Assessing Freeman’s Stakeholder Theory

At least since the publication of the monumental Strategic Management: A Stakeholder Approach (1984), the “stakeholder theory” originated by R. E. Freeman has engrossed much of the business ethics literature. Subsequently, some advocates have moved a bit too quickly and without proper definition or argument. They have exceeded Freeman’s intentions which are more libertarian and free-market than is often thought. This essay focuses on the versions of stakeholder theory directly authored or coauthored by Freeman in an effort to recover (1) Freeman’s intentions and (2) the argumentative justification of stakeholder theory. It then argues that Freeman’s appeal to legal, economic, and ethical constraints ultimately produce arguments that are invalid. One can thoroughly support legislation constraining corporations or seeking to prevent age discrimination, market monopolies, and externalities and regret the extent that capitalism is heir to such shortcomings without it following that (1) business beneficiaries should be changed from stockholders to stakeholders and (2) the latter should be given serious decision-making power. Further, stakeholder theory neither defines nor battles any obvious opposition. Hence, it is difficult to see what it changes about business management. In short, stakeholder theory either changes too much about business, or nothing important at all (depending on one’s interpretation). Efforts to supplant or improve the reigning theory of capitalism will have to do better.     

Wand and Weber’s Decomposition Model in the Context of Business Process Modeling

Whereas the benefits of decomposing process models are obvious, the question what actually characterizes a ??good?? decomposition of a business process model has been given little attention to date. In addition, the process of decomposition itself is considered as being an ??art?? in literature. Our approach for achieving a ??good?? decomposition is Wand and Weber??s decomposition model for information systems. As a first step in our investigation we aim to explore in how far the decomposition model can be adapted for business process modeling at all. The potential this model might bear for evaluating decompositions of process models has been promoted in literature quite often, while a corresponding investigation is still missing. We address this gap by the following research. In the long term, we intend to establish guidelines for decomposing business process models in a structured way.     

A Stakeholder Approach to the Ethicality of BRIC-firm Managers’ Use of Favors

This article investigates the use of favors by managers of BRIC firms to accomplish business goals, the ethicality of which should be determined by the moral reasoning in these countries rather than from a developed country perspective. We define a favor as an exchange of outcomes between individuals, typically utilizing one??s connections, that is based on a commonly understood cultural tradition, with reciprocity by the receiver typically not being immediate, and its value being less than what would constitute bribery within that cultural context. This exchange normally takes place between and among members of networks, and may involve a network outsider contacted by a network insider on behalf of another insider. We see the giver and receiver of the favor, as well as network insiders and outsiders, as stakeholders. Additionally, society could also be considered to be a stakeholder since the practice of using favors generally inhibits the development of legitimate, strong formal institutions, since the use of favors in emerging economies is rooted in cultural traditions that we view as informal institutions. Furthermore, we assert that the practice of using favors can lead to bribery which harms society as a stakeholder both morally and economically. We posit that BRIC-country managers?? behaviors stem from informal, culturally based practices??jeito in Brazil, blat/sviazi in Russia, jaan-pehchaan in India, and guanxi in China. We utilize institutional theory to explain why favors are relied upon, and ISCT to support the argument that the use of favors in environments like the BRICs is generally considered ethical.     

Italy’s Political Upheaval and the Consequences of Inequality

Intereconomics - Political upheaval, with the dangerous rise of the far right – in Italy and Europe – is likely to be stabilised when politics and policies again turn their attention to...     

Consumers and the internal market for services: Shortcomings of the “new approach” of the Community

The paper discusses the new approach of the Community in the area of services, namely the principle that every service — like every good — should be allowed to circulate freely in the entire Internal Market provided it meets the standards of EEC law and of the country of origin. There are some exceptions to this principle, especially in the insurance area (market segregation in the industry's interest). The paper points out that the new approach might endanger consumer protection of Member States unless adequate standards of the receiving country exist. ECLG makes a number of suggestions to overcome the lacunae left by the new approach, especially by opting for minimal harmonisation, by applying rules of private internal law under the Rome Convention, and by providing for safeguard clauses.

