COMM1100 Business Decision Making

Stakeholders and Corporate

Responsibility

Associate Professor Tracy Wilcox

General housekeeping:
• Please switch your microphone to Mute to avoid disruption to the class
• If you need subtitles, turn on live captioning via the More Actions section in Teams
• Use Slido to ask questions or make a comment, or raise your 'virtual' hand
• If you have poor internet, turn off your video
• Wait for your lecturer to start
Last week:
• Stakeholder, Microeconomic and Legal perspectives on
Organisations -- and their goals -- lead to different priorities
and concerns being more ‘visible’..
• The identity of an organisation is socially constructed and
based on relationships
• All of this shapes the decisions we see as important and the
decisions we ultimately make
This week:
• The week we consider the question:
What does it mean to make responsible decisions?
• We look into how a consideration of an organisation’s
stakeholders and their relationships leads to some new
questions and new possibilities.
• As we work through today’s class, please use the
SLIDO link to post and vote on questions!
1. Download Slido App
2. Go to this link: https://app.sli.do/event/zjryelrn
3. Enter Code #COM1100WK2
Key concepts:
• Spheres of human activity
• Interdependence
• Embeddedness
• Stakeholders
• Legitimacy
• Intended & unintended consequences
• Responsibility
• Rights vs. interests
Stakeholder view of business
• Alternative to the narrow ‘shareholder/ stockholder’ views of
firms – maximizing shareholder value as overarching
objective.
• A ‘stakeholder view’ is associated with broader view of
corporate responsibility
• The unit of analysis for Business becomes “a set of
Stakeholder Relationships”, rather than discrete economic
transactions (Freeman et. al, 2020, p. 77)
 • Who are the shareholders/ owners of a firm anyway?
• What are their expectations?

Image © Andrew Weldon

Understanding Stakeholders
• Stakeholders are those who can affect or be
affected by an organisation’s decisions, policies or
practices.
• A stake is a claim on, or investment in, an
organisation, which brings with it exposure to risk
• Stakeholders may be past, present or future-
oriented Edward Freeman

• future generations as inheritors (e.g. The purpose of business is to

• past employees as victims (e.g., James Hardie create and sustain value by
Group) working with its stakeholders.
(Freeman, 2020)
Macro View of Stakeholder Ecosystem
Investors/
Governments/ What problem are
Shareholders/ Employees Customers
Regulators you trying to solve?
Competitors Owners

Suppliers
Managers

Organisation
Creditors
Future
Generations
Local
Labour/ Trade Communities ??? Who
Unions else?
Civil Society /
Natural Society/ ‘The Sub-
Industry
environment general public’ contractors
Groups
Core stakeholders
• Shareholders/owners
• Employees
• Customers What are their:
• Rights?
• Suppliers • Interests?
• Motivations?
• Local Communities What do they value?
• Societies
• Regulators

(Matten and Moon, 2020)

Rights vs interests
• Rights are specifications of important ways human beings
(or other species) are to be treated
• Rights can be Negative (e.g., right not to be harmed), or
Positive (e.g.equal opportunity, transparent & truthful
information)
• Rights are not without limits (e.g., ‘free speech’)
• Legal vs moral rights “every person anywhere in
the world, irrespective of
• Rights are not the same as interests citizenship or territorial
legislation, has some basic
• Interests are the things that people wish to have rights, which others should
satisfied; what they value respect” (Amartya Sen,
2004)

10
Why stakeholders?
Business Case:
• Failing to acknowledge stakeholder
concerns can lead to loss of reputation, trust
& legitimacy, & even the right to operate.
• Can you think of examples where this
occurred?
• We will come to the ‘Ethical Case’ next
Corporate responsibility
• Corporate Responsibility is ‘a different kind of
logic, one in which attention to the stakeholder,
society, and the environment is necessary in order
to retain …. [a] license to operate.’ (Waddock
2008, p. 89)
• ‘Definitions abound!’ (Crane, Matten and Spence,
2014)
 Why corporate responsibility?
• Business-society-natural environment relationships; ripple
effect of impact…
• Economic and political power of businesses – and
commensurate moral imperatives
• Stakeholder rights have corresponding duties
• Public perceptions of business practices
• Legitimacy and social license to operate,
• Consumer and investor preferences
• Shareholder activism
• Regulation & Multilateral guidelines reflecting society’s
concerns
• Costs of criminal & civil liability

