LEARNING OUTCOME/COMPETENCIES

The learners…
 Suggest ways to enhance employer-employee relationship and encourage just and fair business policies
and practices such as recruitment, promotion, retention, marketing and advertising, intellectual
property rights, sources and uses of funds, and the like.
 Define the stakeholders
 Advocate honest policies and practices in all aspects of business operations

MODULE 10: Stakeholder Theory – A comprehensive approach to Corporate Social

Responsibility
I. Class Activity
Direction: Kindly write your answer on a separate paper. Kindly put your Name, year and block, Subject, Module #
and Date.

1. Research and read Caritas In Veritate, n. 40. Talks about Business Management. Write a reaction paper at
least 100 words.

II. Instruction on the Proper use of this module:

1. Follow closely the instruction in every activity.
2. Be honest in answering and checking your exercises.
3. Answer the pre-test before going over the materials. This is to find out what you already know.
4. Answer the exercises encountered at the end of every lesson.
5. Review the lesson that you think you failed to understand.
6. Seek assistance from your teacher if you need help.

III. Introduction
In the last few years, the corporate world has come under increasing pressure to behave in an ethically
responsible manner. In particular, recent accountability failures have led to bankruptcies and restatements of financial
statements that have harmed countless shareholders, employees, pensioners, and other stakeholders. This concept, in
the language of Socially Responsible Investment (SRI) and Corporate Social Performance (CSP), has come to be
subsumed within the term sustainable development, which is “development that meets the needs of the present
without sacrificing the right of future generations to fulfill their needs.

Definition of Stakeholder

It should be clear by now that companies have obligations toward society, people and system in general, both inside and
outside the organization. Thus, company managers should exert effort in incorporating social and environmental
preoccupation into the management of the firm. These actors (both inside and outside the organization) are called
stakeholder.

The stake concept is originated from the word stake (interest) it stem from a deliberate will to indicate that other parties
have an interest in the enterprise.

The development of the term stakeholder began in the 1960’s with the research carried out by Ansoff (1968), who
considered that an enterprise is obliged to adjust its objective to balance out the satisfaction of stakeholders.

In 1963, the Stanford Research Institute introduced the original definition of stakeholders by designating the group that
are indispensable to the organization’s survival. For survival by qualifying stakeholders as:

1. The groups that depend on the company to achieve their own goals
2. The company depends on its groups to guarantee its own existence.
Company Stakeholders

The responsibility principle state that “Most people most of the time, want to and do accept responsibility for the effects of their actions on the
others”. People engaged in value creation and trade are responsible precisely to “those groups and individuals who can affect or be affected by their
actions.” That is, the stakeholders.

Sometimes ranking, this ranking is refined further by distinguishing primary stakeholders (whose participation is required for the company’s
survival) and secondary stakeholder (whose relationship is not considered as vital for the company). Other works also make a distinction between
voluntary and involuntary stakeholders, which is based primarily on the notion of risk.

a. Voluntary Stakeholders – are taking risk by investing a form of capital in the business and thereby contributing to the creation of value.
b. Involuntary Stakeholders – they expose themselves to the consequences of the company’s activities in seeking to reduce the negative
impact that its actions may have on its well-being.

Challenges in CSR

CSR is of pressing importance as it significantly influences the sort of lives we will lead in the future. Furthermore, the distinctive nature of
entrepreneurial action leads to a distinctive set of ethical problems and ethical obligations. When the ethics of corporations is not properly and
sufficiently discussed, then sustainability could mean anything from “exploit as much as desired without infringing on future ability to exploit as
much as desired” to “exploit as little as necessary to maintain a meaningful life”. It is widely accepted today that true sustainability includes valuing
ecosystem health, human needs, economic development, and social justice.

What is Stakeholder Theory?

Stakeholder theory is fundamentally about how business works at its best and how it could work. Stakeholder theory is about value creation, trade,
and managing a business effectively. Effective can be seen as “create as much value as possible.” Stake holder theory does not mean that
representatives of these groups must sit on governing boards of the firm, nor does it mean that shareholder (we prefer “financiers” as a more inclusive
term) have no rights.

They have tried to use the idea to address issues such as “corporate social responsibility,” “corporate legitimacy,” “theory of the firm,” and even
macro-societal issues such as “building the good society” (Freeman et al., 2010)

Stakeholder Approach to Corporate Social Responsibility (CSR)

Following the stakeholder theory, a socially responsible firm requires simultaneous attention to the legitimate interest of all appropriate stakeholder
and has to balance such a multiplicity of interest and not only the interest of the firm’s stockholders.

In order to make stakeholder theory more aligned with the ideas of justice, fairness, and human freedom, Freeman and Philips (2002) proposed
the Principle of Stakeholder Responsibility, which says that parties to an agreement must be compensated, or anew agreement must be
negotiated with all of those parties who are affected.

