The announcement of Toyota, the world’s biggest car manufacturers claimed by Gibbs (2014), to cease its production in Australia by 2017, has been brought to national attention involving Federal government, individual workers, workers union and more, as the decision will undeniably constitute some difficulties to the country. To analyze and evaluate the consequences of this decision, the two models of corporate social responsibility that are Shareholder and Stakeholders theories have been taken into account in order to have a better understanding in areas of social responsibility holding by each particular member of the society. Each theory contains a different view of responsibility; the shareholder theory focuses on shareholders’ profit maximization, while the stakeholder theory looks at the wider view of taking each stakeholder’s interest into the equation. The decision made by Toyota clearly has impacts on the society, and undoubtedly leaves the company to hold responsibility more or less. However, considering the professional roles of the Australian government and workers union, they are also responsible for the decision. This essay evaluates the positive and negative consequences in regard to the decision made by Toyota to end their Australian car-making and also examines the shareholder and stakeholders theories to identify the role of social responsibility that is borne by these three sections; Toyota, Australian Government and Australian manufacturing workers union.
The story begins with the media statement from Toyota earlier this year to stop its vehicles manufacturing, as well as the production of its cylinder engines, in Australia by the end of 2017, and operate in Australia only as a national sales and distribution co...
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...ve the company profits, and under a legal framework established by the federal government to control the acceptable business behavior that somewhat affects the society. On the other hand, the second model, suggested by Edward Freeman, is the stakeholder theory or the wide view that generates the opposite idea of socially responsible behavior of a corporation. The theory argues that the shareholders-centered idea is incomplete, since there are stakeholders, who are affected by a business decision and also can affect a corporation involved (Fassin, 2012). By definition, according to Beauchamp et al. (2009, p.61), the parties, which have a stake; an investment, benefit, any claims for considerations or influences in the activities that make up the business are defined as stakeholders. This includes stockholders, employees, customers, managers, suppliers, local community
Ciulla, J. B., Martin, C. W., & Solomon, R. C. (2007). Is "The Social Responsibility of Business... to Increase Its Profits"? Social Responsibility and Stakeholder Theory. Honest work: a business ethics reader (pp. 217-253). New York: Oxford University Press.
Furthermore, he believed that any corporation assuming a more socially responsible attitude would be met with economic limitations, rendering them less competitive in the market area (Friedman, 1970). R.E. Freeman’s ‘Stakeholder theory’ is often seen as a better alternative to Friedman’s ‘Shareholder primacy theory’. Both the Stakeholder theory and Shareholder theory are normative theories explaining what a corporations social responsibilities ought to be and both adopt a similar stance on management’s accountability (Smith, 2003). However, the Stakeholder theory states that a manager’s duty is not only to focus on shareholder’s interests, but also to balance them against the interests of the company’s other stakeholders. Freeman believes that managers should take into account their customer’s, supplier’s and employee’s interests, even if it brings about a decrease in shareholder returns (Smith, 2003). This is being expanded on because Freeman believes that if Friedman were alive today, he would be a supporter of his Stakeholder Theory. Simply because, in today’s day and age, globalization and increased competition in the markets has led to corporations having to rely not only their shareholders for support but on all their stakeholders (Makower,
It was after 1980, the stakeholder theory emerge and interpret as a challenge and debates either to be injected into company operation and responsible to meet the demands of both shareholders and society (Carroll, 1999). The debates continue but after 2008 financial crisis, the stakeholder theory evolve as a core concern to every firm and it discipline are known as Corporate Social Responsibility (CSR) (Leeson, 2015).
In Edward Freeman's A Stakeholder Theory of the Modern Corporation he suggests a transformation of the corporate system by replacing the notion that managers have a duty to stockholders with the concept that managers bear a fiduciary relationship to stakeholders (56). In its narrow definition stakeholders refer to customers, suppliers, management, owners, employees and the local community- those that are vital to the survival and success of the corporation. This direct approach of focusing on the interests of all those that are vital to its survival embraces all of the elements that have evolved in our society as a result of the absence of direct concern or lack of morality for the stakeholders in the Stockholders Theory.
Hence, the stakeholders which are described as those who are affected by the organisation performance ,actions and duties and those actions includes employees, clients, local community and investors as well. The theory of stakeholders also suggests that it is the responsibility of firm to make sure no rights of stakeholders are dishonoured and make decisions in the interest of stakeholders which is also the purpose of stakeholder theory to make more profit and balancing it while considering its stakeholders (Freeman 2008 pp. 162-165). In the other words organisation must also operates in a more socially accountable approach by carrying out corporate social responsibility as (CSR) activities.
Freeman, R. E.: 2002. Stakeholder Theory of the Modern Corporation, in T. Donaldson and P. Werhane (eds.), Ethical Issues in Business: A Philosophical Approach, 7th Edition (Prentice Hall, Englewood Cliffs, NJ).
