The Corporation and Its Stakeholders

Ch.1 Summary.

Walmart is a great example of how business relates to society or how they affect each other. Walmart the largest private employer in the world has come across many criticisms from hurting local communities to discriminating against woman. An example problem Walmart has come across is the Inglewood, CA case in 2004 where a african american and hispanic suburb voted not to allow a Walmart to be built in their community because they felt Walmart would impact the small businesses, pubic safety, traffic, etc in a negative way.

• Businesses and society together form a social system, where actions of each influenced the other.
• Ownership theory of the firm- purpose of the firm is to maximize returns to shareholders/ make the money it can for the people who own stock in the company
• Stakeholder theory of the firm- serve a broad public purpose: to create value for society
• All businesses have economic and social relationships with others in society-some intended, unintended , positive and negative
  
• Market stakeholders engage in transactions with companies to carry out its primary purpose of providing any goods or services to society.
• Market stakeholders are also known by the name of primary stakeholders.
• Market Stakeholders of a business firm may include:

1. employees
2. stockholders
3. creditors
4. suppliers
5. customers
6. distributors, wholesalers, and retailers

• Each of these relationship have a two-way exchange or transaction.
• For example: a stockholder invests in a firm and in return hopes to receive dividends and capital gain; creditors loan money and hope to receive the payments plus interest.
• Another form of stakeholders are called Non-market stakeholders or can also be known as secondary stakeholders.
  
• Secondary Stakeholders are people or groups that have an impact or may be impacted by a firm although not directly involved with them.
• Secondary Stakeholders of a business firm may include:

1. General Public
2. Communities
3. Governments
4. Activist groups
5. Media
6. Business support groups

• Role sets is a term used to describe individuals or groups that play multiple stakeholder roles.
• Stakeholder interests are the nature of each groups stake in a firm.
• Stakeholder power is the ability to use any resources to make something happen or secure a desire outcome.