Images: Deepwater horizon: https://www.nbcnews.com/science/science-news/ten-years-after-deepwater-disaster-scientists-activists-worry-no-lessons-n1187741

BP Shareholder protest: https://econews.com.au/61090/bp-shareholders-overwhelmingly-adopt-climate-resolution-amid-protests/.
 Economic and political power
The world’s top 100 economic entities: 31 countries; 69 corporations

Source: https://Netivist.org; Lammarino, 2016

Who is more powerful: States or Corporations?
Revenue (USD Bn) Rank Entity Revenue (USD Bn)
Entity
3,336, 13 State Grid - China 348,9
1 United States
14 Netherlands 344,8
2 China 2,591,
1,678, 15 Sinopec Group - China 326,9
3 Japan
1,598, 16 China National Petroleum 326,0
4 Germany
17 Korea, South 318,0
5 France 1,446,
984,4 18 Royal Dutch Shell – Neth/ UK 311,9
6 United Kingdom
19 Mexico 292,8
7 Italy 884,4
20 Sweden 274,8
8 Brazil 819,4
623,7 21 Toyota Motor -- Japan 265,1
9 Canada
22 Volkswagen -- Germany 260,0
10 Walmart - USA 500,3
23 Russia 253,9
11 Spain 492,4
24 Belgium 249,7
12 Australia 461,0
Source: Babic, Heemskeerk & Fichtner,(2018)
25 BP – United Kingdom 244,6
Economic and political power?
• Are Transnational Corporations
currently the most powerful institutions
in modern society”?
• Do they resemble the colonial powers
of old?
• Why do you think this belief has arisen?
The Corporation as a Political Actor
• Not just about adhering to the law, how do corporations shape
the law?
• Corporations are not “neutral” or “apolitical” institutions (e.g.
alcohol industry, financial services firms, food industry (see the work of
Mialon and colleagues)
• Lobbying and Campaign contributions – to what extent are
corporate interests aligned? E.g. tax policy, emissions targets.
• The commoditisation of personal information e.g. Facebook
customer data used by Cambridge Analytica to undermine democratic
elections (e.g. USA 2016, ‘Brexit’).
 So what?

https://www.youtube.com/watch?v=Y2kenVSIV8U
Image: https://fineartamerica.com/featured/29-french-revolution-1789-granger.html
https://www.youtube.com/watch?v=Y2kenVSIV8U
Forms of Duty/Responsibility
(Margolis and Walsh, 2003)

1. Duty to respond to situations or conditions to which a

company’s actions have contributed
(e.g. dangerous working conditions, environmental
damage)
2. Duty when an organisation benefits from but does
not cause, conditions which are unjust or harmful
(e.g. child labour in unregulated economies)
3. Duty of ‘beneficence’ – to aid others when in a position to
do so, even if the organisation is not directly responsible
for the hardship or harm experienced
(e.g. employing and training refugees)
 Ethical (moral) case
• Inherent duties towards stakeholders
• Corporations act as moral agents through the
decisions and actions of their managers. Just as
they can make ‘rational’ economic or strategic
decisions so they also make ethical decisions.
(Wilcox, 2006)
• Ethicists see “necessary and feasible limitations
on the discretion to act” (Scanlon, 2008)
• Social contracts – implicit contracts and risks
• People should not be treated merely as
means to an end (used for instrumental
purposes)
• Endpoint (‘telos’) == human flourishing
 purpose
Core characteristics of CR
(adapted from Crane, Matten & Spence 2014)

Voluntary
It’s not how an
organisation
Beyond Managing
spends its money ‘externalities’
Philanthropy
that determines

CR
whether it is
responsible, it’s
how it makes its
money
Multiple
Practices & stakeholder
Values
orientation
Social,
Environ-
mental &
Economic
Alignment
Business case for CR - doing well by doing
good
• Rising consumer expectations ,source of loyalty – 66% would
switch from a product they typically buy, to a new product from a
Purpose-driven company. (91% for Millennials (Cone/Porter 2018)
• Employee engagement – Greater satisfaction, commitment and
reduced turnover. 64% of Millennials won’t take a job from a
company that doesn’t have strong CSR practices (Cone
Communications, 2016)
• Reduced costs – inputs, legal costs (civil and criminal liabilities)
impact of boycotts.
• Greater Social Capital and scope for Cross-sector
partnerships – Alliances with suppliers, NGOs and Government.
 Changing Consumption Patterns

