Business Ethics & Values Stakeholder Relationship & Social Responsibility

STAKEHOLDER RELATIONSHIP & SOCIAL RESPONSIBILITY

Stakeholders define ethical issues in business

In a business context, customers, investors, employees, suppliers, government agencies, communities and many others who have a ―stake‖ or claim in some aspect of a company’s product, operations, markets, industry and outcomes are known as stakeholders.

These groups are influenced by business, but they also have the ability to influence businesses; thus their relationship is a two-way street.

Identifying stakeholders

There are two different types of stakeholders:-

a) Primary stakeholders. They are those whose continued association is absolutely necessary for a firm’s survival. They include employees, customers, investors and shareholders.

b) Secondary stakeholders. They do not typically engage in transactions with a company and thus not essential for its survival. They include the media, trade associations and special-interest groups.

Stakeholder Orientation

This is the degree to which a firm understands and addresses stakeholder demands.

 It comprises of three sets of activities:- o The organization-wide generation of data about stakeholder groups and assessment of the firm’s effects on these groups. o The distribution of this information throughout the firm. o The organization’s responsiveness as a whole to this intelligence.  Generating data about stakeholders begins with identifying the stakeholders that are relevant to the firm.  Relevant stakeholder communities should be analyzed on the basis of the power that each enjoys as well as by the ties between them.  The firm should characterize the concerns about the business’ conduct that each relevant stakeholder group shares.  Information can be derived from formal research like internet searches.  Employees and managers can generate this information informally as they carry out their daily activities.  Stakeholder orientation is not complete unless it includes activities that address stakeholder issue.  The responsiveness of the organization as a whole to stakeholder intelligence consists of initiatives that the firm adopts to ensure that it abides by or exceeds stakeholder expectations and has a positive impact on stakeholder issues.

Social responsibility & the importance of stakeholder orientation

Social responsibility in Business Ethics embodies standards, norms and expectations that reflect a major concern of major stakeholders, including customers, employees, shareholders, competitors and the community.

Social responsibility & Ethics

Social responsibility is an organization’s obligation to maximize its positive impact on stakeholders and to minimize its negative impact.

If social responsibility is considered an important corporate concern, then it does need quantitative credibility. Employee satisfaction, consumer loyalty, and other stakeholder concerns can be quantified to some extent, but some of the values and other dimensions are more qualitative.

The International Organization for Standardization (ISO) established ISO 26000, which is a corporate social responsibility regulation that cannot be used for certification purposes or audits but is meant as a guideline to encourage discussions on the role of social responsibility and the importance of stakeholders.

Social responsibility & Ethics There are four levels of social responsibility—economic, legal, ethical, and philanthropic.

i. Philanthropic – giving back to society ii. Legal – abiding by all laws and government regulations iii. Economic – maximizing stakeholder wealth and/or value iv. Ethical – following standards of acceptable behavior as judged by stakeholders

Corporate citizenship is often used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their various stakeholders.

It has four interrelated dimensions:-

i. Strong sustained economic performance ii. Rigorous compliance iii. Ethical actions beyond what the law requires iv. Voluntary contributions that advance the reputation and stakeholder commitment of the organization

The value of a positive reputation is difficult to quantify, but it is very important. A single negative incident can influence perceptions of a corporation’s image and reputation instantly and for years afterwards.

Implementing a Stakeholder Perspective

1. Assessing the Corporate Culture To enhance organizational fit, a social responsibility program must align with the corporate culture of the organization.

The purpose of this first step is to identify the organizational mission, values, and norms that are likely to have implications for social responsibility.

2. Identifying Stakeholder Groups It is important to recognize stakeholder needs, wants, and desires.

Stakeholders have some level of power over a business because they are in the position to withhold, or at least threaten to withhold organizational resources.

3. Identifying Stakeholder Issues Steps (1) and (2) lead to the identification of the stakeholders who are both the most powerful and legitimate. The level of power and legitimacy determines the degree of urgency in addressing their needs. Step (3) consists then in understanding the nature of the main issues of concern to these stakeholders.

4. Assessing Organizational Commitment to Social Responsibility It brings the three first stages together to arrive at an understanding of social responsibility that specifically matches the organization of interest. This general definition will then be used to evaluate current practices and to select concrete social responsibility initiatives.

5. Identifying Resources and Determining Urgency The prioritization of stakeholders and issues, along with the assessment of past performance, provides for allocating resources. Two main criteria can be considered:- a. The level of financial and organizational investments required by different actions. b. The urgency when prioritizing social responsibility challenges.

6. Gaining Stakeholder Feedback Stakeholders’ general assessment of the firm and its practices can be obtained through satisfaction or reputation surveys.

To gauge stakeholders’ perceptions of the firm’s contributions to specific issues, stakeholder- generated media such as blogs, websites, podcasts, and newsletters can be assessed.

More formal research may be conducted using focus groups, observation, and surveys.1