Transcript Chapter 3
SOCIAL RESPONSIBILITY AND BUSINESS 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 1 Social Responsibility Framework Social Responsibility Defined • Social responsibility – The adoption by a business of a strategic focus for fulfilling the economic, legal, ethical and philanthropic responsibilities expected of it by its stakeholders • Businesses should look beyond their selfinterests and recognize that they belong to a larger group that expects responsible participation. What do you believe organizations should be responsible for accomplishing? Social Responsibility Defined (cont.) • Applies to all types of businesses – – – – Small businesses Large businesses Sole proprietorships Multinational corporations Social Responsibility Defined (cont.) • Fulfills societal expectations – – – – Provides a return on investment for owners Obeys the law and regulatory agencies Acts in a just, fair, and correct manner Promotes human welfare and good will Pyramid of Social Responsibility Social Responsibility Defined (cont.) • Economic – Maintain profitability • Legal – Abide by legal and regulatory influence • Ethical – Ensure just and fair behavior in the workplace • Philanthropic – Promote human welfare and goodwill SOCIAL RESPONSIBILITY AND BUSINESS 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 2 Strategic Management of Stakeholder Relationships Stakeholders • Those constituents who have a stake in, or claim on, some aspect of a company’s products, operations, markets, industry, and outcomes • Companies that operate with a stakeholder orientation recognize that business and society are interpenetrating systems, in that each affects and is affected by the other. Primary Stakeholders • Groups fundamental to a company’s operation and survival – Customers – Employees – Shareholders – Investors – Suppliers – Government – Community • Balancing the needs and perspectives of primary stakeholders is a strategic imperative. Secondary Stakeholders • Groups that may influence and/or be affected by the company, but are not engaged in economic exchanges with the firm: – Media – Special interest groups – General public • These groups are not fundamental to an organization’s daily survival. • They can place significant pressure on a business and therefore, cannot be ignored. Development of Stakeholder Relationships • Relationships are founded on principles of: – Trust – Commitment – Communication • They are also associated with a degree of: – Time – Interaction – Shared expectations • Companies are searching for ways to develop long-term and collaborative relationships with their customers and business partners. Social Capital • An asset, which resides in relationships, that is characterized by mutual goals and trust • Facilitates smooth internal and external transactions and processes The Reactive-DefensiveAccommodative-Proactive Scale SOCIAL RESPONSIBILITY AND BUSINESS 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 3 Corporate Governance Corporate Governance • Corporate governance is the formal system of oversight, accountability, and control for organizational decisions and resources. • Major issues: – – – – – – Shareholder rights Executive compensation Organizational ethics programs Board composition and structure Auditing, control and risk management CEO selection and executive succession plans Models of Corporate Governance • Shareholder model – Maximizes wealth for investors and owners – Develops and improves the formal system of performance accountability between management and the firm’s shareholders – Makes decisions based on what is ultimately best for investors – Focuses on aligning investor and management interests Models of Corporate Governance (cont.) • Stakeholder model – Considers the interests of employees, suppliers, government agencies, communities, and other groups with which the firm interacts – Assumes a collaborative and relational approach to business – Focuses on continuous improvement, accountability, and engagement with internal and external constituents Issues in Corporate Governance Systems • Boards of directors – Independence – Quality and experience – Performance • Shareholders and investors – Shareholder activism – Social investing – Investor confidence Issues in Corporate Governance Systems (cont.) • Internal control and risk management – Internal and external audits – Control systems – Risk management • Financial misconduct • Executive compensation SOCIAL RESPONSIBILITY AND BUSINESS 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 4 Legal, Regulatory, and Political Issues Government’s Influence on Business • Laws are enforced through the judicial system. – Settles disputes and punishes criminals • Corporations have the same legal status as a person. – Can sue – Can be sued – Can be held liable for debt The Rationale for Regulation • Preventing trusts and monopolies from using their market dominance to negatively manipulate output, pricing, and quality • Eliminating unfair competition and anticompetitive practices • Supporting environmental initiatives, equality in the workplace, and product safety • Protecting consumers and business in ecommerce activities Global Regulation • Import barriers – Tariffs and quotas – Minimum price levels – Port-of-entry taxes • Product quality, safety, distribution, sales, and advertising regulation • North American Free Trade Agreement (NAFTA) – Eliminates virtually all tariffs on goods produced and traded between the U.S., Canada, and Mexico • European Union (EU) – Promotes free trade between member nations Benefits of Regulation • • • • • • • • Greater equality in the workplace Safer workplaces Resources for disadvantaged societal members Safer products More information about products Greater product variety Cleaner air and water Preservation of wildlife Deregulation • Removal of all regulatory authority • Belief that less government intervention allows business markets to work more effectively • Many industries have been deregulated. – – – – Trucking Airlines Telecommunications Electric utilities • Critics of deregulation cite higher prices and poorer service/quality. Corporate Approaches to Influencing Government • Lobbying – Process of persuading public and/or government officials to favor a particular position in decision making – Takes place directly or through trade organizations • Political Action Committees – Organizations that solicit donations from individuals and then contribute to candidates running for political office • Campaign Contributions – Corporate donations Seven Steps to Effective Compliance and Ethics Program • Establish a code of ethics. • Appoint a high-level compliance manager, usually an ethics officer. • Take care in delegation of authority. • Institute a training program and communication system. • Monitor and audit for misconduct. • Enforce and discipline. • Revise program as needed. SOCIAL RESPONSIBILITY AND BUSINESS 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 5 Business Ethics and Ethical Decision Making Ethical Issues in Business • An ethical issue is a problem, situation, or opportunity requiring an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical. • Ethical issues: • • • • • Honesty and fairness Conflict of interest Fraud Discrimination Information technology Personal Misconduct in the Workplace Moral Philosophies • Consequentialism – A decision is right or acceptable if it helps achieve the desired results • Egoism – Maximizing one’s own self-interest • Utilitarianism – Greatest good for the greatest number of people • Ethical formalism – Focuses on the rights of the individual • Justice theory – Evaluations of fairness Kohlberg’s Model • People progress through the previous six stages. • Cognitive moral development should be viewed as a continuum. • People’s moral beliefs and behavior change as they gain education and experience. • There are universal values by which people in the highest level of moral development abide. Social Needs that Motivate Ethical/Unethical Behavior • Need for achievement – Preference for goals that are well defined and moderately challenging • Need for affiliation – Inclination to work with others in the organization rather than alone • Need for power – Desire to influence and control others Creating an Ethical Climate • Top managers, employees, and stakeholders must support the philosophy that all organizations have responsibilities that extend beyond legal and economic obligations. • Members of the organization must be willing to share their values about workplace ethics. Creating an Ethical Climate (cont.) • Ethical concerns should be incorporated into strategic planning. • Management must develop a mechanism for assessing its progress in making ethical decisions that contribute to social responsibility.