Business and Society: Stakeholders, Ethics, and Public Policy 15th Edition Chapters 1,2,&3
Eight Strategic Radar Screens
customer environment competitor environment economic environment technological environment social environment political environment legal environment geophysical environment => seeking environmental intelligence
Corporate Power and Responsibility Negative:
disproportionate political system dominate public course divide markets squash competition
The External Environment of Business is _____
dynamic and ever changing
A successful business must meet both ____
its economic and social objectives.
External stakeholders
may have important transactions with the firm, but are not on its payroll
Internal stakeholders
work "inside" the firm and contribute their effort and skill to everyday operations.
Addressing public issues by:
working collaboratively with other businesses, concerned persons and organizations in stakeholder networks. Example: Nike
Social Audit
A systematic evaluation of an organization's social, ethical, and environmental performance
General System theory
A theory that holds that all organisms are open to, and interact with, their external environment Organisms do not exist in isolation but can only be understood in relationship to their surroundings. Businesses are embedded in a broader social environment with which they constantly interact.
Ownership theory of the firm
A theory that holds that the purpose of the firm is to maximize that long- term return for its shareholders (also known as the property or finance theory of the firm)
Six dynamic forces powerfully shape the business and society relationship:
Changing societal expectations Growing emphasis on ethical reasoning and actions Globalization Evolving government regulations and business response Dynamic natural environment Explosion of new technology and innovation
Competitive Intelligence
The systematic and continuous process of gathering, analyzing, and managing external information about the organization's competitors that can affect the organization's plans, decisions, and operations. With the need to comply with all applicable laws, and to follow the professional standards of fairness and honesty.
Enlightened Self Interest
The view that holds it is in a company's self-interest in the long run to provide true value to its stakeholders
Corporate Citizenship
This term refers to the actions corporations take to put their commitments to corporate social responsibility into practice worldwide
Stakeholder
A person or group that affects, or is affected by, a corporation's decisions, policies, and operations.
Stakeholder Salience
A stakeholder's ability to stand out from the background, to be as important, or to draw attention to itself or its issue. Stakeholders are more salient when they possess power, legitimacy, and urgency
Forces that shape the business and society relationship
- evolving government regulation of business - globalization - explosion of new technology - dynamic natural environment - changing societal expectations - growing emphasis on ethical values
The Issue Management Process
1) Identify Issue 2) Analyze Issue 3) Generate Options 4) Take Action 5) Evaluate Results
B Corporation
A business that explicitly seeks to blend its social objectives with its financial goals Must meet rigorous, independent social and environmental performance standards. B Corporation must prove its socially responsible by meeting the B Lab standards
Environmental Analysis:
A method managers use to gather information about external issues and trends to develop an organizational strategy that minimizes threats and takes advantage of new opportunities.
Stakeholder Expectations:
A mixture of people's opinions, attitudes, and beliefs about what constitutes reasonable business behavior.
The Meaning of Corporate Social Responsibility
Act in a way that enhances society and its inhabitants and be held accountable. Acknowledge any harm to people and society and correct it if possible. May forgo some profits if its social impacts hurt its stakeholders or if its funds is usable for a positive social impact
Stakeholder Materiality
Adaptation of an accounting term to prioritize the relevance of the stakeholders and their issues to the company
The Role of Social Media in Stakeholder Engagement
Address public issues and engage stakeholders. Identify and solve problems faster. Share information better among their employees and partners. Bring customers' ideas for new product designs to market earlier. Platforms to engage with multiple stakeholders, communication has become faster and more effective. Example: Supervalu Red Robin
Stakeholder organizations bring a number of distinct strengths:
Alert companies to emerging issues Give a firm access to information via networking Technical or scientific expertise in specific areas Better result in the eyes of the public Meet the society's expectations and generate good solutions Improve a company's reputation
Business
An organization that is engaged in making a product or providing a service for profit
The Issue Management Process: Identify Issue
Anticipating emerging concerns, or "horizon" issues
Public Issue:
Any issue that is of mutual concern to an organization and one or more of its stakeholders.
