Explain the concepts of reliability and validity. As part of your explanation, describe ways that reliability and validity can be measured. The information may come from more than one chapter. Solution Reliability and validity are used for testing or measuring something. For instance, if an english test a candidate for an employment has made is valid, it indicates that the test measures english knowledge in people who present it. The reliability concept is used to tell if the same candidate presents several times the same test, the results would be almost the same. Who may garantee us that the same person could pass the same test again if he has the chance to present it? That would make the test reliable, or not reliable. Broader definitios are given: Reliability: a test is reliable when it measures what it claims to measure, i.e., if a person present the test several times, the results should be almost the same, for it measures a characteristic of a person, which is not meant to change in a short period of time. Factors to consider when assessing if a test is reliable. To measure reliability, a correlation coefficient could be used, a test taker presents the same test several times, and the ratings got are correlated so as to see if there is any change in the final rating or not. It is statistically measurable, and could be done with several people making the same test several times, so as to build a robust correlation coefficient. Validity: the validity of a test tells us if it measures what it claims to. Validity gives you meaning to the test scores, the relations between the qualities measured in the test with the job qualifications and requierements, and tells you which conclusions you can draw from the score of a test and to what degree you can draw them. To measure validity is more complex, though, a great ampount of data would be of use to determine if a test is valid or not for measuring a given characteristic of a person, that is why it is better to use proved methods (valid methods) of measuring a characteristic, as a measure of validity of the test. See more on this webpage: http://www.hr-guide.com/data/G362.htm.

1. Explain the concepts of stake and stakeholder from your perspective as an individual.
What kinds of stakes and stakeholders do you have? Discuss.
Solution
Let us think for a bit about what it means to be a stakeholder in a business or, for that matter, any
other organization. According to the dictionary, the word "stake" can have at least three
different general meanings, each representing a different type of relationship between the
stakeholder and the entity in which a stake exists. A stake is, among other definitions, a claim of
some sort, e.g., of ownership based on a set of expectations related to principles of ethics, such as
legal or moral rights, justice or fairness, the greatest good for the greatest number, or the
principle of care.
Second, a stake can signify that a stakeholder has made an investment, thereby putting
some sort of capital at risk. In this usage, a stake is an interest in or share in some enterprise or
activity that is somehow placed at risk. Thus, the stake can be a prize as in a horse race a share,
or perhaps a grubstake, for which the provider expects a return for the risk taken. Typically, the
type of risk that is under consideration relates specifically to the type of capital invested. Thus,
for example, owners invest financial capital in the firm, while communities may invest social
capital in the firm's local presence or create infrastructure to support the firm's activities.
Employees invest their human capital, their knowledge, and their intellectual energies, all forms
of "capital," in the firm. Customers invest their trust as part of the firm's franchise and hence
their willingness to continue to purchase the goods and services produced by the firm. Suppliers
may invest in specific technology, equipment, or infrastructure so that they can enhance their
relationship to the firm over time and make the bonds tighter. Which brings us to the third
meaning of stake embedded in stakeholder relationships.
The third meaning of stake is a bond of some sort, such as a tie or tether, something that
creates linkages between two entities, such as tangible linkages that bind the two (or more)
entities together (i.e., contracts or long-term relationships for purchasing supplies, as examples)
or intangible. In fact, bonds can come about because of some tangible or intangible investment or
risk taken by the stakeholder in a specific enterprise or activity, which then creates an on-going
relationship. Alternatively, an intangible bond can come about because a stakeholder identifies in
some way with the organization and therefore feels an association with the organization that
potentially creates one of the other types of stakes, a claim or a risk.[i]
Stake as…
Stake is based on…

2. 1.Owner
2.Community
3.Employee
4.Customer
5.Supplier
1.Financial capital
2.Social/infrastructure capital
3.Knowledge/intellectual/human capital
4.Franchise (trust) capital
5.Technological, infrastructure capital
Stakeholder Relationships
Notice that each of the types of stakes identified above creates a relationship between the
stakeholder and the organization in which there is a stake.[ii] For example, owners are clearly
stakeholders. The stakeholder owner, who makes an investment creates a relationship with the
organization in which the investment is made. Similarly, the stakeholder who puts something at
risk to gain possible benefits from an enterprise creates a relationship with that enterprise, as
communities do when they invest in local infrastructure that supports a firm's activities. Bonds
of identity also create on-going relationships. The important point, then, is that whichever
meaning we use to define a stake, being a stakeholder creates an on-going and interactive
relationship between the stakeholder and enterprise or activity in which one has a stake.[iii] The
stakeholder perspective inherently conceives of the firm as a set of linkages among stakeholders,
a network of relationships.[iv]
Stakeholder relationships also create a boundary around managerial responsibilities, so
that corporations do not have to become responsible for all of the problems of society, but only
those that they create or those that affect them. Thus, when we think about corporate
responsibility, we can think of it terms of the public responsibility of managers, which is limited
to the areas of primary and secondary involvement of their enterprises.[v] The principle of public
responsibility, which was developed by Lee Preston and James Post, comes about in part because
companies are granted "charters" to incorporate by the states in which they are established and
in part as a result of the impacts that companies have on their various constituencies. It also is a
result of the fact that corporations, in fact all organizations, are part of and intersect with other
aspects of society.
The scope of managers' public responsibilities is quite wide given the resources that
companies, particularly multi-national companies, command and the resulting power they hold.
According to Preston and Post, management's responsibilities are limited by the organization's
primary and secondary involvement, both of which contain stakeholders to whom the firm must

