Chapter 2:

Stakeholder Relationships,
Social Responsibility,
and Corporate Governance

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Motivations of doing business?

• Maximize Profits?
• Long-terms development?
• Contribution to society?
• Satisfy customers?
 Home work 1
What is business ethics? How responsible business make
sense?
28/02/2024
Why Ethical Business make
Business senses ($)

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Ethical Business makes sense!
• D:\CECI\RESPONSIBLE BUSINESS\SAS.VOB
Increase profit
Down cost savings
taxes
Good quality products and services
Reduce health issues
Environment-friendly
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Business and stakeholders

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 Stakeholders’ different desires/needs
Internal stakeholders
• Owners: Conflict desires/needs
– Hold significant shares of the firm
– Have a significant role in strategy
– Often make substantial decisions regarding both internal and external
stakeholders.

• Managers
– Play a substantial role in determining the strategy of the organization
– Have a significant voice in operational decisions.
– Accountable for the decisions made, and act as a point of contact between
shareholders, the board of directors, and the organization itself.

• Employees
– Have significant financial and time investments in the organization
– Carry out the strategy, tactics, and operations of the organization 8
 Stakeholders’ different desires/needs
External stakeholders
• Customers
– Consume goods and services → profits for the business

• Suppliers
– Supply inputs and create values to the business
– Timely payments, shipments, communication, and operational processes are key to maintaining a strong
relationship with this stakeholder group

• Local community
– Good: Providing tax money, local access to unique goods and services, jobs, and community
development programs.
– Bad: Increasing traffic, creating pollution, hurting small businesses, and altering real estate prices.

• Government
– Tax businesses.
– Provide regulatory oversight, ensuring that accounting procedures, ethical practices, and legal concerns
are being handled responsibly by business representatives.
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• Broader Society
Traditional Business Ethics
Approach

- Ultimate objective: Maximize Profit/Well-

being of shareholders
- Management of stakeholders
 Minimize negative influence on Business
 Practice management for shareholders benefit, treat
others depend on their power

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 What is Responsible Business?

Responsible Business Approach

- Ultimate objective: Fulfill Organization objectives ($) while well-being of
other stakeholders
- Responsible for stakeholders
 Well-being of all stakeholders is the Ultimate objective to run Business
 Stakeholder Management Practice – Regardless of stakeholder power

Employee Happy → Customer Happy → Shareholder happy !

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 Why Responsible Business make
Business senses ($)

Increase profit
savings
Down cost taxes
Good quality products and
Reduce health
services
issues
Environment-friendly 12
 Exercise
• Suppose you are running a business firm that exports bananas. Your
competitive advantage is low cost. ​
• You are planting bananas in a poor, mountainous area. The minimum wage of the region
is 3 million VND/month/person. Most people in the area are ethnic minority who
normally earn less than 2 million VND/month/person on their household farms. You are
considering hiring local people to work on your farms.​
• If you follow traditional business ethics approach, what would you do? ​
• If you follow responsible business approach, what would you do?​

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Stakeholders’
rights satisfied!

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 Shareholder’s rights
• Shareholders are the owner of the company with limited liability. They have various rights, along with
obligations.

• Shareholder agreement: How the company will be operated, what is the objective of the company,
how the shareholder’s rights will be protected, how they can sell their shares, or other things that are related to the
shareholder are mentioned in the shareholder agreement.
1. Right to Participate in Profit
2. Voting Rights
3. Right to Inspect Books & Records of Company
4. Right to Transfer Ownership
5. Liability Limited by Shares
6. Right to Claim During Liquidation
7. Right Issue
8. Right to Sue for Wrongful Acts

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 How a business responsible for
Shareholders?

1. To ensure safety of investment.

2. To provide a fair and regular dividend or interest.
3. Growth of the business should be planned.
4. There must be effective communication.
5. It must utilize resources properly.
6. To offer reasonable opportunity for participation of shareholders in policy decisions.
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Employee’s rights –
How business responsible for employees?
1. To provide them fair
wages and full
employee
Well run organizations take into account employment.
opinions, concerns, and values in shaping the 2. They should be provided
strategy, vision, and mission of the firm.
good working
1. Right to make complaints conditions.

2. Right to be paid correctly 3. They should be provided

suitable opportunities of
3. Right to be protected from discrimination advancement.
4. Right to be protected from bullying
4. There must be security of
5. Right to be protected from unfair dismissal service and job
satisfaction.
6. Right to be protected from sexual harassment
7. Right to receive the fair work information 5. To develop a sense of
belonging and dignity of
8. Right to request employment records labour. 17
 Customer’s rights
1. The right to satisfaction of basic needs
2. The right to safety – to be protected against products, production processes and services that
are hazardous to health or life.
3. The right to be informed – to be given the facts needed to make an informed choice, and to be
protected against dishonest or misleading advertising and labelling.
4. The right to choose – to be able to select from a range of products and services, offered at
competitive prices with an assurance of satisfactory quality.
5. The right to be heard – to have consumer interests represented in the making and execution
of government policy, and in the development of products and services.
6. The right to redress – to receive a fair settlement of just claims, including compensation for
misrepresentation, shoddy goods or unsatisfactory services.
7. The right to consumer education – to acquire knowledge and skills needed to make
informed, confident choices about goods and services, while being aware of basic consumer
rights and responsibilities and how to act on them.
8. The right to a healthy environment – to live and work in an environment that is non-
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threatening to the well-being of present and future generations.
 How a business responsible for Customers?

1. To ensure regular supply of goods and services.

2. To offer good quality products and services

at reasonable prices.

3. To provide information about the product and

company.

4. Fair trade
5. To settle quickly the grievances of the consumers.

6. Honest advertising and true pricing

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 Supplier’s rights
1. Suppliers also have the right to
How a business responsible for transparency, fairness and equality.
Suppliers?
2. Right to get suitable and time bound
response to the Q&A logs at either stage
of the procurement.
1. Right information
3. Right to be paid correctly and timely
2. Transparency
3. Fair treatment
4. Well payment implementation

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 How a business
responsible for
Government?
1.To set up business as per guidelines issued by the government.
1. To obey Laws
2.To ensure regularity and honesty in the payment of fees,
2. Payment of taxes duties and taxes.
3.To follow pollution control norms set up by the government.
3. Providing inputs to the
government 4.To establish new business units in rural and backward areas for
balanced regional development of the country.
4. Active participation in 5.To avoid indulging into monopolistic and other trade
politics restrictive practices.
5. Implementation Socio- 6.To avoid indulging in unlawful activities like bribing, etc.
economics programs

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 How a business responsible for
Community and Society?

Business should work for the economic and social well-being of the
community.
1. Maximum utilisation of natural resources.
2. To provide maximum employment opportunities.
3. To preserve social and cultural values.
4. To uplift weaker section of the society.
5. Work towards the upliftment of democratic institutions and
national integration.
6. To provide assistance to hospitals, educational institutions, etc.
7. To protect the environment from all types of pollution.

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BUSINESS – More responsible, More sustainable!
Large Image
STAKEHOLDERS
- Who?
- Rights?
- How they impacts Business?

HOW BUSINESS PRACTICE RESPONSIBLY?

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