Business Stakeholders and Ethics

Stakeholder

An individual or group that has an interest in or can influence the success of a business.

Stakeholder Orientation

A business approach that considers the interests and welfare of all important stakeholders when making decisions.

Internal Stakeholders

People within an organization who have an interest in the success of the business, such as employees, executives, and the board of directors.

External Stakeholders

People or groups outside the organization who can influence or are affected by the business, such as customers, suppliers, governments, communities, and the media.

Board of Directors

The group responsible for overseeing the company's mission and direction and selecting the CEO or president.

CEO (Chief Executive Officer)

The top executive responsible for implementing the policies established by the board and managing major company decisions.

Employees

Internal stakeholders who perform work for the organization and have an interest in wages, benefits, working conditions, and the company's success.

Customers

External stakeholders who purchase a company's products or services and whose trust, reviews, loyalty, and purchasing decisions can affect the business.

Suppliers

External stakeholders that provide businesses with the materials, products, or services they need to operate.

Government

An external stakeholder that influences businesses through laws, regulations, and regulatory agencies.

Community

A group affected by a company's operations and decisions, including its economic, social, and environmental effects.

Media

An external stakeholder that can influence a company's reputation by reporting or sharing information about its behavior and activities.

Shareholders

Individuals or groups that own shares of a company and generally have an interest in receiving a return on their investment.

Stakeholder Relationship

The ongoing connection between a business and a person or group affected by or able to influence the business.

Stakeholder Interdependence

The idea that businesses and stakeholders depend on one another for success.

Ethical Responsibility

The responsibility of a business to do what is morally right, which can extend beyond what the law requires.

Legal Responsibility

The responsibility of a business to follow applicable laws and regulations.

Ethical Minimum

The least a company can do while complying with the law.

Ethical Maximum

The strongest or most responsible action a company can take to behave ethically in a particular situation.

Social Contract

The implicit understanding between a business and its stakeholders concerning the responsibilities and expectations each has toward the other.

Ethical Minimum vs. Ethical Maximum

An ethical minimum meets legal requirements, while an ethical maximum goes beyond the minimum to better protect and serve stakeholders.

Stakeholder Welfare

The well-being and interests of people and groups affected by a business's decisions.

Corporate Social Responsibility

The idea that businesses should consider their responsibilities to customers, employees, communities, and other stakeholders as part of their mission.

Shareholder-Oriented View

The view that a business should primarily focus on serving shareholders and maximizing economic returns.

Stakeholder-Oriented View

The view that businesses should consider customers, employees, communities, shareholders, and other stakeholders as important ends in themselves.

Profit Maximization

The goal of increasing the financial return to owners or shareholders.

Stakeholder Loyalty

The continued support of a business by stakeholders, which can help sustain the organization over time.

Business Ethics and Law

Laws establish minimum standards, but ethical responsibilities can extend beyond what is legally required.

Why should businesses consider stakeholders?

Considering stakeholders can be ethically responsible and can also benefit the business by building trust, loyalty, and long-term success.

Why are customers important stakeholders?

Customers provide revenue and can influence a company's reputation through purchases, reviews, referrals, and boycotts.

Why are employees important stakeholders?

Employees contribute to the success of the organization and have interests involving compensation, benefits, working conditions, and treatment.

Why are suppliers important stakeholders?

Suppliers provide important goods and services and can significantly influence a company's ability to operate.

Why is stakeholder welfare important?

It is ethically important to consider the well-being of stakeholders and can also support long-term business success.

What can happen when stakeholders feel ignored?

They may express dissatisfaction to management or the wider community, including through social media.

What is one major difference between legal and ethical responsibilities?

Legal responsibilities require businesses to follow the law, while ethical responsibilities may require businesses to go beyond the legal minimum.

What happens when a business focuses only on ethical minimums?

It may remain legally compliant but risk harming stakeholders and developing a poor reputation.

What is the main lesson of the Samsung washer example?

A company may choose to go beyond the legal minimum to protect customers, maintain trust, and demonstrate ethical responsibility.

What was Samsung's ethical maximum?

Samsung offered refunds and free pickup to owners of affected washing machines rather than simply relying on warnings.

What was the ethical minimum in the Samsung example?

Providing warnings about the defective washing machines without taking additional corrective action.

What does the Amazon example illustrate?

It raises questions about employee working conditions, expectations, sustainability, and the ethical responsibilities businesses have toward employees.

What are employee amenities?

Resources provided in addition to wages and standard benefits, such as exercise facilities, discounts, meals, or opportunities to purchase company stock.

Why might businesses provide employee amenities?

They can help retain employees and strengthen employee loyalty.

What are two major views of business social responsibility?

One emphasizes serving shareholders and economic interests; the other emphasizes responsibility toward customers, employees, communities, and other stakeholders.

What is the long-term benefit of treating stakeholders well?

It can encourage employee and customer loyalty and contribute to the company's long-term success.