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How Should Business Act? - Coggle Diagram
How Should Business Act?
When Ethics and Profit Align
Instrumental Stakeholder Theory
Jones, Harrison, and Felps argue that trust, fairness, cooperation, and information sharing can improve firm performance rather than compete with it.
Strong relationships can improve coordination, knowledge sharing, employee attraction, motivation, and transaction costs, creating advantages competitors may struggle to imitate.
Case
Goldman Sachs: Better treatment of junior analysts could support retention, communication, and work quality, meaning employee welfare and long-term firm performance may reinforce each other.
B Corp: Certification attempts to make social and environmental responsibility compatible with commercial success by formally embedding stakeholder commitments into business structures.
When “Doing Good” Becomes Instrumental
Weitzner & Deutsch: If firms respect stakeholders only because doing so improves profits, stakeholders are still being treated as means rather than ends.
The same outwardly ethical behavior can reflect very different purposes—genuine responsibility or a strategy for reputation, productivity, retention, or competitive advantage.
Case
B Corp tension: Certification can encourage real improvement, but it can also become a reputational signal that makes a company appear more responsible than its underlying practices. 5 The Struggle for the Soul of …
DEI parallel: Lily Zheng argues that employers often purchased visible trainings and messaging because they wanted reputational benefits without changing underlying workplace systems.
Inputs vs. outcomes: Zheng shifts attention away from intentions, workshops, or statements toward measurable results, accountability, incentives, policies, and actual changes in workplace conditions.
Are All Stakeholder Interests Negotiable
The limits of “balance”: Stakeholder capitalism assumes competing interests can be weighed against one another, but some harms may be too serious to offset with benefits elsewhere.
Case
Goldman: High compensation and career opportunities raise the question of whether employees can voluntarily “trade” extreme working conditions for financial and professional benefits.
Private-equity healthcare: Investor returns become morally harder to treat as one interest among many when financial decisions may affect staffing, safety, and essential patient care.
B Corp: Strong performance in some categories may not erase serious weaknesses elsewhere, raising the question of whether responsibility should require minimum standards rather than aggregate scores.
Stakeholder theory may need boundaries where certain harms are non-negotiable rather than assuming enough benefit to one stakeholder can compensate another’s loss.
Who Gets to Define a Company’s Purpose
Management is not the only stakeholder with values: Employees may disagree with how a company uses its products, chooses customers, or publicly positions itself.
Case
Palantir: The company’s political positioning and government work created conflict between leadership’s mission and some employees’ personal values, while also affecting customers and investors.
DEI creates a related problem: When leaders define responsibility mainly through symbolic programs, the people supposedly benefiting from them may have little influence over what meaningful change actually means
A strong corporate identity may build commitment among employees who share it while driving away equally talented employees who reject it.
Stakeholder theory becomes complicated when respecting employees would require limiting strategies or clients that leadership believes are central to the company.