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CHAPTER 1
THE CORPORATION AND ITS
STAKEHOLDERS
INTRODUCTION
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
PREVIEW CASE
Amazon.com
CHAPTER OUTLINE
I. BUSINESS AND SOCIETY
Teaching Tip: Preview Case Video
The Amazon example that opens the chapter illustrates the
challenges of managing successfully in a complex global network of
stakeholders. It may also be used to illustrate how different
stakeholders may perceive a corporation differently, depending on
their vantage point. Instructors may wish to introduce the topic with
a quick video that summarizes the rise of Amazon: “How Jeff Bezos
Became the King of E-Commerce” (Bloomberg, October 3, 2017,
stakeholder later in the session.
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A. A Systems Perspective
II. THE STAKEHOLDER THEORY OF THE FIRM
B. Different Kinds of Stakeholders
III. STAKEHOLDER ANALYSIS
A. Stakeholder Interests
B. Stakeholder Power
C. Stakeholder Coalitions
Teaching Tip: Stakeholder Engagement and Dialogue
“The Clayoquot Controversy: A Stakeholder Dialogue Simulation” by
Anne T. Lawrence and Ann Svendsen, is designed to teach the skills of
stakeholder engagement and dialogue. Through an experiential
peoples, labor unions, and government agencies. At issue was the
company’s logging practices in Clayoquot Sound on the western side
of Vancouver Island, located off the coast of British Columbia. At the
time, Clayoquot Sound was home to one of the largest remaining
stands of old-growth, temperate rainforest in the world. The case
situation is presented as it appeared to the parties in 1998.
The controversy is left deliberately unresolved, and student teams must
engage in a simulated stakeholder dialogue process in an effort to find
common ground. An epilogue in the instructor’s manual provides
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D. Stakeholder Mapping
IV. THE CORPORATION’S BOUNDARY-SPANNING DEPARTMENTS
V. THE DYNAMIC ENVIRONMENT OF BUSINESS
A. Creating Value in a Dynamic Environment
GETTING STARTED
KEY LEARNING OBJECTIVES
LO 1-1: Understanding the relationship between business and society and the ways
in which business and society are part of an interactive system.
LO 1-2: Considering the purpose of the modern corporation.
According to the stakeholder theory of the firm, the purpose of the modern
LO 1-3: Knowing what a stakeholder is and who a corporation’s market and
nonmarket and internal and external stakeholders are.
LO 1-4: Conducting a stakeholder analysis and understanding the basis of
stakeholder interests and power.
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw-Hill Education.
LO 1-5: Recognizing the diverse ways in which modern corporations organize
internally to interact with various stakeholders.
LO 1-6: Analyzing the forces of change that continually reshape the business and
society relationship.
A number of broad forces shape the relationship between business and society. These
KEY TERMS
boundary-spanning departments
business
external stakeholder
focal organization
shareholder theory of the firm
society
stakeholder
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stakeholder analysis
stakeholder coalitions
stakeholder interests
stakeholder (market)
INTERNET RESOURCES
www.economist.com The Economist
www.fortune.com Fortune
www.nytimes.com The New York Times
DISCUSSION CASE
INSURING UBER’S APP-ON GAP
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Discussion Questions
1. Who are Uber’s relevant market and nonmarket stakeholders in this
situation?
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw-Hill Education.
2. What are the various stakeholders’ interests? Please indicate if each
stakeholder would likely support, or oppose, a requirement that Uber extend
its insurance to cover the app-on gap.
Stakeholders FOR closing the App-On Gap:
3. What sources of power do the relevant stakeholders have?
4. Based on the information you have, draft a stakeholder map of this case
showing each stakeholder’s position on the issue, its degree of power, and
likely coalitions. What conclusions can you draw from the stakeholder map?
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business flexibility, consumer affordability, political compromise, and most
importantly, what public policy should be—a collective process for all
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