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Corporate Social Responsibility (Subject) / Lecture 5 - Employees, Consumers & Suppliers (Lesson)

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• Costs to doing business Transactions costs: Costs of getting information Costs of findings partners for exchange Costs of writing contracts Costs of defection Costs of coordination
• Cost of contracting increasing when there is Contractual incompleteness Complex transactions Hold-up problems Power inequality Monopolies Lock-in problems Asymmetric information
• The traditional corporation Industry domination by a few ‘giants’ Vertical integration/conglomerates Competition based on scale and scope Few outside options for suppliers and employees Concentration of power Ownership of inanimate assets for competitive survival
• The modern enterprise The distinction between residual and fixed claimants is blurring Importance of a stakeholder group depends on its extent of firm-specific investment Power, and as a consequence, rents are diffused throughout the firm Maximization of shareholder value ≠ Maximization of enterprise value
• Workers rights Right to freedom from discrimination Right to privacy Right to due process Right to participation and association Right to healthy and safe working conditions Right to fair wage Right to freedom of conscience and speech
• Two main ethical issues in marketing Individual level Misleading & deceptive practices Social level Aggregate social and cultural impact
• Ethical issues in supplier management Arm’s length, transactional relationships: Misuse of power Partnership-based relationships: Conflicts of interests
• Consumer rights Consumer rights are inalienable entitlements to fair treatment when entering into exchanges with sellers
• Deception Occurs, when a marketing communication either creates or takes advantage of a false belief that substantially interferes with the ability of people to make rational consumer choices
• Classical economic view: Residual vs. fixed claimants Owners Residual claimants due to the ownership of the firm bear residual risk typically bring the most important source to the table Stakeholders fixed claimants due to contractual relationship to the firm bear little risk
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• Key changes technological change require more skilled labor improved access to finance Cross-border trade led to more competition Break-up of vertically integrated firm (= firma kauft zB. Zulieferer) employees have more outside options innovation is key for competitive survival

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