One bad thing affects the reputation

Negative cues relating to a rms character are viewed as strongly diagnostic.

That the rm did that tells me all I need to know about them only an irresponsible company would behave that way.

Bad behaviour is seen as revealing a true character trait Positive cues are less diagnostic because they are seen as default behaviour/ conformance to norms

Behavioural/Character Cues

This then creates a negative impression

Firms with poor reputations anyway, if they begin to act positively, people will consider them to have an ulterior motive

Cues indicating the ability to perform poorly is less diagnostic, because it may be caused by a lack of motivation

Performance Cues

Negative cues are more salient (more weighted) over positive cues because positive cues are seen as the norm/a rm conforming to social standards, whereas negative cues are seen as revealing true character traits.

Negative cues are less weighted

Good performance is evidence that the rm has the capability to do well

Positive cues relating to a rms capabilities are viewed as strongly diagnostic.

Positive cues are less weighted

Uniformly POSITIVE= greater stakeholder judgements

Rewarding Uniformity
Uniformly NEGATIVE=negative stakeholder judgements

POSITIVE (+) indicators are WEAKENED by NEGATIVE Indicators Reciprocal Dampening NEGATIVE - indicators are weakened by POSITIVE + Indicators

A "cue" is a piece of information about an organisations's character/ behaviour

Cue Diagnosticity

Some "cues" are given more weight than others. Why? Mixed VS Uniform CSP

If such a rm wishes to achieve the highest nancial returns from CSP, they should focus upon eradicating weaknesses rather than building strengths.
Therefore, each organisation, due to different histories, will be viewed differently Stakeholders make judgements based on past histories with the organisation

BUT: if the CSR is out of character for the rm, stakeholders may just see the CSR as self-serving and the rm's reputation by decrease

It is in the interest of the rm to give CSR evidence, otherwise its CSR MAY BE OVERLOOKED/met with scepticism BY STAKEHOLDERS

Stakeholder Inuence Capacity

Each CSR issue (environmental/social/etc) can expose weaknesses and strengths of a rm.

Reputational Judgements
According to Stakeholder theory, a rms nancial success is contingent upon an ability to manage effectively its relationships with stakeholders.

This helps answer the question: Given how

Consumers therefore can see organisations as if they were people, and judge them in the same way Consumers make corporate character judgements based on: Generosity, selessness, truthfulness, trustworthiness, recklessness etc. Consumers associate the things they buy/have as being a representation of their character
What does this say about someone?

this rm has behaved (mostly socially) in the past (summed up by its SIC), can I trust it in the future?

According to the Stakeholder theory, a rm's nancial success is contingent on an ability to formulate and execute a corporate strategy that manages effectively its relationships with stakeholders Being multinational tends to diversify the stakeholder environment. Choice between exporting home-country standards of social responsibility to host countries, adopting host-country standards in each of the nations in which they operate, or some mixture of the two

What does this say about someone?

Consumer choice

Corporate Reputation

Luxury brands in particular help people achieve self-actualisation

Consumers: Purchasing decisions determine market demand. Employees: Determine the loyalty and productivity of employees Shareholders: Decisions affect share price

Consumers generally relate things that are not people, with people like characteristics

Some countries require stricter/weaker controls, or some issues may be of more importance Firms can either adopt high standards across ill countries, or they can adapt to the demands in each country A company wide approach should lead to greater CFP

Reputation According to Consumers

CSR changes the way the rm is viewed, and therefore inuences how stakeholders behave towards the rm

Given this, people make decisions based on their RELATIONSHIP with the organisation: e.g. customer make good buying decisions, employees make good employee decisions, investors make good investment decisions

Stakeholders must, despite their lack of information, decide what kind of relationship to have with the rm.

CSR & Multi National Firms

Companies may deliberately sestet up in low wage, cheap to pollute countries to lower costs. They may also negotiate deals to further reduce costs in a "race to the bottom" Controversial countries hay have: non democratic politics, corruption, lack of civil liberties, low environmental regulation Remedies: move out of country, or demonstrate positive CSP and overcome stakeholder concerns

less stakeholder pressure

Stakeholders may take a dim view of this and highlights the disregard for the welfare of the greater society Some can leave, some can't e.g. resource companies. it depends on exibility

Good reputations help build strong relationships Firms make prot from strong relationships

Because it affects a rms relationships with its stakeholders, and particularly the behaviour of stakeholders towards the rm.

