CHAPTER 2

“Stakeholder Relationship, Social Responsibility, and Corporate Governance”

a. To identify stakeholder’s roles in business ethics

b. To define social responsibility
c. To examine the relationship between stakeholder orientation and social
responsibility
d. To delineate a stakeholder orientation in creating corporate social responsibility
e. To explore the role of corporate governance in structuring ethics and social
responsibility in business
f. To list the steps involved in implementing a stakeholder perspective in social
responsibility and business ethics

In a business context, customers, investors and shareholders, employees, suppliers,

government agencies, communities, and many others who have a “stake” or claim in
some aspect of a company’s products, operations, markets, industry, and outcomes are
known as stakeholders.

Ethical misconduct and decisions that damage stakeholders will generally impact the
company’s reputation both from investor confidence and consumer confidence
perspectives.
As investor perceptions and decisions begin to take their toll, shareholder value will
drop, exposing the company to consumer scrutiny that can increase the damage.
Reputation is a factor in the customers perceptions of product attributes and corporate
image features that lead to consumer willingness to purchase goods and services at
profitable prices. Some scandals may lead to boycotts and aggressive campaigns to
dampen sales and earnings. Nike experienced such a backlash from its use of offshore
subcontractors to manufacture its shoes and clothing.
New reforms to improve corporate accountability and transparency also suggest that
other stakeholders including banks, attorneys, and public accounting firms can play a
major role in fostering responsible decision making. Stakeholders apply their values
and standards to many diverse issues-working conditions, consumer rights,
environmental conservation, product safety, and proper information disclosure that
may or may not directly affect an individual stakeholder’s own welfare. We can
assess the level of social responsibility that an organization bears by scrutinizing its
effects on the issues of concern to its stakeholders.

We can identify two different types of stakeholders. Primary stakeholders are those
whose continued association is absolutely necessary for a firm’s survival; these
include employees, customers, investors, and shareholders, as well as the
governments and communities that provide necessary infrastructure. Secondary
stakeholders do not typically engage in transactions with a company and thus are not
essential for its survival; these include the media, trade associations, and special
interest groups.

The degree to which a firm understands and addresses stakeholder demands can be
referred to as a stakeholder orientation. The stakeholder orientation comprises three
sets of activities: (1) the organization-wide generation of data about stakeholder
groups and assessment of the firm’s effects on these groups, (2) the distribution of this
information throughout the firm, and (3) the organization’s responsiveness as a whole
to this intelligence.

SOCIAL RESPONSIBILITY AND ETHICS

The concepts of ethics and social responsibility, we defined as the term social
responsibility as an organization’s obligation to maximize its positive impact on
stakeholders and to minimize its negative impact. Whereas corporate responsibility
needs quantitative credibility, significant aspects are more qualitative in nature:
employee satisfaction, customer motivations, company values, and ethical decision
making processes, for instance. All to some extent can be broken down into
quantitative data, but the essence of them cannot. There are four levels of social
responsibility—economic, legal, ethical, and philanthropic.

A firm’s commitment to corporate citizenship indicates a strategic focus on fulfilling

the social responsibilities that its stakeholders expect of it. Then, for the reputation is
one of an organization’s greatest intangible assets with tangible value.

A stakeholder orientation can be viewed as a continuum in that firms are likely to

adopt the concept to varying degrees. To gauge a given firm’s stakeholder orientation,
it is necessary to evaluate the extent to which the firm adopts behaviors that typify
both the generation and dissemination of stakeholder intelligence and responsiveness
to it. A given organization may generate and disseminate more intelligence about
certain stakeholder communities than about others and, as a result, may respond to
that intelligence differently.

