If you were a corporation who would you pay

attention to?

Milton Friedman’s Stockholder Model

“The Social Responsibility of Business is to Maximize Profits” (1971)

How's That Shareholdery-Valuey Stuff Working Out for Ya?

The purpose of a corporation is to maximize shareholder wealth. And a corporation's board of directors' chief fiduciary responsibility is to shareholders.

These are plain and simple facts — and have been so forever. Right?

No, and no, actually.

The Stakeholder Model

Appeals to utilitarian considerations of overall well-being + individual rights

Requires management to achieve balance

Who are stakeholders?

People and groups that affect or can be affected by an organization’s decisions, policies, and operations

Benefits v. risks

Primary + Secondary

Primary stakeholders are critical to company’s existence and activities

Secondary stakeholders are those people/groups that are affected directly or indirectly by a company’s primary activities and decisions

•Secondary DOES NOT = less important

Corporation

Stockholders

CustomersCustomers

EmployeesEmployeesCommunitiesCommunities

GovernmentsGovernments

EducationalInstitutionsEducationalInstitutions

ThePoorThePoor

FutureGenerationsFuture

Generations

Earth’sBiosphereEarth’sBiosphere

ReligiousGroupsReligiousGroups

PoliticalParties

PoliticalParties CreditorsCreditors

PoliticalInterestGroups

PoliticalInterestGroups

TradeAssociationsTrade

Associations

SuppliersSuppliers

MediaMedia

CompetitorsCompetitors

UnionsUnions

PrimaryStakeholders

SecondaryStakeholders

Prioritize your stakeholders

The Stakeholder Paradox

An ethical problem will still exist whether or not management takes a

strategic or multi-fiduciary position.

Some Problems and Concerns

Institutionalizing/Implementing

Conflicts between stakeholder groups

Efficiency

Turns the regulation of the market excessively inward

Not practical

But…

It helps rule out alternatives and can be tested in the marketplace.

Maybe it is practical enough?

For next class

Read Vermilion Iron Mining case Take assessment Interview questions due by 10pm