MGT353 - Chapter 01

1 business and society an interactive system 1 7 two

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Unformatted text preview: ess and Society: An Interactive System 1-7 Two critical questions: What is the purpose of the modern corporation? To whom, or what, should the firm be responsible? 1-8 4 2/10/2014 Two contrasting views: “Ownership Theory of the Firm” (also called property or finance theory) The firm is seen as the property of its owners (shareholders) Argues the owners’ interests are paramount and take precedence over the interests of others The purpose of the firm is to maximize its long-term market value, that is, to make the most money it can for shareholders 1-9 “Stakeholder Theory of the Firm” Argues the corporation serves a broader purpose, to create value for society Must make profit for owners to survive, however, creates other kinds of value too Corporations have multiple obligations, all “stakeholder” groups must be taken into account 1-10 5 2/10/2014 Core Arguments for Stakeholder Theory of the Firm Descriptive More realistic description of how companies really work Instrumental More effective corporate strategy Normative Stakeholder management is the right thing to do 1-11 The Stakeholder Concept A stakeholder refers to persons or groups that affect, or are affected by, an organization’s decisions, policies, and operations A stake is an interest in–or claim on–a business enterprise Businesses are embedded in networks that involve many groups with such a stake 1-12 6 2/10/2014 The Stakeholder Concept: A Tip for Understanding Term stakeholder is NOT the same as stockholder Words sound similar BUT are not the same Stockholders are one of several kinds of stakeholders 1-13 Different Kinds of Stakeholders Stakeholder groups can be divided into two categories: Market stakeholders Nonmarket stakeholders 1-14 7 2/10/2014 MD2 Market Stakeholders Market stakeholders are those that engage in economic transactions with the company as it carries out its primary...
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This document was uploaded on 03/05/2014.

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