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Verbraucher und Binnenmarkt für Dienstleistungen: Mängel der sog. neuen Konzeption der Gemeinschaft

Zusammenfassung Die Gemeinschaft versucht in Vewirklichung der Grundfreiheiten des durch die Einheitliche Akte geänderten EWG-Vertrages die Vollendung des Binnenmarktes auch im Dienstleistungsbereich. Dabei sind unterschiedliche Herangehensweisen denkbar, nämlich das Prinzip der Minimalharmonisierung, die Marktsegmentierung oder die sog. neue Konzeption. Letztere findet sich vor allem im Banken- und Rundfunkbereich; dancah soll es für den Marktzutritt im gesamten Binnenmarkt ausreichen, daß die (angeglichenen) Standards des Ursprungslandes eingehalten werden. Die ECLG befürchtet einen Abbau des Verbraucherschutzes bei einer konsequenten Durchführung dieses Prinzips und macht Gegenvorschläge. Diese beziehen sich auf eine verstärkte Durchsetzung des Prinzips der Minimalharmonisierung, auf die Notwendigkeit der Anwendung der Regeln des Internationalen Privatrechts nach dem Römischen Schuldrechtsübereinkommen von 1980, und durch Verankerung von Schutzklauseln.

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The European Consumer Law Group (ECLG) is a group of lawyers and law scholars in the EEC and EFTA countries, concerned with legal aspects of consumer protection. Correspondence regarding the paper should be directed to: Professor Norbert Reich, Centre for European Legal Policy, Universitätsallee GW 1, D-2800 Bremen 33, Federal Republic of Germany.     

A Stakeholder’s Perspective on Human Resource Management

In order to understand the system wherein human resource management practices are determined by the interactions of a complex system of actors, it is necessary to have a conceptual framework of analysis. In this respect, the works of scholars (Mitroff, 1983, Stakeholders of the Organizational Mind, Jessey-Bass; Freeman, 1984, Strategic Management: A Stakeholder Approach, Pitman) concerning stakeholder theory opened new perspectives in management theory. An organisation is understood as being part of a politico-economic system of stakeholders who interact and influence management practices. Each stakeholder tries to optimise and protect his interests (Frooman, 1999, Academy of Management Review 24, 191–205; Savage et al., 1991, Academy of Management Executive 5(2), 61–75). The framework of stakeholder analysis enables escape from a purely instrumental approach to HRM, and avoids reducing our understanding of conflicts within companies to mere antagonism between employees and their employers. It enables us to point out the existence of other stakeholders in the relationship. Notably, it allows for the incorporation into management theory of actors from the sphere of politics (president of the republic, government, national elected representatives – deputies and senators – and locally elected representatives – mayors and regional councillors, etc.) as well as their dependent administrations. All these actors are considered to be stakeholders who define the legal framework of firm management and guarantee the application of these laws.     

How the sender’s positioning and the target’s CSR record influence the effectiveness of scapegoating crisis communications

Past research on scapegoating argues that this crisis communication strategy is often ineffective because it can be perceived as an unfair attempt at shifting blame. In contrast, a few studies have shown that scapegoating can be effective by increasing the perceived ethicality of the sender relative to the target that is presented as responsible for wrongdoing. Reconciling these inconsistent findings, we show that the relative effectiveness of scapegoating depends on the perceptions of the sender and of the target. Our findings show that both the positioning of the sender as an underdog or a top dog and the positive or negative CSR record of the target contribute to explaining the effectiveness of scapegoating. Following a crisis, scapegoating appears to be most effective when the sender is an underdog and the target has a negative CSR record. The effectiveness of scapegoating for an underdog is however reduced when the target has a positive CSR record. At the opposite end, scapegoating might backfire when the sender is a top dog that attacks a target with a positive CSR record. Finally, when a top dog attacks a target with a negative CSR record, scapegoating reduces negative word of mouth even though this effect does not appear to be mediated by perceived ethicality. The study contributes to research on scapegoating communications and on the consequences of an underdog positioning and a positive CSR record for companies trying to manage the negative fallout from an ethical crisis.

     

Trust and Stakeholder Theory: Trustworthiness in the Organisation–Stakeholder Relationship

Trust is a fundamental aspect of the moral treatment of stakeholders within the organization–stakeholder relationship. Stakeholders trust the organization to return benefit or protections from harm commensurate with their contributions or stakes. However, in many situations, the firm holds greater power than the stakeholder and therefore cannot necessarily be trusted to return the aforementioned duty to the stakeholder. Stakeholders must therefore rely on the trustworthiness of the organization to fulfill obligations in accordance to Phillips’ principle of fairness (Business Ethics Quarterly 7(1), 1997, 51–66), particularly where low-power stakeholders may not be fully consenting (Van Buren III, Business Ethics Quarterly 11(3), 2001, 481–499). The construct of organizational trustworthiness developed herewith is presented as a possible solution to the problem of unfairness in organization–stakeholder relations. While organizational trustworthiness does not create an ethical obligation where none existed before, stakeholders who lack power will likely be treated fairly when organizational trustworthiness is present.     

