p.135)
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Stakeholder model of the firm
All groups that are affected by
the firm’s pursuit of its goals
Broad set of all the rights of
those groups which are affected
by the firm
All stakeholders are an end in
interests in the firm
Maximizing value for all groups
that have a stake in the firm
Balancing all interests of the
firm’s stakeholders
Organizational
14
Stakeholders theory as ‘managerial’

• Managers perspective – what should managers do?

• Stakeholders - new role for managers…
• Power: who assesses power, urgency and legitimacy? Managers? What information do they have and
who do they get this from?
• Managerial characteristics vary and act as an important moderator of stakeholder-relations and
stakeholder responsibility (Mitchell, Agle and Wood, 1997)

• ‘Key question: if multiple stakeholders have legitimate stakes should they be represented on the board?
(Matten and Crane, 2005)

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And stakeholders theory as a theory of ethics

• What are ethics?

• ‘Stakeholder theory is a theory of organizational management and ethics (Phillips et al, 2003, p. 480).
• This is what makes it distinct from other managerial theories
• In what way is stakeholder theory ethical?
– Stakeholder theory is ‘first and most fundamentally, a moral theory that specifies the obligations that
companies have to their stakeholders’ (Freeman et al, 2010: 212) – moral obligation to consider
stakeholder interests
– If the company affects individuals or groups to reach its goals, these groups also have a legitimate
interest in the company

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 BUT – What about less powerful stakeholders (Banerjee, 2018)

Global extractive industries and conflicts with communities

• ‘CSR is a strategy that enables multinational corporations to exercise power in the global
political economy’ (Banerjee, 2018, p.796)
– Conflicts ‘between communities, the state and multinational corporations that arise owing
to the negative social and environmental impacts of mining and extraction’
– Corporate social responsibility and multi-stakeholder initiatives can not and do not take
into account the needs of vulnerable stakeholders
– ‘Power asymmetries between key actors in the political economy can diminish the
welfare of communities impacted by extraction’ (and the ecological environment).
– Proposed solution: a ‘translocal governance framework from the perspective of
vulnerable stakeholders’: Community driven partnerships; indigenous rights; indigenous
ecology

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‘Stakeholder theory is a theory of organizational management and ethics’?

• Only if you find ways of including the interests of less powerful stakeholders.

• Many CSR initiatives try to do this (in stakeholder relations, and multi-stakeholder initiatives)
but don’t do it very well yet.

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Attempts to include less powerful stakeholders (Keenan et al., 2014)

The key is bringing views of marginalised stakeholder in (Keenan, Kemp and Ramsay, 2014)
E.g. Mining sector stakeholder management:
• Company–community agreements are widely considered to be a practical mechanism for stakeholder
relations in mining - try to reduce conflict between companies and communities.
• But women are often more adversely impacted by mining than men (Oxfam and others), and face greater
challenges in accessing development opportunities that mining can bring.
• Study by Centre for Social Responsibility in Mining (CSRM, University of Queensland), funded by the
Minerals Council of Australia (MCA) and the Department of Foreign Affairs and Trade (DFAT). Explores:
– Women’s participation in agreement processes,
– The gendered distribution of agreement benefits, and
– The extent to which impacts and benefits influence women’s development and economic inclusion.
– Indigenous women
• If don’t bring good management and ethics together mining exacerbate inequalities, and fails to
contribute to long-term sustainable development.

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Conflicts between companies and societies/stakeholders
Examples:
• Negative externalities (see Lecture 2 slide 24)
• Shareholders vs stakeholders (this lecture). E.g.:
– Environment (Shell Brent Spa (lecture 1), or BP Horizon), or
– Labour rights (Truecost video (Lecture 1))
– Gender equality
o When tech start-up founder, Evan Thornley, told a room full of conference attendees about his
policy of recruiting women rather than men, he unleashed a firestorm. He hired women, he said,
because they were “still often relatively cheap compared to what we would’ve had to pay
someone less good of a different gender.” To illustrate the point he even showed a slide:
“Women: Like men, only cheaper”.
o Despite it being illegal to pay women less than men for the same work, it appears to be a nearly
universal problem affecting many industries.
(https://www.huffpost.com/entry/women-like-men-only-cheaper_b_593ff837e4b094fa859f1bd2)
CSR is about addressing these different interests and how to improve the impacts of business on society
to the benefit of both

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 Assessment Tasks 1: Individual Short Essay (Weight - 10%)

Assessment Tasks 1: Individual Short Essay - Understanding CSR (WIL

Component)
• Assessment description:
• You are required to write a short essay explaining what you think CSR is and how it can help both
business and society, including how it might help resolve conflicts between the two.
• The precise essay question for this assignment is as follows: “CSR can help both international
business and society, including when it comes to conflicts between the two”: Do you agree
with this statement? Why, or why not?
• As this is an essay you must write in full sentences - NO bullet points. Further guidance will be
provided in class and on Canvas
• You must use at least two peer-reviewed academic references (journal articles and academic
books) in addition to the core readings for the course. You can also use other sources of
information.
• Weight: 10%
• Assignment type: Individual essay
• Deadline: Sunday 16th August (end of Week 4)
• Word count: 1,000 words, +/- 10% (references excluded)
• Submission Instructions: Submission via Turnitin
• WIL: This essay is part of the WIL component of the course - it informs your work on the
Assessment 3 case study.
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 Assessment Tasks 1: Individual Short Essay (Weight - 10%)

Assessment Tasks 1: Individual Short Essay - Understanding CSR (WIL Component).

Essay question:
“CSR can help both international business and society, including when it comes to conflicts
between the two”: Do you agree with this statement? Why, or why not?

Suggested structure:
• A brief introduction (this can be one or two sentences)
• A definition of CSR, including an explanation of why you chose this definition
• How can CSR contribute to international business? (give examples)
• How can CSR help societies? (give examples)
• How might the interests of business and societies conflict (give examples)?
• Explain at least one way in which CSR might help resolve such conflicts (give examples), or the
reasons that you think it can’t
• Conclusion – here you should sum up your answer to the essay question

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Your study

• Listen to the lecture

• Do the readings
• Attend your tutorial – you will do work here that helps you with your assignments