Legal and economic responsibilities are generally accepted as the most important
determinants of performance: “If this is well done,” say classical theorists, “profits are
maximized more or less continuously and firms carry out their major responsibilities
to society.” Some economists believe that if companies address economic and legal
issues, they are satisfying the demands of society and that trying to anticipate and
meet additional needs would be almost impossible. Milton Friedman has been quoted
as saying that “the basic mission of business [is] thus to produce goods and services at
a profit, and in doing this, business [is] making its maximum contribution to society
and, in fact, being socially responsible.” Even with the business ethics scandals of the
twenty-first century, Friedman suggests that although those individuals guilty of
wrongdoing should be held accountable, the market is a better deterrent than new laws
and regulations at deterring firms from wrongdoing. Thus, Friedman would diminish
the role of stakeholders such as the government and employees in requiring that
businesses demonstrate responsible and ethical behavior.

Tanggung jawab hukum dan ekonomi adalah diterima secara umum sebagai faktor
penentu kinerja yang paling penting: “Jika ini dilakukan dengan baik,” kata para ahli
teori klasik, “keuntungan bisa dimaksimalkan atau dimaksimalkan terus menerus dan
perusahaan melaksanakan tanggung jawab utama mereka kepada masyarakat.”
Beberapa para ekonom percaya bahwa jika perusahaan mengatasi masalah ekonomi
dan hukum, maka mereka akan berhasil memuaskan tuntutan masyarakat dan
berusaha mengantisipasi dan memenuhinya kebutuhan tambahan hampir mustahil.
Milton Friedman telah dikutip dengan mengatakan bahwa “misi dasar bisnis adalah
menghasilkan barang dan layanan dengan keuntungan, dan dalam melakukan hal ini,
bisnis menghasilkan hasil maksimal memberikan kontribusi kepada masyarakat dan,
pada kenyataannya, bertanggung jawab secara sosial.” Bahkan dengan skandal etika
bisnis abad kedua puluh satu, Friedman mengemukakan hal itu meskipun orang-orang
yang bersalah melakukan kesalahan harus dimintai pertanggungjawaban, namun pasar
adalah pencegah yang lebih baik dibandingkan undang-undang dan peraturan baru
yang dapat menghalangi perusahaan dari kesalahan. Dengan demikian, Friedman akan
mengurangi peran pemangku kepentingan seperti pemerintah dan pegawai yang
mewajibkan dunia usaha untuk berdemonstrasi perilaku yang bertanggung jawab dan
etis.

CORPORATE GOVERNANCE PROVIDES FORMALIZED RESPONSIBILITY

TO STAKEHOLDERS

To remove the opportunity for employees to make unethical decisions, most

companies have developed formal systems of accountability, oversight, and control—
known as corporate governance. Accountability refers to how closely workplace
decisions are aligned with a firm’s stated strategic direction and its compliance with
ethical and legal considerations.
Corporate governance establishes fundamental systems and processes: for preventing
and detecting misconduct, for investigating and disciplining, and for recovery and
continuous improvement. Effective corporate governance creates a compliance and
ethics culture so that employees feel that integrity is at the core of competitiveness.

IMPLEMENTING A STAKEHOLDER PERSPECTIVE

Step 1 : Assesing the Corporate Culture

Step 2 : Identifying Stakeholder Groups
Step 3 : Identifying Stakeholder Issues
Step 4 : Assesing Organizational Commitment to Social Responsibility
Step 5 : Identifying Resources and Determining Urgency
Step 6 : Gaining Stakeholder Feedback

https://slideplayer.com/slide/6234495/
https://www.slideshare.net/FirdausFitriZainalAb/chapter-2-stakeholder-relationships-
social-responsibility-corporate-governance
https://link.springer.com/article/10.1057/palgrave.abm.9200218
https://uk.indeed.com/career-advice/career-development/sustainability-in-business-
examples
Pertanyaan :
What are the problems with social responsibility? (bagaimana permasalahan dalam
tanggung jawab sosial? )
PERMASALAHAN DALAM TANGGUNG JAWAB SOSIAL (PROBLEMS IN
SOCIAL RESPONSIBILITY)

Tanggung jawab sosial bertumpu pada orientasi pemangku kepentingan dan

perusahaan melihat isu- isu yang lebih luas yang mempertimbangkan kesejahteraan
masyarakat dalam jangka panjang. Hubungan jangka panjang dengan pemangku
kepentingan dapat mengembangkan kepercayaan, loyalitas, dan kinerja yang
diperlukan untuk mempertahankan profitabilitas.
(Social responsibility relies on stakeholder orientation and companies looking at
broader issues that consider the long-term welfare of society. Long-term relationships
with stakeholders can develop the trust, loyalty and performance necessary to
maintain profitability.)