Stakeholder’s Preference and Rational Compliance: A Comment on Sacconi’s “CSR as a Model for Extended Corporate Governance II: Compliance, Reputation and Reciprocity”

Lorenzo Sacconi’s recent re-statement of his social contract account of business ethics is a major contribution to our understanding of the normative nature of CSR as the expression of a fair multi-party agreement supported by the economic rationality of each participant. However, at one crucial point in his theory, Sacconi introduces the concept of stakeholders’ conformist preferences – their disposition to punish the firm if it defects from the agreement, refusing to abide by its own explicit CSR policies and norms. We take issue with him over this concept: we show that the assumption of conformist preferences is a moral premise, and it arguably weakens the normativity of the theory as a whole. As an alternative, we propose an evolutionary game theoretic approach. We draw upon recent applications of evolutionary game theory to moral philosophy (Skyrms, Danielson), and we use a computer simulation of the trust game. According to this approach, the failure of the logic of reputation, which is the problem conformist preferences were introduced to solve, is overcome through the dynamics of interaction.     

John Rawls’ Concept of the Reasonable: A Study of Stakeholder Action and Reaction Between British Petroleum and the Victims of the Oil Spill in the Gulf of Mexico

Journal of Business Ethics - In his political philosophy, John Rawls has a normative notion of reasonable behaviour expected of citizens in a pluralist society. We interpret the various strands of...     

Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model

As part of its growth strategy, Bangladesh instituted a trade liberalization process in the early 1990s which gained momentum in later years. Trade grew from 24.4 to 45% of GDP between 1980–81 and 2007–08, an indicator of increased liberalization as well as the growing importance of the external sector in Bangladesh. Apart from its unilateral liberalization, Bangladesh participates in three different regional trade agreements (RTAs): the South Asian Free Trade Agreement (SAFTA), the Asia Pacific Trade Agreement (APTA) and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation Free Trade Area (BIMSTEC FTA). In addition, Bangladesh signed preferential trade agreements (PTAs) with the member countries of the Developing 8 (D8). Because of the growing importance of RTAs, this study investigates their contribution to the export flows from Bangladesh using the gravity model that has become the primary tool for estimating the trade effects of regional integration. Regression results of bilateral exports for 40 countries from 1992–2009 indicate two crucial aspects. Firstly, all the RTAs consistently maintained statistically significant negative signs, except the BIMSTEC FTA and SAFTA, which showed insignificantly positive and insignificantly negative effects respectively. Secondly, the intensity of negative effects and the level of significance have shown a declining trend as the status of those blocs has changed from political or economic cooperation agreements to preferential agreements and from preferential agreements to free trade agreements. Thus, the intensity of tariff liberalization and the degree of sectoral coverage seem to be the important determinants of the RTAs’ performance. Therefore, experts expect that full-fledged implementation of FTA provisions and the elimination of all tariff and non-tariff barriers might result in a higher degree of integration.     

Regulation and the Promotion of Audit Ethics: Analysis of the Content of the EU’s Policy

Accounting literature has commonly judged the impact of regulation on auditors’ ethical commitment by studying daily audit practice. We argue that the content of the regulations themselves is an important determinant of such an impact. This paper evaluates the capacity of the content of regulation to promote audit ethics by reference to the European Union’s (EU) audit policy. Anchored in the extant conceptual perspectives on ethics, our analysis of relevant policy documents shows that the EU’s approach to audit ethics relates most strongly to the deontological perspectives on ethics and leaves largely unexplored other means of promoting auditors’ ethical stance, such as by stimulating virtue ethics. We find that it is the EU regulators’ restricted view of the conceptual foundations of audit ethics that limits the capacity of their policy to effectively stimulate auditors’ ethical commitment. The paper also discusses the potential implications of our analysis for the design of future audit policy.     

Advertising and Steiner’s Dual Stage Model: Our Assessment

Between 1967 and 1979, we produced a number of studies that explored different facets of the economics of advertising. This work culminated in our 1974 book entitled Advertising and Market Power. Our leading hypothesis was that heavy advertising expenditures often but not always had anti‐competitive effects. And our primary empirical evidence in support of this hypothesis was that industries with heavy advertising expenditures also reported higher profit rates, which we interpreted as indicating that higher prices followed when manufacturers can effectively spend large amounts on advertising. Since that time, Robert Steiner has developed a model of firm behaviour for consumer goods industries. He finds that distribution margins are generally higher where manufacturer prices are lower. Furthermore, heavy manufacturer advertising is likely to depress distribution margins for heavily advertised products. While our earlier work implicitly assumed that distribution margins are generally the same regardless of the volume of advertising, Steiner’s results raise doubt on this assumption. Steiner’s model must therefore be acknowledged when interpreting our earlier findings.     

