Global business ethics is the study and analysis of how ethics and global business are connected. How we should treat each other and our organizations in global and local contexts is the topic of this course. Business ethics and corporate responsibility are inherent in global commerce. Commerce is about markets, and markets entail exchanges between people and groups of people. So commerce is about human relationships, and indeed, it could not be otherwise. One of the important challenges in global business is working out the extent of these obligations in the interrelationships between businesses and the particular local cultures in which that business operates. The ethical issues arising from these engagements, the kinds of values-based considerations out of which an organization negotiates with local concerns, and how an organization can be both an enabler of economic value-added while respecting cultural differences will be topics of this course. Upon successful completion of this course you will be able to: • Become morally sensitive to ethical dilemmas in global commerce • Identify ethical issues in global business • Master stakeholder analysis • Address issues from more than one point of view • Use a well-reasoned process by which to arrive at ethically-defensible decisions • Evaluate good and weak arguments • Defend your conclusions This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.
2-1.3: Stakeholder Theory
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Do curso por University of Illinois at Urbana-Champaign
Global Impact: Business Ethics
35 classificações
University of Illinois at Urbana-Champaign
35 classificações
Curso 6 de 7 em Specialization Global Challenges in Business
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Module 2: Stakeholder Theory: Bayer CropScience in India
Distinguish stakeholder theory from managerial shareholder theory. Be able to use stakeholder theory in the framework for moral reasoning. Apply the model to one case, e.g., Merck, BHP or the Oil Rig.
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Patricia WerhaneVisiting Professor
Department of Business Administration
In this lesson, we will explore stake holder theory in detail, and
contrast it to shareholder theory.
The idea that shareholders are the primary stakeholders
of the corporation for which all managers should act.
[MUSIC]
So before we analyze the Bayer Crop Science case further,
let's step back and look at the stakeholder theory as a theory.
Believe it or not this is old of course in 1970 Milton Friedman who
is a well known Nobel Prize economist, first argued that the social
responsibility of a company is to engage in activities that increase its profits.
He does have a proviso to that, that you can engage in whatever you
like to increase profits but within the rules of the game.
So you have to follow the law, open and
free competition without deception or fraud.
This is a famous famous quote and so people site Milton Friedman
as a reason why companies have no business doing anything but pursuing profits.
Now we saw in the Merc case, they ignored this,
they decided they weren't just in the business to pursue profits,
they were in the business of health, and that became their dominant mission.
And so they engaged in various projects, some of which make money and
some of which do not.
If you hold that managerial model,
you also see, are thinking hierarchically that you are shareholders,
a board, management and employees very hierarchically looked.
And then outside are the community, the customers,
the media, the government, activists, all those are affecting the company but
by enlarge is the central shareholders and board and management
that's controlling this company, and that gives us another way of looking at that.
Now, look at this slide for a moment, it's an inward focus,
right, the shareholders are in the center.
And what happens?
Just look this is completely not theoretical, but
think about it when you're looking at this slide your eye goes to the middle.
And you begin to think the shareholders are the center of the universe,
they're the most important stakeholder in this company.
And you can't help it because this slide focuses your attention that way.
Now, one of the things that comes out of this inward focus,
is the question of greed.
Of self interest of companies,
should companies only pursue their self interests.
And so in the next slide, I'm going to give
you a URL to return to an old, old movie.
Maybe some of you have seen it, called Wall Street in which Michael Douglas
is this greedy shareholder who goes in and takes over companies and
just decimates them, so that the shareholders make the money.
And he has this very famous speech, Greed is Good.
And the interesting part, two interesting parts about the speech,
one is that obviously the thesis that greed is good.
But this speech, came originally from an insider trader named Ivan Boesky,
who did so much illegal trading that he was put in jail.
But before he went to jail, he went to a shareholder meeting and
made this same argument, greed is good.
So the producer of this film, Oliver Stone,
basically did what we tell you students not to do,
he copied that speech and put it in the mouth of Michael Douglas.
Now, Ivan Boesky didn't sue him for that because he was in jail, but
whether was that ethical?
Yeah, well, probably not because he doesn't footnote that, but anyway.
So look up that and you'll be able to see the interesting and actually charming,
all though scary, greed is good speech.
So, that's one model, but there's another model, and
that is called stakeholder model.
What is the theory of stakeholder theory?
That business can be understood as a set of very complex relationships
between customers, shareholders, shareholders or stakeholders,
suppliers, employers, employers and employees, and the community.
So, stakeholder three wants to know how do these all interact to create value?
Because without those interactions the stakeholder model argues,
you can't create value, you can't create value just to hear about profits because
you have to have good employees.
