Business Ethics

Title: - Stakeholder perspectives on corporate ethics

PRAKRUTHI PUTTASWAMY
PES1UG21BB198
6D

Abstract

The management literature has promoted and defended the stakeholder theory on the grounds
of its normative validity, instrumental power, and descriptive accuracy. Despite their
connections, these three facets of the theory are very separate from one another; they entail
various kinds of arguments and supporting data and have various consequences. We look at
these three facets of the theory in this piece, provide a critical analysis, and incorporate
significant additions to the relevant literature for each. We come to the conclusion that the
normative foundation of stakeholder theory, which encompasses the contemporary theory of
property rights, is essential and that the three components of the theory are mutually
supportive.

Introduction

Stakeholder theory primarily examines the business from the viewpoints of its direct
stakeholders as well as the business itself. Stakeholder theory, which holds that a business
must act in the best interests of all of its stakeholders, shapes this viewpoint (Freeman, 1984).

Big corporate stakeholders frequently keep an eye on operations to make sure they abide by
established rules and laws. When a company is entering a new market, stakeholders like
consultants could potentially offer consulting services to help minimize compliance concerns.
Decisions made by other stakeholders that include a risk to compliance may be influenced by
a referendum or a vote against them.

Furthermore, they could also bring goodwill to the company by suggesting CSR (corporate
social responsibility) programs. Initiatives that companies undertake in host communities as a
component of environmental and social governance (ESG) are referred to as corporate social
responsibility (CSR). Voting by stakeholders is another way for them to express opposition to
corporate actions that harm the business environment.

Determining corporate objectives and creating plans to support them are the main
responsibilities of stakeholders. Also, in an effort to identify more effective techniques, these
stakeholders routinely assess company operations and strategy. Employee performance is
also accessed to make sure it matches growth goals. To support the company's long-term
expansion, stakeholders may also make investments in it.
Review of literature

1. This article provides a brief overview of stakeholder theory, clears up some widely
held misconceptions, explains the importance of examining stakeholder theory from a
variety of international perspectives and how this type of research will advance
management theory, and introduces the other articles in the special issue.

Design/methodology/approach – Some of the foundational ideas of stakeholder theory

are discussed, leading to arguments about the importance of the theory to management
research, especially in an international context.

Stakeholder theory is found to be a particularly useful perspective for addressing

some of the important issues in business from an international perspective. It offers an
opportunity to reinterpret a variety of concepts, models and phenomena across may
different disciplines.

Practical implications – The concepts explored in this article may be applied in many
contexts, domestically and internationally, and across business disciplines as diverse
as economics, public administration, finance, philosophy, marketing, law, and
management.

Originality/value – Research on stakeholder theory in an international context is both

lacking and sorely needed. This article and the others in this special issue aim to help
fill that void.

2. Stakeholder theory has gained currency in the business and society literature in recent
years in light of its practicality from the perspective of managers and scholars. In
accounting for the recent ascendancy of stakeholder theory, this article presents an
overview of two traditional conceptualizations of corporate social responsibility
(CSR) (Carroll: 1979, ‘A ThreeDimensional Conceptual Model of Corporate
Performance’, The Academy of Management Review 4(4), 497–505 and Wood: 1991,
‘Corporate Social Performance Revisited’, The Academy of Management Review
16(4), 691–717), highlighting their predominant inclination toward providing static
taxonomic CSR descriptions.

The research methodology is consistent with descriptive stakeholder theory, which

seeks to outline participants’ views of what the business organization is doing vis-a-
vis its stakeholders, as well as the mechanisms through which different views come
into being (Brickson, 2007). This descriptive stakeholder methodology will be
supplemented in turn by reference to the two other veins of stakeholder theory,
namely instrumental stakeholder theory and normative stakeholder theory. In the
framework of these three branches of stakeholder theory, the following research
hypotheses are derived and tested after being presented here in the context of the
corresponding CSR literature in which they are respectively anchored.
 3. Shareholder activism on CSR issues (particularly those focused on environmental and
social (“E&S”) issues) continues to rise, necessitating further engagement between
companies and their shareholders and other stakeholders. Institutional Shareholder
Services Inc. (“ISS”) recently reported that the 2013 proxy season (from January 1
through June 30, 2013) saw an increase in the number of E&S resolutions filed by
shareholders with US companies (395 filed in 2013 compared to 368 in 2012).
Average shareholder support for those resolutions also increased to 21.7% in 2013, up
from 18.6% in 2012, continuing the general upward trend of increasing shareholder
support for such issues.

