2-1

Chapter 2: Stakeholders
and the Corporate Mission

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-2

Preview

✔Stakeholders
✔The Mission Statement
✔Corporate Governance and
Strategy
✔Strategy and Ethics

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-3

Figure 2.1: Stakeholders and the

Enterprise
External Stakeholders The Firm
• Customers Contributors
• Suppliers
• Governments
• Unions Inducements
• Local Communities
• General Public

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-4

Figure 2.1: Stakeholders and the

Enterprise
External Stakeholders The Firm
• Customers Contributors
• Suppliers
• Governments
• Unions Inducements
• Local Communities
• General Public
Contributors Inducements

Internal Stakeholders
• Stockholders
• Employees
• Managers
• Board Members
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
 2-5

Stakeholder Impact Analysis

• Identify Stakeholders
• Identify Stakeholders’ Interests and
Concerns
• Identify Resulting Claims Stakeholders
Are Likely to Make
• Identify Most Important
Stakeholders (From
Organization's
Perspective)
• Identify the Resulting
Strategic Challenges

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 2-6

Mission Statement
• Defined
• Built Around Three Main Elements:
– Overall “Vision” or “Mission”
– Key Philosophical Values Management
Is Committed to and That Influence
the Decisions They Make
– Statement of Key Goals Necessary to
Attain the Mission That Are Consistent
With the Values Above

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-7

Mission Statement of
Seattle City Light*
Vision
To be the most customer-focused,
competitive, efficient, innovative, a
nd environmentally responsible co
mmunity owned utility in the Unite
d States by the year 2000

*Adapted from Figure 2.2 Continued on next slide . . .

Copyright  1998 by Houghton Mifflin Company. All rights reserved.
 2-8

Mission Statement of
Seattle City Light (Continued)
Values
✔Customer ✔Accountabilit
First y
✔Investment in ✔Community
Employees ✔Environmenta
✔Safety l Stewardship
✔Financial ✔Excellence
Responsibility ✔Integrity
Continued on next slide . . .
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
 2-9

Mission Statement of
Seattle City Light (Continued)
Goals
✔Customer Satisfaction
✔Employee Satisfaction
✔Safety
✔Financial
Responsibility

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-10

The Mission Statement

(Continued)
• Vision or Mission
• Strategic Intent
• Customer Orientation
and Business Definition
#
1
• Consumer-oriented
vs. Product-oriented

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-11

Figure 2.3: Abell’s Framework

for Defining the Business
Who is being What is being
satisfied? satisfied?

Customer Customer
Groups Definition Needs
of Business

How are
customer needs
satisfied?
Distinctive
Source: Derek F. Abell, Determining the
Business: the Starting Point of Strategic Competencies
Planning (Englewood Cliffs, N.J.: Prentice-
Hall) 1980. p. 17.
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
 2-12

The Mission Statement

(Continued)

• Values
#
1

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-13

Johnson & Johnson Credo*

• First Responsibility Is to Those
Who Use J&J Products
• Next Come Its Employees
• Next, the Communities in
Which the Employees Live and
Work
• Its Final Responsibility Is
to Its Stockholders
*Adapted from Figure 2.4

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-14

The Mission Statement

(Continued)

• Values
• Goals
#
1

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-15

The Mission Statement

(Continued)

• Goal Characteristics
– Precise and Measurable
–
–
Address Important Issues
Challenging, but Realistic
#
1
– Time Period Specified

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-16

The Mission Statement

(Continued)

• Maximizing Shareholder
Returns
• Short-Term Problem
• Long-Term Goals
#
1

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-17

The Corporate Governance

Problem
• On-the-Job Consumption

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 2-18

The Corporate Governance

Problem (Continued)

• Excessive Pay

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 2-19

The Corporate Governance

Problem (Continued)
• Empire Building

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 2-20

Figure 2.5: Tradeoff Between

Profitability and Growth Rate
PMAX
Profitability

P1

P2

G0 G1 G2
Growth Rate

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-21

The Corporate Governance

Problem (Continued)
• Corporate Governance
Mechanisms
– Board of Directors

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 2-22

The Corporate Governance

Problem (Continued)
• Corporate Governance
Mechanisms
– Stock-Based
Compensation ST
OC
K

K
TOC
S

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-23

The Corporate Governance

Problem (Continued)
• Corporate Governance
Mechanisms
– Corporate Takeovers
• Takeover Constraint
• Corporate Raiders
• Greenmail

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 2-24

The Corporate Governance

Problem (Continued)
• Corporate Governance
Mechanisms
– Exchange of Equity
for Debt in a
Leveraged
Buyout
S
ND
BO

OCK
ST

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-25

Strategy and Ethics

• Purpose of Business Ethics
• Shaping the Organization’s Ethical
Climate
• Thinking Through Ethical Problems

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-26

Figure 2.6: Model of Ethical

Decision Making
STEP 1

Evaluate Decision
From Ethical
Standpoint.
Identify Affected
Stakeholders.
Are Stakeholder
Rights Violated

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 2-27

Figure 2.6: Model of Ethical

Decision Making
STEP 1 STEP 2

Evaluate Decision Evaluate

From Ethical Decision
Standpoint. From Ethical
Identify Affected Standpoint.
Stakeholders. Moral
Are Stakeholder Principles
Rights Violated

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-28

Figure 2.6: Model of Ethical

Decision Making
STEP 1 STEP 2 STEP 3

Evaluate Decision Evaluate Establish

From Ethical Decision Moral
Standpoint. From Ethical Intent
Identify Affected Standpoint.
Stakeholders. Moral
Are Stakeholder Principles
Rights Violated

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-29

Figure 2.6: Model of Ethical

Decision Making
STEP 1 STEP 2 STEP 3 STEP 4

Evaluate Decision Evaluate Establish Engage

From Ethical Decision Moral In
Standpoint. From Ethical Intent Ethical
Identify Affected Standpoint. Behavior
Stakeholders. Moral
Are Stakeholder Principles
Rights Violated

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 2-30

Strategy and Ethics (Continued)

• Purpose of Business Ethics
• Shaping the Organization’s Ethical
Climate
• Thinking Through Ethical Problems
• Corporate Social Responsibility

Copyright  1998 by Houghton Mifflin Company. All rights reserved.

 2-31

Chapter Summary

✔STAKEHOLDERS
✔THE MISSION
STAT ENETRNANCE
EMO
✔CORPORATE G V
AND STRATEGY
✔STRATEGY AND ETHICS

Copyright  1998 by Houghton Mifflin Company. All rights reserved.