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Unformatted text preview: ial environment with which
they constantly interact Business and society together form an interactive social
system (shown graphically in the following slide) 1-6 Figure 1.1 Business 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 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 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 embedde...
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This document was uploaded on 03/05/2014.
- Fall '14