Page 142 - Introduction to Business

116 PART 1 The Nature of Contemporary Business

Case in Point

The Supervisory Board at DaimlerChrysler

The supervisory board, or board of representative from the German Metalworkers’ Union
directors, at DaimlerChrysler Corpora- in Germany.
tion, one of the world’s largest automobile compa-
Source: www.daimlerchrysler.de/company/supervisory/
nies, has according to German codetermination law supervisory_e.htm (accessed June 3, 2004).
20 members, 10 of whom are elected by the share-
holders and 10 of whom represent the employees. Questions
The shareholder-elected representatives include lead- 1. Do you think union and other employee represen-
ing academics and business executives from through- tatives should be members of corporate boards of
out the world, such as the chairperson of Nortel Net- directors?
works Corporation, the former chairperson of 2. To what extent should the DaimlerChrysler board of
Dresdner Bank, and the former CEO of Xerox Corpo- directors have representatives from both Germany
ration. The employee members represent employees (Daimler) and the United States (Chrysler)?
from throughout the worldwide operations of the 3. Why do you suppose German law is so encourag-
company, including a representative from the United ing of stakeholder representation on corporate
Autoworkers Union (UAW) in the United States and a boards?

Companies taking a stakeholder orientation toward their employees care
about them and make a special effort to look after them. The classic example,
perhaps, is that of Malden Mills in Methuen, Massachusetts. In 1995, a fire
burned the company facility to the ground, putting 3000 people out of work. The
company’s owner and CEO Aaron Feuerstein, however, kept them all on the pay-
roll with full benefits for three months. In explaining his decision, Feuerstein
simply said, “I have a responsibility to the worker, both blue-collar and white-
collar.” 32

Shareholders
Even under a stakeholder model of business governance, a company’s shareholders
remain its most important constituency. The difference between the stakeholder
and shareholder governance models is that under the stakeholder model, share-
holders are not the only important constituency.

reality Can you think of a company you interact with that goes especially out
CH ECK of its way to assist its customer stakeholder group?

Societal Responsibility Model of Business Governance

LEARNING OBJECTIVE 6
Describe the societal responsibility model of business governance.

societal responsibility model of The societal responsibility model of business governance goes a step beyond the
business governance The business stakeholder model and says that businesses operate for the benefit of, and have a
governance model operating from the
premise that a purpose of business is to responsibility toward, not just stakeholders but society in general. Take, for exam-
benefit society at large ple, the case of SC Johnson Company, the family-owned company that makes such
well-known household products as Johnson’s Wax, Raid, Pledge, and Glade. In 1975,

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