Nielsen, 2014, 2018

Shaping CR
Stakeholder inclusion

• Stakeholders are concrete, not abstract

• Practical methods for dialogue and participation in
decision-making
• Recognition of power asymmetries
• Empathic understanding
• Multi-stakeholder initiatives

Image: https://www.lucidchart.com/blog/what-is-dialogue-mapping
Business Decisions: What if there are
interdependencies? conflicts ?
• Business decisions to reflect the ecosystem of relationships rather
than ‘trying to maximise a particular variable in a transaction’.
• To understand an organisation is to ‘know how these relationships work’.
• Who is
• harmed by?
• benefits from? this decision?
• Whose rights are enabled and whose values are realised by this
decision? Whose are not?
• What kind of organisation will we become if we make this decision?
• What relationships will be strengthened or weakened by this decision?
See Freeman et al, 2020
In summary
• Organisations are embedded in a network of relationships
within social, political economic and natural systems
• Looking at business decisions from a Corporate Responsibility
and Stakeholder perspective, we can see:
New relationships
New questions
New possibilities
• We start to consider the consequences of business decisions,
whether intended or unintended, and the responsibilities
organisations have to their stakeholders
Next week:
• We move to the ECONOMIC sphere, and consider:
• The 'Why' of Economic Possibilities: Why does an
organisation supply what they do, in the quantities that
they do?
• Where does the money come from: What are the two
basic options to raise finance?
• Why is it not always a great idea to realise the full
economic possibilities (think profit maximisation)?
References
Babic, M., Fichtner, J., & Heemskerk, E. (2017). States versus corporations: Rethinking the power of business in international politics. The
International Spectator, 52(4), 20-43.
Babic M., Heemskeerk E., Fichtner J. (2018). Who is more powerful – states or corporations? The Conversation. July 11, 2018
Crane, A., Matten, D., Spence, L. (2014) Corporate Social Responsibility. Routledge, London.
Freeman, R. E., Parmar, B. L., & Martin, K. (2020). The Power of And: Responsible business without trade-offs. Columbia University Press,
New York.
International Standards Organization (ISO) (2010). Guidance on Social Responsibility. ISO, Geneva
Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly,
48(2), 268-305.
Matten, D., & Moon, J. (2020). Reflections on the 2018 decade award: The meaning and dynamics of corporate social responsibility. Academy
of Management Review, 45(1), 7-28.
Mialon, M., & McCambridge, J. (2018). Alcohol industry CSR initiatives and harmful drinking: a systematic review. The European Journal of
Public Health, 28(4), 664-673.
Mialon, M., & Mialon, J. (2018). Analysis of corporate political activity strategies of the food industry. Public Health Nutrition, 21(18), 3407-3421.
Nielsen IQ, (2014) Global Survey on Corporate Social Responsibility. https://nielseniq.com/global/en/insights/
Nielsen IQ. (2018) The Database: What Sustainability Means Today. Podcast Episode 17,
https://www.nielsen.com/us/en/insights/podcast/2018/what-sustainability-means-today/
Scanlon, T. M. (2009) Rights and Interests, in K. Basu and R. Kanbur (Eds), Arguments for a Better World: Essays in Honor of Amartya Sen.
Oxford University Press, Oxford, 68-79
Sen, A. (2004). Elements of a theory of human rights. Philosophy & Public Affairs, 32(4), 315-356.
Waddock, S. (2008). Building a new institutional infrastructure for corporate responsibility. Academy of Management Perspectives, 22(3), 87-
108.
Wilcox, T. (2006). Human resource development as an element of corporate social responsibility. Asia Pacific Journal of Human Resources,
44(2), 184-196.
Thank you
If you have any questions about the
course, please contact the Course
Coordinator.

The lecture recording will be made

available in your Moodle course site.

© The New Yorker

Contact details:
Course Coordinator: Scott French, comm1100@unsw.edu.au

Course site:
https://moodle.telt.unsw.edu.au/course/view.php?id=56913