3. pay attention if it hopes to succeed. Primary involvement arenas are related to the primary
mission and purpose of the firm as attempts to live out its vision in society. Thus, as Preston and
Post state, "Primary involvement relationships, tested and mediated through the market
mechanism, are essential to the existence of the organization over time." [vi]
Primary involvement arenas are those that affect primary stakeholders, i.e., those
stakeholders without whom the company cannot stay in business.[vii] For most companies,
primary stakeholders include owners, customers, employees, and (at least in virtual
organizations) suppliers. Some people even believe that the environment is a primary stakeholder
(although it is not a person or group of people) because it supplies the raw materials necessary to
the company's existence.[viii]
But managerial public responsibilities do not end with primary involvement arenas; they
extend also to arenas of secondary involvement, which includes those arenas and relationships
that affect or are affected by the firm's activities. Secondary stakeholders, by extension, are
those who affect or are affected by the company. Secondary stakeholders may not be in direct
transactions with the corporation or necessary to its survival. Because they can impact the firm or
are affected by the firm's activities, it is important that secondary stakeholders' needs and
interests be taken into consideration in much the way that the needs and interests of primary
stakeholders are.[ix] Thus, the governments that create the rules of the game by which
companies operate, as well as the communities that supply the local infrastructure on which
companies depend can be considered secondary stakeholders.
Stakeholders interact with--or in the case of primary stakeholders actually constitute--
organizations. Thus, for example, activists may attempt to influence corporate environmental
policy but may not be in a position to put the company out of business, making them secondary
stakeholders. Similarly, towns and cities located downstream from a company may feel the
impact of its polluting a river that flows through, and thus are secondary stakeholders. Firms
ignore these impacts at their peril, because as the next section suggests, such secondary
stakeholders can be demanding or dangerous when their needs are urgent, when, for a variety of
reasons, they have power, or if they are inactive (dormant), when they are awakened into action.
[i] See, for a perspective on this, Tammy MacLean, "Creating Stakeholder Relationships: A
Model of Organizational Social Identification -- How The Southern Baptist Convention Became
Stakeholders of Walt Disney," Presented 1998 Annual Meeting of the Academy of
Management, San Diego, CA.
[ii] Thanks are owed to Max B.E. Clarkson for providing a basis for thinking about corporate
social performance in terms of stakeholder relationships. See his article "A Stakeholder
Framework for Analyzing and Evaluating Corporate Social Performance," Academy of
Management Review, 1995, 20 (1): 92-117.

4. [iii] See, for example, R. Edward Freeman's Strategic Management: A Stakeholder Approach.
New York: Basic Books, 1984; and William M. Evan and R. Edward Freeman (1988). A
Stakeholder Theory of the Modern Corporation: Kantian Capitalism. In Ethical Theory and
Business, edited by T. Beauchamp and N. Bowie. Englewood Cliffs, NJ: Prentice-Hall. See also
Max B.E. Clarkson, Max B.E. (1995). A Stakeholder Framework for Analyzing and Evaluating
Corporate Social Performance. Academy of Management Review, 1995, 20: 1, 92-117, and,
more recently, Ronald K. Mitchell, Bradley R. Agle, and Donna J. Wood, "Toward a Theory of
stakeholder Identification and Salience: Defining the Principle of Who and What Really
Counts," Academy of Management Review, October 1997, 22 (4): 853-886.
, Clarkson, and Mitchell, Agle, Wood.
[iv] See Evan and Freeman, 1988, cited above.
[v] The concepts of primary and secondary involvement come from Lee E. Preston and James E.
Post's classic book Private Management and Public Policy: the Principle of Public
Responsibility, Englewood Cliffs, NJ: Prentice-Hall, 1975.
[vi] See Preston and Post, cited above, p. 95.
[vii] This is Clarkson's (1995) definition, 1995, cited above, p. 106.
[viii] For example, Mark Starik, "Should Trees Have Managerial Standing? Toward Stakeholder
Status for Non-Human Nature," Journal of Business Ethics, 1995, 14: 204-217
[ix] Again, the reference is to Clarkson, 1995, p. 107.
Stake as…Claim
Stake is based on…Legal or moral rightConsideration of justice/fairnessUtility (greatest good for
the greatest number)CareRisk
1.Owner
2.Community
3.Employee
4.Customer
5.SupplierInvestment of capital including
1.Financial capital
2.Social/infrastructure capital
3.Knowledge/intellectual/human capital
4.Franchise (trust) capital
5.Technological, infrastructure capitalBonds (tether, tie)Identification (process)Each type of
stake creates a relationship that, when constructive and positive,
is…MutualInteractiveConsistent over timeInterdependent