The Corporation in Society P A R T O N E Law81305_ch01pg02_21 2/17/04 5:31 PM Page 1
2 C H A P T E R O N E The Corporation and Its Stakeholders Business corporations have complex relationships with many individuals and organizations in society. The term stakeholder refers to all those that affect, or are affected by, the actions of the firm. How corporations manage their interactions with stakeholders powerfully contributes to business success or failure. Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management’s role. In a world of fast-paced globalization, shifting public expectations and government policies, growing ecological concerns, and new technologies, managers face the challenge of achieving economic results while simultaneously creating value for all of their diverse stakeholders. This chapter focuses on these key questions and objectives: • What is the relationship between business and society, and in what ways are they part of an interactive system? • What is the purpose of the modern corporation? • What is a stakeholder, and who are a corporation’s market and nonmarket stakeholders? • What is stakeholder analysis, and how can it be used to build collaborative relationships? • What forces of change continually reshape the business and society relationship? Law81305_ch01pg02_21 2/17/04 5:31 PM Page 2
Chapter 1 The Corporation and Its Stakeholders 3 In 2003, United Airlines faced a dire crisis. The terrorist attacks of September 11, 2001 — in which United lost two planes — and the economic downturn that followed had slashed air travel by businesspeople and vacationers alike. Fuel costs were rising, pushed up by an oil workers’ strike in Venezuela and concern over conflict in the Middle East. Low- cost competitors such as Southwest Airlines and JetBlue were cutting into United’s mar- ket share. The company was weighed down by debt from the acquisition of expensive new planes like the Boeing 777. By the end of 2002, facing losses of $20 million a day , United had reluctantly filed for bankruptcy. United’s woes affected not just the airline itself, but also a vast network of other organizations and people. The airline, then the second largest in the world after American, employed 80,000 workers, many of whom feared layoffs as the airline cut back. Regular customers wondered if the 1,800 daily flights they had come to rely on would still run as scheduled, and if their frequent-flier miles would still be usable. Business partners — particularly other nations’ airlines whose flights connected with United’s — stood to lose as international fliers refused to book on a bankrupt carrier. Communities that were the home to United hubs — Denver, San Francisco, and Chicago — were concerned about the loss of related jobs in airfreight, hospitality, and food service.
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