Article Summary
Article 3
The article reports a case of Santos shareholders, one of the largest Australia's oil and gas firms, pushing for climate change measures. According to the article, nearly half of the shareholders demanded commitment for strong emission-reduction targets. The resolution was proposed by one of the company’s ethical investors, the Australian Center for Corporate Responsibility, which had a strong backing of both local and overseas large influential proxy firms. The move marked the highest ever resolution passed amid to fulfill global climate change goals.
As the report further demonstrates, the concerned stakeholders were motivated by the growing damage the oil and gas industry has on the planet. The decision indicates that climate change is a serious topic for stakeholders today. Because of this, the company’s board is taking industry-leading actions in collaboration with its stakeholders towards reducing emissions. Also, there is growing pressure on investors of such companies to embrace climate change measures.
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Article 5
The article reports AGL's case, Australia's heaviest greenhouse emitter, and its stakeholders' need to cut on emissions. According to the article, the company will face a move by the stakeholders to close some of its coal-powered plants to limit the impact of climate change. In particular, the stakeholders will demand the closure of power plants in New South Wales and Victoria by 2036, which is considerably shorter than its plans to close some of its plants by 2048.
The company serves more than 3.7 million customers in Australia, making it one of the most important power suppliers. However, it emits approximately 42 million tons of carbon, the most emissions in the country. The motion will be filed by environmentalist stakeholder, Australian Center for Corporate Responsibility. The pressure has seen the company become the first ASX-listed firm to tie its long-term executive bonuses to climate goals. Also, its expenditure on sustainability has grown from 25 percent in 2013 to 70 percent.
Theory
Stakeholder Theory
The theoretical model stresses the interconnected relationship between an organization and its stakeholders, including customers, investors, suppliers, government, and communities. R. Edward Freeman proposed it in 1984 as a theoretical model of business ethics and organizational management, examining the moral and values of running a business entity (Freeman & Dmytriyev, 2017). The model seeks to define who constitutes the stakeholder of a company and further examines the conditions under which managers can treat these stakeholders. It is a prominent corporate social responsibility business theory in the world today (Jones, Harrison, & Felps, 2018). The model has widely been applied in the modern business environment to study business ethics and evaluate the sustainability of shareholders' wealth. There are two branches of stakeholder theory – ethical (moral) and managerial.
The managerial branch is concerned with identifying key stakeholders and their role in a company. According to the stakeholder theory's managerial branch, stakeholders exist in two groups – internal and external stakeholders. Examples of the former include employees, management, and owners (Freeman & Dmytriyev, 2017). The latter includes customers, suppliers, creditors, society, and the likes. These stakeholders are affected differently by the decisions and actions a company takes. The ethical or moral branch is concerned with business ethics as the primary objective. According to the branch, organizations should operate that benefits all stakeholders apart from investors and shareholders. It ensures that, in as much as a company seeks to maximize the wealth of shareholders, it should do son in ways that are not harmful to other stakeholders, including the communities.
Public Interest Theory
Public interest theory is a model of regulation that provides a framework for protecting the general public and addressing their interests and concerns. The theory suggests that economic regulation should promote the welfare of the general public instead of addressing the interests of a few stakeholders. For example, a government can establish social and economic regulations to realize the achievement of goals such as stabilization, fairness, just, and efficiency in the distribution of resources (Hantke-Domas, 2013). The relevance of the theory in the modern economy is that it has become intensively competitive. As a result, some firms are resulting in unethical approaches to profit their investors. Essentially, the law stresses on the relationship between public interest and law in the sense that governments should, at all times, prioritize public interests in its regulatory frameworks.
According to the model's principles, government regulation is the key to overcoming undesirable market practices and outcomes. Government intervention in the form of regulation is one of the effective ways of preventing implications of imperfect competition, increased corporate pollution, exploitation of resources. Established in the 1960s, the theory has gained massive consideration with the increased adoption of democracy as a form of governance in most parts of the world (Hantke-Domas, 2013). A notable application of the model is the regulation of the electricity market in Sweden. It involved studying the determinants of the Swedish Energy Agency's decision in replacing decision-makers by listening to customer complaints. It was discovered that the agency abused customers by overcharging them on electric utilities. Consumer protection act was adopted to protect consumers.
Analysis
Article 3
The stakeholder theory applies to the case covered in article 3 in ways more than one. The problem addressed in article one is that stakeholders, who are not necessarily the owners of Santos company, are pushing for a move to ensure the company operates within business ethics provisions. There is a story emerging in today's corporate environment worldwide – the narrative of corporate social responsibility. The story arose from the impacts of activities of a business in the 21 st century. One of the major impacts of corporations has included global warming and climate change, which has stirred multiple discussions globally.
The pressure has been on firms operating in the oil and gas industry to adopt sustainability measures to protect the planet. Various stakeholders, especially those concerned with protecting and preserving the environment, are committed to ensuring companies adhere to environmental standards. As far as Santos Limited is concerned, such a stakeholder includes the Australian Center for Corporate Responsibility. The organization continues to lobby to minimize greenhouse gas emissions by oil and gas firms in the country. Its role, backed by other organizations on Santos, illustrates the principles of stakeholder theory.
As per the stakeholder theory guidelines, an organization must take into account all the interests of its stakeholders before making critical decisions. Often, the board of directors focuses on the needs of a company’s shareholders and investors, that is, to maximize profits and business opportunities (Freeman & Dmytriyev, 2017). Achieving this objective sometimes comes at a price that involves exploiting the environment by engaging in unethical practices. As a result, other stakeholders, such as the general public, are impacted negatively. Stakeholder theory, particularly the moral branch, ensures such wrongdoings do not happen by making sure businesses stick to ethical practices at all times.
Article 5
The central issue in article five is the regulation of emission of greenhouse gases in an attempt to accomplish goals of climate change. Over the years, AGL has been emitting a considerable amount of carbon gases into the atmosphere, thereby contributing to climate change's intensifying implications. The oil and gas company has been doing so for decades without facing consequences of their actions. In other words, the investors of the company have been profiting from the destruction of the planet. They have been gaining wealth at the expense of the welfare of the general public.
It is where the public interest theory comes in. The role of public interest, in this case, is to ensure the activities of AGL are regulated for the benefit of the general public. As the article suggests, such regulation includes the closure of some of the power plants responsible for the emissions. Regulation of the economy and practices of business entities should demonstrate morals, fairness, and justice, elements that are centered on the needs of the public (Li, Long, & Wan, 2019). Currently, climate change is a huge discussion around the world. There is a need for companies to adopt corporate social responsibility in their long-term plans.
The role of government regulations is to ensure that firms that do not volunteer to do so are forced to adjust. Corporate social responsibility is, so far, a voluntary initiative. For companies like AGL, whose business baseline relies on the production and use of gas and oil, would lose profits when they decide to go green (Li, Long, & Wan, 2019). Thus, volunteering to minimize the emissions of greenhouse gases would not be a profitable move. That being so, the Australian government should exercise authority within the principle of public interest theory to ensure that companies like AGL engage in the right business practices that impact the environment positively.
Conclusion
Many theoretical models of business management and organizational practices have been proposed. Some of the theories, such as stakeholder theory and public interest theory, influence corporations' actions and decisions to take. As the discussion illustrates, the theories provide a framework for defining business practices based on their decisions' potential impact.
References
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