Arguments for Corporate Social Responsibility
Balances corporate power with responsibility Discourages government regulation Promotes long-term profits for business Improves stakeholder relationship Enhances business reputation
Stakeholder Dialogue
Business and its Stakeholders come to face-to-face conversations Core interest and concerns, common definition of a problem Understandings and concerns of all parties Invent innovative solutions and implement them Example: Pacific Power
Corporate Power:
Capability of corporations to influence government, the economy, and society, based on their organizational resources.
Transparency
Clear public reporting of an organization's performance to various stakeholders.
Nonmarket stakeholders
Community, government, business support groups, etc. People or groups who—although they do not engage in direct economic exchange with the firm—are affected by or can affect its actions.
Reactive -
Companies act only when forced to do so, and then in a defensive manner
Interactive -
Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust
Inactive -
Companies ignore stakeholder concerns
Proactive -
Companies try to anticipate stakeholder concerns
4 Phases of Corporate Social Responsibility
Corporate Social Stewardship (1950s-1960s) Corporate social responsiveness (1960s - 1970s) Corporate/business ethics (1980s - 1990s) Corporate/global citizenship (1990s - 2000s)
Stakeholder Theory of the Firm
Corporations serve a broad public purpose: to create value for society. Profit is necessary for survival but other values drive the firm's purpose. Corporations have multiple obligations and need to consider all stakeholders
Boundary-spanning departments
Departments, or offices, within an organization that reach across the dividing line that separates a company from groups and people in society
Three arguments in support of the stakeholder theory of the firm:
Descriptive: realistic description of how companies really work Normative: Stakeholder management is the right thing to do Instrumental: stakeholder consideration key for effective corporate strategy
Stakeholder Analysis Question 1: Who are the relevant stakeholders?
Draw market and nonmarket stakeholder maps. Recognize not all groups are relevant to every situation. Examples: Some businesses sell directly to the public and will not have retailers. A certain stakeholder may not be relevant to a particular decision/action.
Multiple responsibilities of business include
Economic responsibilities Social responsibilities Legal responsibilities Challenge is to balance all three
Public Issues: Performance-Expectations Gap
Failure to understand stakeholder concerns and to respond appropriately will: Permit the performances-expectations gap to grow. The larger the gap, the greater the risk of stakeholder backlash or of missing business opportunity. Example: Human antibiotic in chicken
6 Benefit of Social audits by Simon Zadek:
Help businesses know what is happening within their firm Understand what stakeholders think about and want from the business Tell stakeholders what the business has achieved Strengthen the loyalty and commitment of stakeholders Enhance the organization's decision making Improve the business's overall performance
The Origins of Corporate Social Responsibility
In the United States, the idea of corporate social responsibility appeared around the start of the 20th century. Corporations under attack for being too big, too powerful, and guilty of antisocial and anticompetitive practices. To use their power and influence voluntarily for broad social purposes rather than for profits alone. Example: Steelmaker Andrew Carnegie, Henry Ford
External Stakeholder
Individuals or groups that may have important transactions with a firm but are not directly employed by the firm, such as customers or suppliers
Internal Stakeholder
Individuals who are employed by the firm, such as employees and managers
_______ stakeholders are employed by the firm - ________ stakeholders are not
Internal external
Corporation
Legally, an artificial legal "person," created under the laws of a particular state or nation. Socially and organizationally, it is a complex system of people, technology, and resources generally devoted to carrying out a central economic mission as it interacts with a surrounding social and political environment.
Arguments against Corporate Social Responsibility
Lowers economic efficiency and profit Imposes unequal costs among competitors Imposes hidden costs past on to stakeholders Requires skills business may lack Places responsibility on business rather than individuals
Two Kinds of Stakeholders:
Market and Nonmarket
The Issue Management Process: Evaluate Results
Must assess results of the program and make adjustments if necessary
The Issue Management Process: Take Action
Once an option is chosen, the organization must design and implement a plan of action
The Issue Management Process: Analyze Issue
Organizations must understand how the issue is likely to evolve, and how it is likely to affect them
Stages in the Business-Stakeholder Relationship
Over time, the nature of business's relationship with its stakeholders often evolve through a series of stages. Inactive Reactive Proactive Interactive
Ownership Purpose
Owner's Needs and Wants Share Value
Organizing for Effective Issue Management
Part of the organization is mobilized to address a particular emerging issue, it often depends on the nature of the issue itself. Involve the board of directors and top management levels Effective global leadership on public issues requires three basic capabilities: Understanding of the changing business context Ability to lead in the face of complexity Connectedness: the ability to engage with external stakeholders in dialogue and partnership
Society
Refers to human being and to the social structures they collectively create; specifically refers to segments of humankind, such as members of a particular community, nation, or interest group.
