University of Texas at Tyler

1) Conservation of Economic Value

Take at Figure 1. This is a modified circular flow diagram (like you might see in a macroeconomics course). For a brief introduction to (or review of) circular flow diagrams, go here: (Links to an external site.) (and/or google the phrase “circular flow diagram”).

Fig 1 Systemic Analysis.jpg

Firms engage in exchanges to secure labor inputs, to secure capital, and to sell their output (goods/services). Inter-firm transactions are ignored (because we’re talking about firms in a collective sense), and there are a few other simplifications (e.g. the way government and the “rest of the world” are represented).

Think for a minute about what it means for economic value to be transferred in a voluntary exchange. For example, if I go to a store and buy a shirt that I feel is worth $30 (in other words, I am indifferent about whether or not I have the shirt or I have $30), and the shirt costs $20, then I come away feeling $10 richer (this is referred to as consumer surplus). In this exchange, $10 of economic value is transferred to me, the customer. The same principle can be applied to exchanges with labor and exchanges with capital.

The notion of conservation of economic value suggests that if a firm creates economic value, it must “go” somewhere (it doesn’t just disappear), and there are only three places (or exchanges) where it can go. This implies that created economic value has to go to either labor (in the form of wages that are above the minimum value that labor would have accepted or that are considered to be “fair” based on norms or societal standards), to customers (in the form of consumer surplus, as illustrated by the shirt example above) or to those who have supplied capital (the “owners”) in the form of return on investment above the minimum they would accept. It is assumed that the company receives collective inputs (or public goods, subsidies, etc.) that are equal to the value of any taxes paid, and any transactions with the “rest of the world” are ignored.

From your reading of the case materials (in the Getting Started thread), here are a few questions to get the discussion going:

  • What is economic value?
  • How is economic value created?
  • Once economic value is created, who gets it?
  • What does it mean for value to go to labor, customers, and/or investors? What would (or does) that “look like” in each case? How would you be able to tell if these groups were receiving economic value from the organization?

2) Where Does Economic Value Go?

In a properly functioning economic market, where does the economic value created by firms go? In other words, who gets it? Why?

Think about the phrase “properly functioning economic market” in the previous sentence. What does this mean? This assumption (“in a properly functioning economic market. . .”) is intended to imply that Figure 1 is a closed system (i.e. that it’s possible, for example, for individual firms to operate in a market context without producing externalities, positive or negative). Is this really possible? For example, given that firm behavior has the potential to contribute to the stability (or instability) of the larger economic system itself, doesn’t this imply that firms always have some systemic or social responsiblity?

Systemic analysis is about understanding the role of firms in the larger social system. Take a look at the rectangle labeled “firms” in the above sketch. What kind of control, if any, should society be able to exercise over what goes on in this box? How can (do) firms exercise influence over society with regard to societal attempts to control firm behavior (see arrows #4 and #5 in Figure 1)?

3) It’s Complicated

The following articles do a good job of illustrating what the contours of the academic discussion about the role of business and society looks like (at least the dialogue in scholarly journals). You don’t need to read all these articles. Skim one or two and see if you can find something you think is interesting to comment on (and then comment on what other students have posted).

Freeman Wicks Parmar 2004 Corporate Objective.pdf download

George 2014 Compassion and Capitalism.pdf download

Jensen 2001 Value Maximization.pdf download

Jones et al 2016 Social Welfare.pdf download

Porter Kramer 2011 Shared Value.pdf download

Sundaram Inkpen 2004 Corporate Objective Reply.pdf download

Sundaram Inkpen 2004 Corporate Objective Revisited.pdf download 

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University of Texas at Tyler

This is a response to ONE group member’s post of my choice). should be 300-400 words (excluding references), should contain 1 internal reference (a reference to a textbook page) and 1 external reference (a reference to a business journal/magazine article.internal reference is :Northouse, P. G. (2016). Leadership: Theory and Practice. Sage Publications.

Below is the student post,please respond following the above guidelines

What are special traits and skills (that are different from a “face-to-face” leader) that a virtual leader should possess? I believe what a virtual leader should possess different than a face-to-face leader in regards to trait theory is motivation, sociability, persistence, responsibility and self-monitoring among others. However, I believe these referenced here are what virtual leaders must possess because they deal with a different kind of atmosphere than when in person. Although any one of these traits can be use in any setting, they are crucial to the virtual world. The ones that are named here tend to deal with the person themselves in order to gain a better understanding of what is expected of them in a virtual non-personable setting. As far as skills go human skills by far and large are at the top because they have to deal with people and how they act and react to things. In regards to human skills they are equally dispersed across the organization at various levels of management.

