Stakeholder Theory (Freeman, 1984)
Stakeholder theory says that if we focus on the relationships between a business and the people
or groups it affects—or who affect it—we can manage issues more effectively.
From this view, a business is seen as a network of relationships with people who have an interest
in what the business does.
ESG Investment (Environmental, Social, Governance)
These are investments where companies are chosen based on how well they perform in areas like
the environment, society, and good governance—though making money is still the main goal.
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Environmental: Looks at how the business affects the environment, such as carbon
emissions, waste, water use, and clean technology.
Social: Focuses on how the business impacts people, including human rights, workplace
safety, diversity, and community involvement.
Governance: Checks how well a company is managed, including leadership quality,
fairness, anti-corruption policies, and openness.
SRI (Socially Responsible Investment)
SRI supports investments that help achieve sustainable development goals.
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It includes environmental, social, and ethical issues in decision-making, not just profits.
These investments usually last longer than typical ones.
They aim to benefit communities and push businesses to support global goals like
fighting climate change.
SRI often avoids investing in companies or industries considered unethical (like tobacco
or weapons).
Some SRI investments allow small involvement in excluded industries (5–50% of
revenue).
Impact Investing
This type of investing aims to create positive social or environmental change, along with some
financial return.
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Impact is measured and tracked to improve future decisions.
Financial gain is less important than doing good.
Philanthropic Investing
This is like donating money. The goal is to create a positive impact, and there is no concern
about making a profit.
Changing Business Environment
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People now expect businesses to plan for climate-related risks.
There’s more awareness among business stakeholders (like investors, employees, and
customers) about social and environmental issues.
It’s more important than ever for companies to protect their reputation.
Companies are moving from just avoiding risks to actively managing them.
What This Means for Corporate Governance
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Managing a company is becoming more complex.
Corporate Social Responsibility (CSR) is now a key part of how businesses are run.
Good governance means managing relationships with all stakeholders, not just
shareholders.
According to stakeholder theory, business success comes from creating valuable
relationships with those involved.
Main Committees in Corporate Governance
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Audit Committee:
o Checks the accuracy of financial reports
o Reviews internal controls and audits
Risk Committee:
o Looks at the risks the company faces
o Makes sure there's a good plan to manage those risks
Nominations Committee:
o Handles appointments and planning for leadership changes
Remunerations Committee:
o Decides on salaries and compensation for executives
A social enterprise is a business that sells products or services mainly to achieve a social
goal. (SER, 2015)
Social entrepreneurship is when someone tries to create positive change for a group or
society by starting something new, even if it’s risky. (Wee-Liang Tan, 2005)
There are many similar definitions with small differences.
Personal and Business Ethics
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When you think about how you should act—whether at home or at work—you’re
deciding what kind of behavior you believe is right. This is your personal ethics.
It’s important to think about how your actions affect others (stakeholders) when making
decisions.
Business ethics are the rules that guide how companies behave legally and fairly,
especially toward customers, employees, the community, and the environment.
Acting ethically means being honest, fair, and treating others with respect. This helps you
build trust and feel confident in your actions.
Integrity in Business
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Acting with integrity means sticking to your values and doing what’s right—even when
it’s hard.
A person with integrity is reliable, honest, and consistent in their actions.
Good business leaders and companies treat people with fairness and dignity.
Why Ethical Business Matters
1. Companies that behave ethically earn respect and loyalty from customers, employees,
and the community.
2. Ethical behavior helps businesses succeed in the long run.
3. People are more likely to support and work for companies that are honest and socially
responsible.
Compliance: Ethics vs. Law
Ethical Compliance
Doing what is morally right, even if not required by
law
Based on personal or company values
Voluntary, guided by beliefs about right and wrong
Legal Compliance
Following laws and regulations is a
must
Based on official rules and penalties
Required to avoid punishment
Utilitarianism (Mill & Bentham)
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This ethical theory focuses on the results of an action.
A decision is considered ethical if it creates the greatest good for the most people.
Businesses often use this approach in decisions like opening or closing stores, hiring, or
layoffs.
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It’s similar to doing a cost-benefit analysis: weighing the pros and cons to decide what
helps the most people.
Drawbacks:
1. Only the result matters, not the reason behind the action.
2. Might ignore fairness, personal rights, or unintended harm.
Deontology (Kant)
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Deontology focuses on doing the right thing because it’s the right thing, not just
because of the outcome.
Kant believed:
1. We should act with good intentions, not just for self-gain.
2. People should never be treated as tools for personal benefit—they should be
respected as individuals.
In business today:
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A company acts ethically if it benefits others without putting its own interests above
everyone else’s.
While this is a good ideal, many businesses still focus more on outcomes than motives.
Whistleblowing
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Whistleblowing is when someone reports a company for breaking the law or doing
serious wrong.
It’s seen as a public service because it can stop harmful behavior.
However, whistleblowers often face challenges and risks—like losing their job—so it
should be done carefully and with good intent.
What is Corporate Culture?
Corporate culture is the way people behave and work together in a company. It includes the
unspoken rules that shape how employees think and act.
What Influences Corporate Culture?
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The company’s structure (how it’s organized)
How work is done (systems and processes)
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The attitudes and behaviors of employees
The company’s values, traditions, and history
The leadership and management style
Why Corporate Culture Matters
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People naturally want to fit in with their group—just like in families.
Employees usually feel most connected to their close teammates.
Understanding the company’s culture helps everyone work together toward shared goals.
If strategies don’t match the culture, people may resist change.
A good culture supports employee well-being and makes the workplace feel safe and
positive.
Cradle to Cradle (C2C) Idea
C2C is a design idea that:
1. Separates materials into two loops:
o Biological (can safely return to nature)
o Technical (can be reused in industry)
2. When kept separate, materials can be reused over and over—turning waste into a
resource.
3. This focuses on being eco-effective (creating positive environmental impact), not just
eco-efficient (reducing harm).
Circular Economy (CE) – Ellen MacArthur Foundation
The circular economy is based on three main principles:
1. Eliminate waste and pollution – Design things so they don’t produce waste or harm the
environment.
2. Keep products and materials in use – Reuse, repair, or recycle materials so they keep
their value.
3. Regenerate nature – Help nature recover and thrive.
Decoupling
Decoupling means breaking the link between using more raw materials (like oil or water) and
growing the economy (GDP). It’s about using fewer natural resources while still growing
businesses.
Business Model Basics
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A Business Model (BM) explains how a company creates, delivers, and earns from
value.
Business Model Innovation (BMI) means changing a business model in response to
challenges or new opportunities.
A Circular Business Model (CBM) is one that supports reuse, recycling, or
regeneration, reducing waste and environmental harm.
Circular Value Hill
Types of companies in the circular economy:
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Uphill – Focus on designing long-lasting, reusable products.
Tophill – Help customers use products better and longer.
Downhill – Recover value after a product’s first use (e.g., recycle or refurbish).
Network Organizations – Support the entire system with services, materials, and
information.
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a) Sustainability
We should only use resources that nature can replace or regenerate.
b) Accountability
Organizations should take responsibility for how their actions affect people and the
environment.
c) Transparency
Organizations should be open and honest, making it easy for the public to see the effects
of their actions and access the facts.
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