CHAP 3: STAKEHOLDERS AND CORPORATE SOCIAL RESPONSIBILITY (CSR)

1. Stakeholders
Stakeholder theory development

# Author (Year) Definition

1 Berle (1931) - All the powers given to a corporation are to be used to create benefits to the
interests of the shareholders.
- Argued that managers within a corporation should consider themselves
trustees and guardians of the investment made by the shareholders.

2 Dodd (1932) - Beside shareholders, corporations should recognize their obligations to the
community, employees and consumers.
- ​Argued that corporations are allowed to become legal entities because they
serve a purpose to the community, rather than just financial profit.

3 Friedman (1970) - The social responsibility of business is to increase its profit.

- In a free market, executives of the company need to be considered as the
employees of the shareholders.
- The only social responsibility that a manager has is to ensure that the
company’s resources are optimized to enhance the level of profitability of the
firm.

4 Freeman (1984) - A stakeholder was any individual or group that can impact or be impacted by
the actions of the firm
- Definition encompasses any individual or group that has a vested interest in
the operations of the firm.
 The stakeholder concept

Major stakeholders Secondary stakeholders

- Company owner or stockholder - The Government

- Employee - Other consumer
- Customer - The media
- Supplier - Competitor
- NGO

Stakeholder impact on organization

- Stakeholders establish expectations (explicit or implicit) about the corporate
performance.
- Stakeholders experience the effects of corporate behaviors.
- Stakeholders evaluate the effects of corporate behaviors on their interests or
reconcile the effects of those behaviors with their expectations.
- Stakeholders act upon their interests, expectations, experience, and
evaluations.

2. Corporate social responsibility

Definition
- CSR: The obligation companies have to develop and implement courses of
action that aid in social issues that impact society.

Components of CSR

Economic Legal Responsibility Ethical Charitable

Responsibilities responsibilities responsibilities

Responsibilit Firm has a The law and Change over time Those responsibilities
y responsibility to use regulations that all because they are in which society does
the resources firms are expected to based on not have a clear
available to produce abide by as they expectations of message to present
 goods and services perform their daily society. to businesses as to
for society functions. what their courses of
action should be.
Left in the hands of
managers to make
the proper
judgements.

Insight Purpose of firms Abide by law, proper Society expects They society hopes a
behavior company to be fair, company make
not harmful to its contributions,
citizens. improving the quality
of life

Summary Be profitable Obey the law Be ethical Be a good citizen