IV. WHAT CAN I DO?

1. Research and enumerate the 30 companies that made up the PSEi (PSE Composite Index)
2. Answer the self-assessment activity
Answer the following questions:
a.When you enter a store to buy
clothes, has it ever occurred to
you that you are a stakeholder
in that clothing business? If
so, why?
b. Based on the reading
beside, the stakeholder theory
tells us that we are a
stakeholder in every business
that produces the food we eat,
that creates the clothes we
wear, that renders the services
we benefit from, etc. Write
down a few resolutions to take
more seriously your role as
stakeholder in those
businesses by listing down the
actions you will take when
 you realize that the business producing the goods and services you purchase has been abusive or otherwise neglectful of its
duties.

LEARNING OUTCOME/COMPETENCIES
The learners…
 Explain the importance of establishing and sustaining business enterprises as source of job
opportunities and financial freedom
 Encourage employees to play active roles as decision makers in the business enterprise
 Suggest innovative ways of developing new products and introducing

MODULE 11: Toward a New Theory of the Firm – Humanizing the Firm and the Management
Profession

I. Instruction on the Proper use of this module:

1. Follow closely the instruction in every activity.
2. Be honest in answering and checking your exercises.
3. Answer the pre-test before going over the materials. This is to find out what you already know.
4. Answer the exercises encountered at the end of every lesson.
5. Review the lesson that you think you failed to understand.
6. Seek assistance from your teacher if you need help.

II. Introduction
In the last few years, the corporate world has come under increasing pressure to behave in an
ethically responsible manner. In particular, recent accountability failures have led to bankruptcies and
restatements of financial statements that have harmed countless shareholders, employees, pensioners, and
other stakeholders. This concept, in the language of Socially Responsible Investment (SRI) and Corporate
Social Performance (CSP), has come to be subsumed within the term sustainable development, which is
“development that meets the needs of the present without sacrificing the right of future generations to fulfill
their needs.

Neo-Classical Theory of the Firm

“Our highest priority going forward is to fix our broken political system. Short of that, there is no viable long
term solution to our badly warped economy.”
- Alan Greenspan, “ The Map and the Territory
The Humanistic Approach: Human Persons as the Most Important Stakeholders

Management Theory and practice are facing unprecedented challenges. The lack of sustainability, increasing
inequity, and the continuous decline in societal trust pose of threat to “business as usual.”
“People” is one of the domains that should be sustained in inclusive and sustainable enterprise. The
businessman has to produce social cohesion, which refers to fulfilling individual and community needs.
It has been shown that this humanistic paradigm provides the foundations for more sustainable business
practice, in the following ways:
1. The companies are steadfastly purpose-driven;
 2. Humanistic management styles as implemented in specific firms aim to promote human development,
which includes psychology, physical, social, and financial dimension; and
3. Managers in those firms are “servant leaders” and regard themselves as stewards for the greater good.
A New Theory of the Firm for the 21st Century
“ The Vocation of the Business Leader”
“ Theory of Human Actin in Organizations” Perez Lopez (1991)
Viewing the Firm from a Virtue Theory Lens
Humanistic Approach to business and management, that is, a managerial approach whose outlook emphasizes
common human needs and is oriented to the development of human virtue, in all its forms, to its fullest extent.

III. WHAT CAN I DO?

The lesson mentioned humanistic management as a new approach to management whereby human
dignity and human rights are not neglected when business managers run their organizations. A study has
come up with the so-called Human Quality Treatment (HQT) model which establishes what treatment of
humans in organizations which needs to be considered:

1. Maltreatment (blatant injustice through abuse of power or mistreatment)

2. Indifference (disrespectful treatment through lack of recognition of people’s personhood and concern)
3. Justice (respect for persons and their rights)
4. Care (concern for people’s legitimate interests and support for them in resolving their problems)
5. Development (favoring human flourishing, mutual esteem, and friendship-based reciprocity)

Answer the following questions briefly:

1. Describe 3 (three) situations where human resources in the organization are mistreated or treated with
indifference or treated unjustly.
2. List down a few resolutions so that, when you become your won company’s manager, you will treat
humans in the organization with greater respect, dignity, justice, and care.

SELF ASSESSMENT

The Humanistic Management Center advocates a paradigm shift away from economistic views on
market activities toward a humanistic approach. To move from criticism of the status quo toward a fruitful
discourse on alternatives, the Center has embarked upon research and workshops on stress management. The
Center has explored how stay sane and healthy at work by keeping control of our cortisol. Cortisol is the stress
hormone and high levels of it can have a serious impact on our well-being. The potential damage to our hearts,
immune systems, blood pressure, and emotional well-being are real and significant. Most people in the
workplace are under pressure – perhaps due to deadlines or performance expectations or excessive workloads –
and these stresses have a detrimental effect on us. Learning how to balance and control our cortisol levels is key
to a healthier and happier professional life.

Answer the following questions briefly:

1. Do you experience stress in school? What do you think are the causes of such stress?
 2. Do you believe that happiness in the workplace is a very important objective? Why or why not?
3. Do you believe that stress reduction or management and living a healthy life should be part of the human
development efforts in any business organization? If so, mention a few tips or practices that you can introduce
into your company when you become owner or general manager.