Which leadership style will be most effective in leading a virtual team? Short answer is it all depends on the specific situation, to only name one style because I do believe that more than one style could be and may be effective. However, I do believe that being in a virtual team environment an S2 would be most beneficial because it gives directives and supportive behavior in order to be successful while not in person. “The leader focuses communication on both achieving goals and meeting followers’ socioemotional needs.” (Northouse, 2016, p. 94) Some people work better alone and others in a group setting. This style would be beneficial for the ones that do like working alone because it will allow the leader to closely monitor them as needed to ensure compliance.

Share your personal experience where applicable. In the world of virtual team meetings, they are different in the scope that you are not in person and thus the physicality is taken away. In the past 12-16 months this has been the normal routine for many and most leaders. Leaders must rely on a different approach to everyone based on the fact that many are working from home. For me I am in-person type of person because I enjoy the close-knit relationships you can form being in person. In a virtual setting these are possible, yes, but very difficult. The nurturing piece is quite different. Oneself must also be mature enough to take on such tasking as holding and facilitating virtual meetings. In the article Situational Leadership by (Hersey and Blanchard 1976) maturity is defined in Situational Leadership Theory as the capacity to set high but attainable goals (achievement-oriented), willingness and ability to take on responsibility, and education and/or experience of an individual or a group.


Northouse, P. G. (2016). Leadership: Theory and Practice. Sage Publications.

Hersey, Paul and Ken Blanchard. 1976. “Situational Leadership.” Center for Leadership Studies.

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Final Project (Persuasive Speech“Leaders in Times of Crisis –What would I Do as a Leader during a crisis situation”). This is the end-of-the-course individual project that will aim at showcasing your leadership skills in times of crisis.A crisis is the single most difficult challenge for anyone. No one is ever ready for the unexpected, especially when it comes in the form of a virus that takes the entire world by storm.Most of us have been confused and scared. In crisis situations, we often rely on leaders as a source of strength, hope and direction. That is why leading in crisis can be particularly challenging , as leaders have to demonstrate extraordinary forethought and competence (e.g., skills approach), compassion and care (e.g., servant leadership), a clear direction despite an unprecedented situation (e.g., transformational leadership) or an ability to look inward, reflecting on what needs to be done and inspiring others to join in(e.g., charismatic leadership).How would you lead in a situation of crisis? Which leadership style(s) would you rely on and which decisions would you make? For this final project, “take” a role of a leader (e.g., U.S. President, a company’s CEO, a state’s governor, a team manager etc.) and make a persuasive speech to your respective audience (U.S. people, employees and customers, state residents, group members etc.) to address the crisis situation. If you are currently a leader (a director, manager etc.), you can use your current role and environment as the context for this project. Your speech should not only focus on the description of the severity of the crisis and its effects on your organization/people but (most importantly) on the actions you encourage everyone to take to have the best possible outcome. Examples of crisis situations(different levels of severity):COVID-19 pandemic, winter storm and its effects on the company, cybersecurity breach, employee misconduct, discrimination, product recall, safety violations, etc.). Here are some steps that will help you prepare your speech.1.Decide on a specific leadership role you would like to take (e.g., U.S. President , a CEA, a restaurant’s owner, etc.)and your audience to whom you will address your speech as the content of your speech would vary based on your audience. 2.Start with a brief description of the crisis situation. The best approach would include a mix of factual information and current and projected consequences for your institution/people. 3.As a leader, take a position on the issue and defend your decision in light of your leadership philosophy. Prepare a persuasive speech in which you would need to a) propose 1-3waysof addressing the issue, and b) justify the choice of your solutions. In your suggestions/speech follow a specific leadership style (or a combination of them). Make sure you very well understand the selected styles and employ characteristics/strategies associated with those styles in your speech (e.g., if you rely on transformational leadership make sure you very well communicate the ways how you encourage, inspire and motivate employees to innovate and create change etc.).Adhere to the style(s) that connects best with you (who you are as a leader or who you are aspired to be) as well as with the situation. You do not need to explain why you selected a particular style(s) but you will need to make sure the style would be recognizable from your speech/proposed actions.4.Record a 5-10 minute video of your speech [videos that exceed 10 minutes will result in loss of points]. Use visual aids of your choice (power point, videos, graphics, etc.). Be as creative as you can. Use motivational techniques that will help you convince others in your 5 rightness. The main goal of your speech is to be persuasive and convince the audience that the problem you selected is critical and warrants immediate attention and your proposal is the right one to implement. The main goal of this project is to apply the leadership theories learned in class to practice effective leadership skills to be able to influence others, utilizing your social capital, expertise and ability to grasp the entirety of the complex situation.

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