Permasalahan yang umumnya terkait dengan tanggung jawab sosial dapat dipisahkan
menjadi empat kategori umum (Issues generally related to social responsibility can
be separated into four general categories) :
a) isu sosial (social issues) → dalam sebuah perusahaan dagang, membuat produk
pasti ada sisa bahan dan limbah yang bisa menyebabkan pencemaran lingkungan.
Hal tersebut dapat mengganggu aktivitas masyarakat sehari-hari.
(In a trading company, when making products there are bound to be leftover
materials and waste which can cause environmental pollution. This can disrupt
people's daily activities.)
b) perlindungan konsumen (consumer protection) → hak atas keamanan konsumen,
hak mendapat informasi, hak untuk didengar, hak untuk memilih produk, hak
mendapat advokasi, hak untuk dilayani dengan baik, hak untuk mendapatkan
kompensasi ganti rugi dan/atau pengganti.
c) Keberlanjutan (sustainability) → Keberlanjutan dalam bisnis mengacu pada
bagaimana perusahaan mengelola dan mengoordinasikan permasalahan dan
tuntutan sosial, lingkungan, dan keuangan untuk memastikan keberhasilan yang
berkelanjutan, bertanggung jawab, dan etis agar mendorong dampak positif.
(the right to consumer safety, the right to information, the right to be heard, the right
to choose a product, the right to advocacy, the right to be served well, the right to
receive compensation and/or replacement.)
- penggunaan transportasi ramah lingkungan
- program daur ulang
- tempat kerja tanpa kertas
- penghematan energi
- pemanfaatan limbah
- dan bisnis ramah lingkungan
(Sustainability in business refers to how companies manage and coordinate social,
environmental, and financial issues and demands to ensure sustainable, responsible,
and ethical success in order to drive positive impact.)
- use of environmentally friendly transportation
- recycling program
- paperless workplace
- energy savings
- waste utilization
- and environmentally friendly business
d) tata kelola perusahaan → seperti yang kita ketahui bahwa tata kelola perusahaan
digunakan untuk mengelola sumber daya dan resiko secara efisien, efektif, dan
berkesinambungan. Oleh karena itu, prinsip-prinsip yang ada pada tata kelola
perusahaan digunakan sebagai tolak ukur dalam pengambilan keputusan baik dari
pihak eksternal ataupun internal. Akhirnya, para pemegang kepentingan perlu
berperan aktif dalam manajemen dan lingkup sosial perusahaan.
(As we know, corporate governance is used to manage resources and risks efficiently,
effectively and sustainably. Therefore, the existing principles of corporate governance
are used as benchmarks in decision making from both external and internal parties.
Finally, stakeholders need to play an active role in the management and social sphere
of the company.)
Apa hubungan atau keterkaitan antara pemangku kepentingan (stakeholder) dengan
pelaksanaan CSR? (What is the relationship or connection between stakeholders and
CSR implementation?)
Pertanyannya berkaitan dengan jawaban sebelumnya di poin tata kelola. Stakeholder
menentukan bagaimana perusahaan dapat membangun performanya CSR dalam
perusahaan. Kemudian, sudut pandang stakeholder juga akan menjadi pertimbangan
dalam pengambilan keputusan agar memenuhi tanggung jawab sosial dimana
perusahaan akan terikat jika masyarakat mendapat kerugian dan manajemen serta
finansial perusahaan juga akan goyah.
(The question is related to the previous answer in the corporate governance point.
Stakeholders determine how the company can build CSR performance within the
company. Then, the stakeholder's perspective will also be taken into consideration in
decision making in order to fulfill social responsibilities where the company will be
bound if the community suffers losses and the company's management and finances
will also falter.)