Before we analyze the Bayer Crop Science case further, let's step back and look at stakeholder theory as a theory. Believe it or not, this is old of course. In 1970 Milton Friedman, who was a well-known Nobel Prize economists, first argued that the social responsibility of a company is to engage in activities that increase its profits. He does have a proviso to that, that you can engage in whatever you like to increase profits but within the rules of the game. You have to follow the law, open a free competition without deception or fraud. This is a famous, famous quote. People site Milton Friedman as a reason why companies have no business doing anything but pursuing profits. Now we saw in the Merck case, they ignored this. They decided they weren't just in the business to pursue profits, they were in the business of health. That became their dominant mission. They engaged in various projects, some of which make money and some of which do not. If you hold that managerial model, you also usually are thinking hierarchically that you have shareholders, a board, management and employees, very high hierarchically looked. Then outside are the community, the customers, the media, the government, activists, all of those are affecting the company. But by and large, it's the central shareholders and board and management is controlling this company. That gives us another way of looking at that. Now, look at this slide for a moment. It's an inward focus. The shareholders are in the center. What happens? This is completely not theoretical. But think about it. When you're looking at this slide, your eye goes to the middle and you begin to think the shareholders, it's like being the center of the universe, but they are the most important stakeholder in this company. You can't help it because the slide focuses your attention that way. Now, one of the things that comes out of this inward focus is the question of greed, of self-interest of companies. Should companies only pursue their self-interest? If so, in the next slide, I'm going to give you a URL to return to an old movie. Maybe some of you have seen it called Wall Street, in which Michael Douglas is this greedy shareholder who goes in and takes over companies and just decimates them so that the shareholders make the money. He has this very famous speech, ''Greed is good.'' Two interesting parts about this speech. One is that obviously the thesis that greed is good, but this speech came originally from an insider trader named Ivan Boesky, who did so much illegal trading that he was put in jail. But before he went to jail, he went to a shareholder meeting and made the same argument, greed is good. The producer of this film, Oliver Stone, basically did what we tell you students not to do. He copied that speech and put it in the mouth of Michael Douglas. Now, Ivan Boesky didn't sue him for that because he was in jail. But whether was that ethical? Well, probably not because he doesn't footnote that, but anyway, so lookup that and you'll be able to see the interesting and actually charming, although scary, greed is good speech. That's one model, but there's another model. That is called stakeholder model. What is the theory of stakeholder theory that business can be understood as a set of very complex relationships between customers, shareholders or stakeholders, suppliers, employers and employees, and the community. The stakeholder through wants to know how do these all interact to create value. Because without those interactions, the stakeholder model argues, you can't create value. You can't create value just thinking about profits because you have to have good employees. Think about Marx, you have to have good researchers, you have to have customers who buy things [inaudible] Yes you have to have shareholders or owners, yes, you have to have managers to manage this, but you also have suppliers. You have to have good suppliers, because if you don't, you get bad supplies and things aren't so good. That's why Bayer Crop Science wants those seeds. That's a great supply for them. You see, there all these complications. Business can't just be about profit, it has to be about all these stakeholders work together to create value and the value has to be for all of them. Otherwise, it won't work. If I treat my employees badly, they're going to quit or they're not going to work, [inaudible] take all the sick days. You've seen that, you know that. If I don't treat my customers well, they're not going to buy my product. They're going to go someplace else. If I don't treat my suppliers well they don't have to work with me, they'll go someplace else. I will have to treat my shareholders well or they will of course not help me support my company. All of these are important. Here it is, the basic shareholders we always talk about, owners, of course, customers. A small company, it's just the owner, not the shareholder. Customers or clients, employees, managers, suppliers, and of course, the community in which the company operates. Those are all important. We also often talk about the natural environment as a shareholder. Natural environment isn't a person, or a group of people, or organizations. But nevertheless, business depends on the ecosystem and it affects the ecosystem. As you know, it often hurts the ecosystem. Sometimes it's very green and helps ecosystem. That's a very important stakeholder even though it's not a human stakeholder. Perhaps, there's often minutes debate between shareholder theory and stakeholder theory, but maybe they all overlap in the end. Maybe it is that in order to make profits, I depend on all these other stakeholders, and these other stakeholders, of course, depend on the company making money in order for them to keep doing what they're doing. There's this complete interaction and interrelationships between all of these components. The message is, we can't forget any of them, and then the company you have to run it. All of these matter because if you don't run it that way, you will suffer. That's what we'll see later in Module 4 when we look at Volkswagen who forgot about their customers. This is very complex stakeholder map. You don't have to memorize it, but it just shows how companies are so involved with so many people. It's just astonishing. In so many organizations, it's just difficult. Business is difficult and even a little company with just one owner, just a small company. Think about your little grocery. If you have a grocery near you, think about all the interactions that owner has to involve to buy the foods that the owner sells. Even if you have a little kiosk, where do I get my supply? Very complex, even in little tiny, tiny organizations. Big organizations, they've work to do. This is complex. But now look again at this slide, the firm is in the middle and your eyes go to the middle, and that affects your thinking and your decision-making because we tend to put what's in the middle as primary. That's all right, but we must be careful that the firm is not the center of the universe, is just one of thousands of firms, small firms, medium-sized firms, large firms, mom-and-pop perms, single owner firms. We have to be very careful about our thinking to remind ourselves that firms are part of many political economic economies. This is a standard stakeholder map and I put the Bayer in the center here, and you can see that. But what happens if I put the farmers in the middle? Does that affect your thinking? I begin to take the farmers into account and I don't forget them. They become important and I remember about them because I had forgotten about them, and worrying about the crop science and the child labor. All that's important, but the farmers are also key to this case and we might forget them. In the Bayer Crop Science case, let's look at the stakeholders and do a little stakeholder analysis. Who are the primary stakeholders in this case? Well, I think we know, the Indian farmers, the children, Bayer Crop Science itself, the shareholders, Bayer as the company, and obviously, the environment itself is important, although they don't make as much of that in this case as they probably should. But how are each affected? It matters to those Indian farmers that they have this liaison with Bayer Crop Science because they're very supportive of the farmers. It matters that they have someone to harvest their thing, but it matters that those children go to school, and that the rights of the children here that are really a stake. Of course, Bayer is focusing on, they want the best cotton seeds, but if they only focus on that, which will be very profitable, that would be a Milton Friedman perspective, then they will forget about the children and I'm not sure they will always remember they're dealing with Indian farmers who have rights as well. Think about another stakeholder map, what happens if I put a child as a middle? Does that affect your decision-making? I think it does. We forget and then we see this little kid and that kid's been working in the fields, and suddenly we've got issues here. We don't like that. We don't like the idea of five-year-olds, six-year-olds, seven-year-olds working in the field, very uneasy about them.
