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Corporate Governance Corporate Governance Stakeholders Firm Stakeholders Any individual or group who can influence or is influenced by the operations of a firm Types of Stakeholders Primary – participation and support required for survival of the firm Inside: Stockholders, Board of Directors, Managers, Employees, … Outside: Customers, Suppliers, Creditors, Competitors, Governments, Community, … Secondary – not directly involved in the activities of the firm but can have influence over its operations Media, Special Interests, Investment & Rating Firms, Unions, … Types of Stakeholders Organizational: unions, employees, managers, … Capital Market: shareholders, banks, brokers, rating services, … Product Market: customers, suppliers, franchises, distributors, … Environmental: government, special interests, media, … Stakeholder Analysis 1. Identify Specific Stakeholders Organizational Capital Market Product Market Environmental 2. Identify Stakeholder Interests Potential impact of the firm on the stakeholder 3. Identify Stakeholder Power and Influence Potential impact of the stakeholder on the firm 4. Prioritize Stakeholder Interests Rank stakeholders in terms of importance to the firm 1. Identify Stakeholder Management Actions taken to satisfy stakeholder needs Stakeholder Analysis Stakeholder Organizational …… Capital- market …….. Product-Market ……. Environmental ……. Interest Power Consequences Importance Stakeholder Management Stakeholder 1 Interest and Consequences Actions taken to address needs Assessment of continued support Stakeholder 2 . . . . . Ethical Decisions Individual Beliefs Institutional Norms Organizational Culture Ethics Background Major Approaches • Consequentialism: Actions and decision are judged by the outcomes they are expected to produce • Deontology: Actions themselves are judged as right or wrong regardless of expected outcomes Consequentialism – Utilitarian Perspective: Ethical actions and decisions are those that maximize the total utility produced by business practice – Justice Perspective: Ethical actions and decisions are those that promote equity, fairness, and impartiality in the distribution of the costs and benefits of business practice Deontology – Legal Perspective: Ethical actions and decisions are those that obey all laws related to business practice – Moral Rights: Ethical actions and decisions are those that uphold recognized human rights in business practice Encouraging Ethical Behaviors? • • • • • • Codes of Conduct Role Models Policies and Procedures Reward Systems Organizational Culture Selection and Training Ethical Dilemmas • Managers often must deal with ethical dilemmas – situations in which none of the available alternatives seems ethically acceptable – situations with conflicting ethical expectations • Key is to recognize when decisions involve ethical issues – Recognize situation – Analyze situation using a consistent framework – Determine best action