LEARNING OUTCOME/COMPETENCIES
The learners…
 Explain the importance of establishing and sustaining business enterprises as source of job
opportunities and financial freedom
 Encourage employees to play active roles as decision makers in the business enterprise
 Suggest innovative ways of developing new products and introducing

MODULE 12: Toward a New Theory of the Firm – Humanizing the Firm and the Management
Profession

I. Instruction on the Proper use of this module:

1. Follow closely the instruction in every activity.
2. Be honest in answering and checking your exercises.
3. Answer the pre-test before going over the materials. This is to find out what you already know.
4. Answer the exercises encountered at the end of every lesson.
5. Review the lesson that you think you failed to understand.
6. Seek assistance from your teacher if you need help.

II. Introduction
In the last few years, the corporate world has come under increasing pressure to behave in an
ethically responsible manner. In particular, recent accountability failures have led to bankruptcies and
restatements of financial statements that have harmed countless shareholders, employees, pensioners, and
other stakeholders. This concept, in the language of Socially Responsible Investment (SRI) and Corporate
Social Performance (CSP), has come to be subsumed within the term sustainable development, which is
“development that meets the needs of the present without sacrificing the right of future generations to fulfill
their needs.

Socially Responsible Investment (SRI)

The SRI movement can be said to have taken off in 1970, when the first shareholder resolutions were field against
companies investing or working under the apartheid regime in South Africa.

What is Ethical Banking?

Ethical banks’ very missing is to bridge social opportunity into sustainable reality innovatively, effectively, and
efficiently, with the specification that ethical business and values are inherently embedded in the ideology, principle,
standards, and objectives of the banking organization.

What are Economy of Communion Enterprises?

The Focolare Movement is a new ecclesial community, which has been present in Catholic church since the 1940s and in
other Christian traditions since the 1950s. The specific aim of the movement is to contribute toward the fulfilment of
Christ’s prayer “May they all be one” (John 17:21) through working for greater social and spiritual integration, or
“communion”.

The most recent development in the Focolare’s economic vision emerged in1991 and is known as the Economy of
Communion.
The general ideas of the Economy of Communion (EoC) project were very positively received, including in the
Philippines, where Bangko Kabayan is flourishing as an EoC bank. Ms. Teresa (Tess) Ganzon met the Focolare
movement in 1968 and has since been an active member.

What is the Impact Investing?

Is “making money while earning” or serving “serving while earning”. Its other synonyms are sustainable investing and
environmental, social, and governance (ESG) investing.

Mission-Related Investing

MRI is a term associated with foundations and involves seeking out investments that offer market-like returns and also
provide for social, environmental, or educational impact, thus allowing foundations to better align their investments with
their stated mission.

III. WHAT CAN I DO?

Access the given links: http://www.uniqclasses.com/chapter-14-financial-inclusion/;
http://www.bankexamstoday.com/2015/08/banking-awareness-quiz-part-14.html;
http://www.gktoday.in/quiz-211-banking-financial-awareness/; http://quiz.thefullwiki.org/Microfinance;
https://quizlet.com/97506236/test, to be able to answer the test questions below:

_______1. Financial Inclusion
_______2. Grameen Bank
economy
bank reserves
surpluses, and even from
Natural resources.
_______3. Inclusive Business
Advantage
_______4. Microfinance
Development,
10, 1986 by a
social development
services.
_______5. Inspired Finance
income
income
_______6. CARD Bank, Inc.
a. It demonstrates how modern microfinance traces its roots various
religious traditions, exploring the tension between charity and
self-reliance in those traditions.
b. Pools of money derived from a company’s reserves, which are set
aside for investment purposes that will benefit the country’s
and citizens. The funding for this comes from central
that accumulate as a result of budget and trade
revenue generated from the exports of
c. It is a business concept first introduced in Harvard Business Review
article Strategy & Society: The Link between Competitive
And Corporate Social Responsibility.
d. It traces its origins to the Center for Agriculture and Rural
Inc. (CARD, Inc.) which was organized on December
group of 15 rural development practitioners as a
foundation through responsible financial
e. A type of banking service that is provided to unemployed or low-
Individuals or groups who would otherwise have no other means of
gaining financial services. Ultimately, its goal is to give low
people an opportunity to self-sufficient by providing a means of saving
money, borrowing money, and insurance.
f. It is universal access, at a reasonable cost, to a wide range of financial
services, provided by a variety of sound, and sustainable institutions.
_______7. Creating Shared g. It refers to the collective value of all “social networks” and the
inclination
Value (CSV) that arise from these networks to do things for each other.
_______8. Sovereign wealth h. It calls for additional focus and innovation in the way companies do
funds business. It involves creating new forms of employment, new
markets,
and affordable products and services.
_______9. Social Capital i. Fruit of an action research project to examine the possibility of
designing credit delivery system to provide banking services targeted at the
rural poor.

Business Ethics and Social Responsibility by Aliza Racelis