Why does reputation matter?

The greater POWER the stakeholder group has to inuence the performance of the rm. the greater extent to which stakeholder claims are viewed as LEGITIMATE among the wider society.

"those groups who can affect or are affected by the achievement of an organizations purpose Freeman Governments Investors Suppliers Stakeholders favour relationships with rms that they judge to be socially responsible

Denition

Encompassing the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time. (Carroll, 1979) The ways in which an organization exceeds the minimum obligations to stakeholders specied through regulation and corporate governance. Interesting because if a company meets legal requirements, it is not socially responsible, however if it provides day care for its employees, it is deemed socially responsible.

Giving back, voluntarily Customers Stakeholders:: Philanthropic Philanthropic- not clear cut The willingness of customers to consumer the product

The more URGENTLY must stakeholder claims be met in order to avoid detrimental impacts on the rms performance.

Employees Communities

Carroll's Pyramid

Moral Legal Economic

Expected to behave ethically Expected to follow laws Produce goods for prot, benet shareholders

Not clear cut "subversive" -Friedman

Stakeholder Theory
A relationship among social actors in which one can get another to do something that the latter would not have otherwise done. A generalised perception that actions are proper or appropriate within some socially constructed system of norms, values or beliefs. The degree to which stakeholder claims call for immediate action, determined by time sensitivity and criticality.

Why do stakeholders matter?

The willingness for employees to work The willingness for investors to invest

Power "Enlightened Self Interest"-Carroll Legitimacy Attributes of Stakeholders

Stakeholder Salience

Urgency

Corporate Social Responsibility

Institutional Theories
The action itself has intrinsic value

CSR is Self-Interested

CSR related to increase protability

Eg: Insurance company advertising how res can be prevented- aimed at increasing protability through reduced claims

Before stakeholder theory, managers had a duty to stockholders. Stakeholders changes that and suggests managers have a duciary relationship with stakeholders These stakeholders have the right to be treated as intrinsically important- Kantian

Stakeholder Theory
Results from both formal and informal pressures on organizations to reect the cultural expectations of the society of which they are a part and of the organizations on which they depend. Firms behave in a similar way to other peer rms e.g. Nestl and Unilever ISOMORPHISM

About tting in, rather than doing the right thing

Coercive

Ethical Theories
The value of actions lie in the MOTIVES rather than consequences Respect rational beings as ends in themselves; They are people so therefore they are important, not because they are young or in need. If the action does not full one's duties, the action is not ethical

results when organizations model themselves on other organizations due to uncertainties in their operating environment (i.e. the practices of competitors).

Mimetic

Isomorphism can be created by three types of pressures: coercive, mimetic and normative These bring pressures to conform

Organisations exist in an environment with NGOs, Government, Competitors. Characteristics of the rm are size, location and industry

The moral worth of an action is determined by the CONSEQUENCES

Behavior is ethically right if its consequences are good and wrong if its results are bad or evil.

Deontological Theories
What decisions say about one's character

Teleological Theories

Is consistent with utilitarianism- greatest good for the greatest number- John Stewart Mill The impacts must be appropriately measured

Issue with utilitarianism: difficult to foresee, and measure outcomes

Normative Stems primarily from professionalization, either resting on education, legitimacy or network.

Legitimacy
Society grants legitimacy and power to business. In the long run, those who do not use power in a manner which society considers responsible will tend to lose it. EG: Right to breath fresh air To have rights, someone much have a duty Which rights are more important than others?

People disagree on topics

Virtue Ethics Rights

Frameworks:

Aristotle dened virtue as the mean or an optimal balance between two extremes that one should seek- e.g. bluffing and boasting in a negotiation What one party might deserve, another party has a responsibility to provide

If central stakeholders lose condence in the rms performance, legitimacy may be withdrawn, as the stakeholders refuse to provide their share of reciprocal benets.

Theory of Justice
Companies should respect and protect individual's rights

Fairness and equity in decision making