China’s Investments in Germany and the Impact of the COVID-19 Pandemic

Intereconomics - This paper analyses how China’s investments in Germany have developed over time and the potential impact of the COVID-19 pandemic in this regard, based on four different...     

Today’s practice of brand placement and the industry behind it

This article presents a content analysis of brand placement on Dutch television, followed by 24 interviews with the parties involved. By combining a content analysis and a practitioners’ perspective, this article offers unique insights into the increasingly popular phenomenon of integrating advertising into television content. Analysis of one week’s television programming showed that programmes with brand placement are growing into a significant part of Dutch television. A fifth of these sponsored programmes can be classified as brand-integrated programmes in which brands are an intrinsic part of the programme. The practitioner interviews showed that these brand-integrated programmes were considered as the future of advertising. Moreover, the interviews gave insights into the mutual relationships between the different parties, showing that practitioners use the law restrictions to estimate the acceptance levels of the audience with respect to television sponsoring.     

China’s Financial Transformation in the Context of Slowdown and Deleverage

China stands in a critical inflexion point, because its credit-fuel investment model has become obsolete. China’s current slowdown has revealed that its original growth drivers have been exhausted, whereas its debt accumulation has reached unsustainable highs. Hence, China is in urgent need of implementing an efficient deleveraging process at a time when slowdown and demographic pressure make such a process difficult. There is a danger that slowdown, deflation, and deleveraging will bounce negatively into each other. The deflationary tendencies, if uncontrolled, will propel China into a liquidity trap and threaten to draw the economic system to a halt.     

Burger King and McDonald’s: Where’s the Spillover?

This paper studies how spillover effects from competitors’ choices affect a firm’s decision to open a store. Using panel data from the UK’s fast food industry, I propose and estimate a game of entry under incomplete information that incorporates spillover effects between firms’ entry decisions. A positive spillover is identified for Burger King – increasing the stock of existing McDonald’s by one outlet increases Burger King’s estimated equilibrium probability of opening a new store by approximately 18 percentage points. Furthermore, the estimated model suggests that this spillover affects Burger King’s variable profit, as opposed to its fixed cost of entry. It is less clear whether this externality matters for McDonald’s.     

The Strength of an Accounting Firm’s Ethical Environment and the Quality of Auditors’ Judgments

This study examines the impact of the strength of an accounting firm’s ethical environment (presence and reinforcement vis-à-vis the presence of a code of conduct) on the quality of auditor judgment, across different levels of audit expertise. Using a 2 × 2 full factorial ‹between subjects’ experimental design, with audit managers and audit seniors, the impact of different levels of strength of the ethical environment on auditor judgments was assessed with a realistic audit scenario, requiring participants to make judgments in respect of an inventory writedown. Based on prior research, and as hypothesized, participants possessing greater auditing experience made higher quality technical judgments. While there were no significant differences between the quality of audit judgments made by participants in the stronger ethical environment, over-all results indicate that managers are more sensitive to differences in the strength of the ethical environment than seniors. This is consistent with the hypothesis, and with prior research which suggests that the impact of the code will only be significant if it has been bilaterally internalized by individuals. This has important implications for accounting firms and regulators, given that the International Standard on Quality Control 1, requires the communication and reinforcement of ethical principles as part of firms' quality control processes. It suggests that firms will need to carefully consider the means by which they communicate and reinforce ethical principles, as it is possible to differentially impact auditors of different rank.     

What’s in a Credo? A Critique of the Academy of Management’s Code of Ethical Conduct and Code of Ethics

The Academy of Management formally adopted a Code of Ethical Conduct in 1990. During the subsequent 15 years, almost nothing had been published about it and its value as a formal document meant to guide professional practice. Rather surprisingly then, in December 2005 an entirely new Code of Ethics was introduced by the Academy’s Board, to take effect in February 2006. Why was a new code promulgated? More broadly, what do the contents of these codes, the processes of their promulgation, and their expressed purposes, suggest about the value of such codes for similarly situated professional associations, in general? This article seeks to identify key strengths and weaknesses of the original code, begin an assessment of the potential value of the new code, and so stimulate debate. Further, not only is this a call to the members of the Academy to engage in some thoughtful debate and possible amendment of its new code, but also a caution to all such associations to take seriously the hurdles that must be jumped before any code can be developed and promulgated to worthwhile effect.