Business Ethics

Topics: Stakeholder theory, Stakeholder analysis, Corporation Pages: 35 (10167 words) Published: March 11, 2012


Business in Society



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. An important part of management’s role is to identify a firm’s relevant stakeholders and understand the nature of their interests, power, and alliances with one another. Building positive and mutually beneficial relationships across organizational boundaries can help enhance a company’s reputation and address critical social and ethical challenges. In a world of fast-paced globalization, shifting public expectations and government policies, growing ecological concerns, and new technologies, managers face the difficult challenge of achieving economic results while simultaneously creating value for all of their diverse stakeholders. This Chapter Focuses on These Key Learning Objectives: • Understanding the relationship between business and society and the ways in which business and society are part of an interactive system. • Considering the purpose of the modern corporation. • Knowing what a stakeholder is and who a corporation’s market and nonmarket stakeholders are. • Conducting a stakeholder analysis and understanding the basis of stakeholder interests and power. • Recognizing the diverse ways in which modern corporations organize internally to interact with various stakeholders. • Analyzing the forces of change that continually reshape the business and society relationship.


Chapter 1

The Corporation and Its Stakeholders


Walmart has been called “a template for 21st century capitalism.” In each period of history, because of its size and potential impact on many groups in society, a single company often seems to best exemplify the management systems, technology, and social relationships of its era. In 1990, this company was U.S. Steel. In 1950, it was General Motors. Now, in the 2010s, it is Walmart.1 In 2009, Walmart was the largest private employer in the world, with 2.1 million employees worldwide. The company operated 7,390 facilities in 14 countries and had annual sales of $404 billion. The retailer was enormously popular with customers, drawing them in with its great variety of products under one roof and “save money, live better” slogan; 176 million customers worldwide shopped there every week. Economists estimated that Walmart had directly through its own actions and indirectly through its impact on its supply chain saved American shoppers $287 billion annually, about $957 for every person in the United States.2 Shareholders who invested early were richly rewarded; the share price rose from 5 cents (split adjusted) when the company went public in 1970 to a high of $63 in 2008. ( Walmart’s stock, like that of many other companies, fell during the financial crisis of 2008–2009.) Walmart was a major customer for 61,000 suppliers worldwide, ranging from huge multinationals to tiny one-person operations. Yet, Walmart had become a lightning rod for criticism from many quarters, charged with hurting local communities, discriminating against women, and driving down wages and working conditions. Consider the following: • In 2004, the City Council in Inglewood, California, a predominantly African-American and Hispanic suburb of Los Angeles, voted down a proposed Walmart mega-store on a 60-acre parcel near the Hollywood racetrack. The city expressed concern that the development would adversely impact small businesses, traffic, public safety, and wages. This was only one of many communities that mobilized to block Walmart’s entry in the 2000s. • The same year, a federal judge ruled that a lawsuit charging Walmart stores with discrimination against women could go forward as a class action. The case charged that women at Walmart were paid less than men in comparable positions, received fewer promotions into...
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