You have to have good, think about Merc, you have to have good researchers,
you have to have customers who buy things.
You don't have customers who forget it, right?
Yes you have to have shareholders and owners, yes you have to have managers to
manage this, but you also have suppliers and you have to have good suppliers.
Because if you don't you get bad supplies and things aren't so good,
that's why Bayer Crop Science wants those seeds, that's a great supply for them.
So you see, there are all these complications so
business can't just be about profit,
it has to be about how all these stakeholders work together to create value.
And the value has to be for all of them otherwise it won't work.
If I treat my employees badly they're going to quit or
they're not going to work well they're going to say,
you know take all the sick days and you've seen that, you know that.
If I don't treat my customers well,
they're not going to buy my product, right, they're going to go someplace else.
If I don't treat my suppliers well, they're going to go so
they don't have to work with me, they go someplace else.
And I have to treat my shareholders well or
they will of course not help me support my company, so all of these are important.
So here is the basic shareholders we always talk about, owners of course,
customers, so a small company is just the owner, not the shareholder.
Customers or clients, employees, managers, suppliers, and of course
the community in which the company operates and those are all important.
So business then, we often talk about the natural environment as a shareholder.
Now natural environment isn't a person or a group of people or organization, right,
but nevertheless business depends on the ecosystem and
it affects the ecosystem as you know, it often hurts the ecosystem.
Sometimes it's very green and helps the ecosystem, so
that's a very important stakeholder, even though it's not a human stakeholder.
So perhaps, there's often been this debate between shareholder theory and
stakeholder theory, but maybe they all overlap in the end.
Maybe it is that in order to make profits I depend on all these other stakeholders.
And these other stakeholders, of course, depend on the company making money in
order for them to keep doing what they're doing.
So there's this sort of complete interaction and
interrelationships between all of these components,
this message is we can't forget any of them.
And in a company you have to run it so all of these matter,
because if you don't run it that way, you will suffer.
And that's what we'll see later in module four when we look at
Volkswagen who forgot about their customers.
So this is a very complex stakeholder map, I mean, you don't have to memorize it,
but it just shows how companies are so involved with so many people.
I mean, it's just astonishing, and so many organizations,
I mean it's just difficult business is difficult.
And even a little company with one owner, just a small company,
think about your little grocer, if you have a grocery near you.
Think about all the interactions that owner has to involve to buy the food
that the owner sells. Even if I have a little kiosk, where do I get my supply?
Very complex, even in little, tiny, tiny organizations, so big organizations,
they have work to do, this is complex, but now look again at this slide.
The firm is in the middle, and your eyes go to the middle, and
that affects your thinking and your decision making.
Because we tend to put what's in the middle as primary.
And that's all right, but we must be careful that the firm is not
the center of the universe, it's just one of thousands of firms.
Small firms, medium sized firms,
large firms, mom and pop firms, single owner firms.
So we have to be very careful about our thinking to remind ourselves
that firms are part of many political economic economies.
So, this is a standard stakeholder map, and I've put the Bayer in the center here.
And you can see that, but what happens if I put the farmers in the middle?
Does that affect your thinking?
I begin to take a few farmers into account and I don't forget them.
They become important and I remember about them because I had forgotten about them.
I'm worrying about the Crop Science and the child labor, all that's important but
these are also,
the Indian Farmers are also key to this case, and we might forget them.
Now, in the Bayer Crop Science case, let's look at the stakeholders and
do a little stakeholder analysis.
Who were the primary stakeholders in this case?
Well, I think we know, the Indian farmers, the children, Bayer Crop Science Itself.
The shareholders, Bayer as the company and
obviously the environment itself is important,
although they don't make as much of that in this case as they probably should.
But how are each affected?
It matters, it matters to those Indian farmers that they have this lease on
their Bayer Crop Science because they're very supportive of the farmers.
It matters that they have someone to harvest their food, but
it matters as those children go to school.
And that the rights of the children here, that are really at stake.
And of course Bayer is focusing on, they want the best cotton seeds but
if they only focus on that, which would be very profitable.
That would be a Milton Friedman perspective,
then they would forget about the children, and I'm not sure they will always
remember they are dealing with Indian farmers, who have rights as well.
[MUSIC]
So, think about another stakeholder map,
what happens if I put a child in the middle?
Does that affect your decision making?
I think it does, we forget, and then we see this little kid, and
that kid's been working in the fields, and suddenly, we've got issues here right?
We don't like that, we don't like the idea of five year olds,
six year olds, seven year olds working in the field, very uneasy about them.
[MUSIC]
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