Answers to Chapter Discussion Questions

CHAPTER 2 STAKEHOLDER ANALYSIS

1. Several issues are worth considering regarding objections to a stakeholder worldview. First, investments in stakeholder relationships may take resources away from other potentially worthwhile opportunities and/or reduce the pool of funds available for compensation of owners and managers. Second, the input/output model is a serviceable approximation for the functioning of the firm, and in some cases may be all that is needed to solve the problem at hand. Some firms, particularly in the earlier stages of their development, may not need to have an intense focus on stakeholders not described by the input/output model.
2. Many empirical studies suggest that attention to stakeholder relationships can be financially beneficial to the firm. For example, Orlitzky, Schmidt, and Rynes (2003) find a general positive relationship and address the issue of causality. Edmans (2011) shows that companies with superior employee relations have a higher propensity to deliver earnings above Wall Street forecasts. Guenster, Derwall, Bauer, and Koedijk (2010) report that companies with superior sustainability policies have higher returns on capital. All of these studies suggest that investments in stakeholder relationships can yield tangible financial benefits.
3. Stakeholder theorists generally agree on two primary points. First, virtually all stakeholder theorists agree that the company is in some way accountable to stakeholders ...

Get Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.