 Shareholders—addressing the company’s business model and corporate governance,

including disclosing the role of the board in risk management, in sustainability
reporting and in evaluating CSR performance.
 Employees—addressing diversity, health and safety, training and mentoring,
employee relations, and wages and benefits.
 Customers—addressing customer service and privacy.
 Suppliers—addressing labor standards and whether suppliers are required to
implement their own CSR programs.

4. Stakeholder contact is becoming more widely acknowledged as a crucial element of

sustainable business models (SBMs), as it contributes significantly to the generation
and capture of sustainable value propositions. Nevertheless, the literature regarding
the function and possible impact of stakeholder contact has been dispersed and has
not been well scrutinized. In response, a thorough assessment of the literature was
done to get insight into the subject.

SBMs and stakeholder interaction are pertinent ideas in many different fields of study. As
a result, a wide range of research projects are available that may be connected to the goal
of the study. The study methodology of choice was a systematic literature review (SLR),
which is a thorough, transparent, and robust way to find relevant articles from a vast
number of publications and to analyze and evaluate the body of current information.

Despite the strengths of the systematic literature review as a research method, some
limitations should be noted. First, this study focused on stakeholder interaction in SBMs from
the perspective of individual organisations, but studies often have an overlapping focus
connecting collaborative and circular business models, which has not been explicitly
considered in this study.

5.
Findings:

1. Transparency: Transparent reporting of CSR activities is essential for maintaining trust and
credibility with stakeholders. Companies should disclose accurate information about their social and
environmental impact, including both successes and challenges.

2. Sincerity: Genuine commitment to addressing societal issues is crucial for ethical CSR. Companies
should avoid token gestures or "greenwashing" and instead demonstrate a sincere dedication to
making a positive difference in communities and the environment.

3. Accountability: Ethical CSR requires companies to take responsibility for the impact of their
actions, both positive and negative. They should be accountable to stakeholders and willing to assess
and address any harm caused by their operations.

4. Stakeholder Engagement: Involving stakeholders in decision-making processes ensures that CSR

initiatives align with the needs and priorities of the communities they serve. Ethical CSR involves
listening to and considering the perspectives of diverse stakeholders, including employees,
customers, investors, and the broader community.s

Suggestions:

1. Develop Clear Ethical Guidelines: Companies should establish clear ethical guidelines and
standards for CSR activities, outlining expectations for transparency, sincerity, accountability, and
stakeholder engagement.

2. Embed Ethics in Organizational Culture: Ethics should be embedded into the organizational
culture, with leadership setting the tone for ethical behavior and decision-making. Employees should
be encouraged and empowered to act ethically in their interactions with stakeholders.
3. Conduct Ethical Impact Assessments: Before implementing CSR initiatives, companies should
conduct ethical impact assessments to evaluate potential risks and benefits. This involves considering
the ethical implications of actions on various stakeholders and identifying ways to mitigate any
negative consequences.

4. Foster Collaboration and Learning: Collaboration with external stakeholders, such as NGOs,
government agencies, and industry partners, can enhance the ethical effectiveness of CSR initiatives.
Additionally, companies should prioritize ongoing learning and improvement, continuously
evaluating and refining their CSR practices based on feedback and outcomes.

5. Lead by Example: Companies can lead by example by demonstrating ethical behavior in their CSR
efforts. By prioritizing integrity, honesty, and social responsibility, companies can inspire trust and
confidence among stakeholders and set a positive example for others in the industry.

Overall, by adhering to ethical principles and integrating them into CSR strategies and practices,
companies can enhance their reputation, build stronger relationships with stakeholders, and
contribute to meaningful social and environmental change.

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