Business organizations regularly run into demands from various stakeholders groups when conducting day-to-day business. These demands are generated from employees, customers, suppliers, community groups, governments, and shareholders. Thus, according to Goodpaster, any person or group of people that can shape or can be shaped by attainment of the objectives by an organization is considered a stakeholder. Most business organizations recognize and understand their responsibilities to these groups and endeavor to honor and fulfill them. These responsibilities are often communicated to the public by a statement of principles or beliefs. For many business organizations, corporate social responsibility (CSR) has become an essential and integral part of their business. Thus, this paper discusses the two CSR views: the classical view and the stakeholder view. Furthermore, I believe that the stakeholder view has brought ethical concerns to the forefront of businesses, and an argument shall be made that businesses would improve both socially and economically if CSR, guided by God’s love, was integrated into their strategic planning.
The idea behind stakeholder theory is that it’s all about making the stakeholder which is the group that has a stake in the company , better off. In this model, corporate responsibility involves anyone who has direct ties to the company. For example, as an employee you are responsible to do things such as “...follow the instructions of management most of the time, to speak favorably about the company, and to be responsible citizens in the local communities in which the company operates.” In return for this form of loyalty and their labor, the company is expected to do things such as be there for them during hard times and other standard employee benefits such as wages and security. The whole idea behind corporate responsibility in this theory is that who you have a responsibility to becomes wider if you focus on the stakeholders. This could work if it wasn’t for the fact that even if you get something out of being invested, sometimes that isn’t enough. For example, if you work for a company and you catch your CEO doing some shady stuff. As an employee, you’re invested in whether or not this company continues to thrive under the current CEO. But your loyalty isn’t deserved if the company is engaging in morally questionable behavior. This idea of corporate responsibility fails when applied to real life scenarios in companies that might engage in misconduct or unethical practices.
Who would have thought that a business as large as Toyota would have stemmed from an Automated Loom invention? Sakichi Toyoda wanted to make a positive contribution to society, with watching his mother wove cloth by hand, Sakichi set out to improve the weave industry. Sakichi invented a winding machine and opened his own business to sell it. However, Japan’s economy took a turn for the worse and Sakichi was forced to resign from the company. Misfortune did not cease him. He continued with his innovations which led to him and his son, Kiichiro, inventing a fully automatic loom. They started their own textile business known as Toyoda Automatic Loom Works.
According to Marjaana Kopperi "business ethics, can simply be defined in terms of social and ecological responsibility of business. According to this definition, business ethics requires that business decisions should not be made exclusively from the narrow, economical perspective, but also the social and ecological concerns should be taken into account. This means that people who work in the business life should consider how their economical decisions affect other people, environment or the society on the whole. In other words, it means that the interests of all the relevant parties, or "stakeholders" are acknowledged and weighed. She also believes that "The "stakeholder" approach to business is especially made known by Kenneth Goodpaster who defines the term as follows: "A stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization's objectives." As examples of such stakeholder groups Goodpaster mentions employees, suppliers, customers, competitors, governments and communities."
So before we go in greater detail on the different perspectives related to social responsibility, one might question the meaning of social responsibility. It is generally agreed that social responsibility is defined as the business obligation to make decisions that benefit societ...
Toyota seeks to revitalize their venture spirit by reforming their consciousness in light of the Global Vision through other efforts. Toyota Company has mostly focusing on the areas of development, design and procurement. As an example Toyota has been creating innovative synthesis of development and design through a new car making policy building better cars. By introducing different cars that meet local needs in rapidly growing emerging markets, the executive seeks on an increase in the share of Toyota global sales made up by emerging
Stakeholders are those groups or individual in society that have a direct interest in the performance and activities of business. The main stakeholders are employees, shareholders, customers, suppliers, financiers and the local community. Stakeholders may not hold any formal authority over the organization, but theorists such as Professor Charles Handy believe that a firm’s best long-term interests are served by paying close attention to the needs of each of these stakeholders. The modern view is that a firm has responsibilities to all its stakeholders i.e. everyone with a legitimate interest in the company. These include shareholders, competitors, government, employees, directors, distributors, customers, sub-contractors, pressure groups and local community. Although a company’s directors owes a legal duty to the shareholders, they also have moral responsibilities to other stakeholder group’s objectives in their entirely. As a firm can’t meet all stakeholders’ objectives in their entirety, they have to compromise. A company should try to serve the needs of these groups or individuals, but whilst some needs are common, other needs conflict. By the development of this second runway, the public and stakeholders are affected in one or other way and it can be positive and negative.
When the problem became serious two main views formed: the “narrow” view and the “broader” view, based on different ideas. The “narrow” view is based on the proposition that corporations have no social responsibility and they have only one main purpose, to make a profit (Friedman, 1970). So corporations should remain socially independent and all conflicts must be solved through the individual responsibility concept. On the contrary the “broader” view states that corporations have social obligations as all existing participants of market, persons and entities are tied together and are mutually dependent. So corporations cannot ignore some serious events or problems, which take place, and must help society, as profit is not their single purpose.
Toyota Motor Corporation is one of the largest automakers in the world. At its annual conference in Tokyo on May 8, 2008, the company announced that activities through March 2008 generated a sales figure of $252.7 billion, a new record for the company. However, the company is lowering expectations for the coming year due to a stronger yen, a slowing American economy, and the rising cost of raw materials (Rowley, 2008). If Toyota is to continue increasing its revenue, it must examine its business practice and determine on a course of action to maximize its profit.