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If you were a corporation who would you pay
attention to?
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Milton Friedman’s Stockholder Model
“The Social Responsibility of Business is to Maximize Profits” (1971)
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How's That Shareholdery-Valuey Stuff Working Out for Ya?
The purpose of a corporation is to maximize shareholder wealth. And a corporation's board of directors' chief fiduciary responsibility is to shareholders.
These are plain and simple facts — and have been so forever. Right?
No, and no, actually.
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The Stakeholder Model
Appeals to utilitarian considerations of overall well-being + individual rights
Requires management to achieve balance
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Who are stakeholders?
People and groups that affect or can be affected by an organization’s decisions, policies, and operations
Benefits v. risks
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Primary + Secondary
Primary stakeholders are critical to company’s existence and activities
Secondary stakeholders are those people/groups that are affected directly or indirectly by a company’s primary activities and decisions
•Secondary DOES NOT = less important
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Corporation
Stockholders
CustomersCustomers
EmployeesEmployeesCommunitiesCommunities
GovernmentsGovernments
EducationalInstitutionsEducationalInstitutions
ThePoorThePoor
FutureGenerationsFuture
Generations
Earth’sBiosphereEarth’sBiosphere
ReligiousGroupsReligiousGroups
PoliticalParties
PoliticalParties CreditorsCreditors
PoliticalInterestGroups
PoliticalInterestGroups
TradeAssociationsTrade
Associations
SuppliersSuppliers
MediaMedia
CompetitorsCompetitors
UnionsUnions
PrimaryStakeholders
SecondaryStakeholders
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Prioritize your stakeholders
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The Stakeholder Paradox
An ethical problem will still exist whether or not management takes a
strategic or multi-fiduciary position.
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Some Problems and Concerns
Institutionalizing/Implementing
Conflicts between stakeholder groups
Efficiency
Turns the regulation of the market excessively inward
Not practical
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But…
It helps rule out alternatives and can be tested in the marketplace.
Maybe it is practical enough?
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For next class
Read Vermilion Iron Mining case Take assessment Interview questions due by 10pm