0Summary of Chapter

10. Stakeholders are individuals or groups that have an interest, claim, or stake in the company, in what it does, and in how well it performs. 20. Stakeholders are in an exchange relationship with the company. They supply the organization with important resources or contri!utions" and in exchange expect their interests to !e satisfied !y inducements". #0. $ company cannot always satisfy the claims of all stakeholders. The goals of different groups may conflict. The company must identify the most important stakeholders and give highest priority to pursuing strategies that satisfy their needs. %0. $ company&s stockholders are its legal owners and the providers of risk capital, a ma'or source of the capital resources that allow a company to operate its !usiness. $s such, they have a uni(ue role among stakeholder groups. )0. *aximizing long+run profita!ility and profit growth is the route to maximizing returns to stockholders, and it is also consistent with satisfying the claims of several other key stakeholder groups. ,0. -hen pursuing strategies that maximize profita!ility, 00a company has the o!ligation to do so within the limits set !y the law and in a manner consistent with societal expectations. .0. $n agency relationship is held to arise whenever one party delegates decision+making authority or control over resources to another. /0. The essence of the agency pro!lem is that the interests of principals and agents are not always the same, and some agents may take advantage of information asymmetries to maximize their own interests at the expense of principals.

00. $ num!er of governance mechanisms serve to limit the agency pro!lem !etween stockholders and managers. These include the !oard of directors, stock+!ased compensation schemes, financial statements and auditors, and the threat of a takeover. 100. The term ethics refers to accepted principles of right or wrong that govern the conduct of a person, the mem!ers of a profession, or the actions of an organization. Business ethics are the accepted principles of right or wrong governing the conduct of !usinesspeople, and an ethical strategy is one that does not violate these accepted principles. 110. 1nethical !ehavior is rooted in poor personal ethics2 the ina!ility to recognize that ethical issues are at stake, as when there are psychological and geographical distances !etween a foreign su!sidiary and the home office2 failure to incorporate ethical issues into strategic and operational decision making2 a dysfunctional culture2 and failure of leaders to act in an ethical manner. 120. 3hilosophies underlying !usiness ethics include the 4riedman doctrine, utilitarianism, 5antian ethics, rights theories, and 'ustice theories such as that proposed !y 6awls. 1#0. To make sure that ethical issues are considered in !usiness decisions, managers should a" favor hiring and promoting people with a well+grounded sense of personal ethics2 !" !uild an organizational culture that places a high value on ethical !ehavior2 c" make sure that leaders within the !usiness not only articulate the rhetoric of ethical !ehavior !ut also act in a manner that is consistent with that rhetoric2 d" put decision+making processes in place that re(uire people to consider the ethical dimension of !usiness decisions2 e" use ethics officers2 f" have strong corporate governance procedures2 and g" !e morally courageous and encourage others to !e the same.