The Issue Management Process: Generate Options
Requires complex judgments that incorporate ethical considerations like the company's reputation
Stakeholder Salience and Mapping
Salient - stands out from a background, is seen as important, or draws attention. Stakeholders stand out (i.e., are salient) to managers when they have power, legitimacy, and urgency. Managers can use the salience concept to develop a stakeholder map - a graphical representation of the relationship of stakeholder salience to a particular issue. A stakeholder map is a useful tool, because it enables managers to see quickly how stakeholders feel about an issue.
Market stakeholders
Shareholders, suppliers, employees, etc. They engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services.
Drivers of Stakeholder Engagement
Stakeholder engagement is, at its core, a relationship. The participation of a business organization and at least one stakeholder organization is necessary. Engagement: both the company and its stakeholders both have: An urgent and important goal The motivation to participate The organizational capacity to engage with one another
Stakeholder Analysis Question 4: How are stakeholder coalitions likely to form?
Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests. Coalitions are very dynamic (can change at any time). Coalitions are increasing international. Internet has enabled coalitions to form quickly, across political boundaries.
Stakeholder Analysis Question 3: What is the power of each stakeholder?
Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome. There are 5 types of stakeholder power: Voting power Economic power Political power Legal power Informational power
Stakeholder Purpose
Stakeholders' Needs and Wants
Issue Management
The active management of public issues once they come to the attention of a business organization
Iron Law of Responsibility
The belief that those who do not use their power in ways that society considers responsible will tend to lose their power in the long run
Interactive social system
The closely intertwined relationships between business and society
Integrated Reporting
The combining of legally required financial information with social and environmental information into a single report
Enlightened Self-Interest
The company's self-interest in the long term to provide: true value to its customers to help its employees grow and behave responsibility Example: Nestle
Reputation
The desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders
Corporate Social Responsibility
The idea that businesses should act in a way that enhances society and their stakeholders and should be held accountable for any of its actions that affect people, their communities, and their environment.
Focal Organization
The organization from whose perspective a stakeholder analysis is conducted
Performance- Expectations gap
The perceived distance between what a firm wants to do or is doing and what the stakeholder expects
Stakeholder Analysis Question 2: What are interests of each stakeholder?
What are the groups' concerns? What does the group want/expect from their relationship with the firm? Examples: Shareholders have an ownership interest; they expect to receive dividends and capital appreciation. Customers are interested in gaining fair value and quality in goods and services they purchase. Public interest groups advance broad social interests
Social Reporting
When a company decides to publicize information collected in a social audit.
Transparency:
When companies clearly and openly report their performance—financial, social, and environmental. Example: Australia New Zealand
Social audit:
a systematic evaluation of an organization's social, ethical, and environmental performance.
Business and society together ______
form an interactive social system
The term _______, similarly, refers to putting these commitments into practice worldwide.
global corporate citizenship
Stakeholder analysis includes:
identification of relevant stakeholders and analysis of their interests and power
Iron law of responsibility says ___
in the long run, those who do not use power in ways that society considers responsible will tend to lose it.
An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single _______.
integrated report
The Reputation Index
measures a company's social reputation. It evaluates critical intangible assets that constitute corporate reputation. Rating Research, a British firm, distributes the index and ratings to interested partie
Corporate Power and Responsibility Positive:
more resources lower cost production new products technologies
Successful firm is _____
one which finds ways to meet each of its critical responsibilities and develops strategies to enable the obligations to help each other.
Companies demonstrate their corporate citizenship by:
proactively building stakeholder partnerships discovering business opportunities in serving society transforming a concern for financial performance into a vision of integrated financial and social performance
Business reputation
refers to desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders.
Environmental Intelligence:
the acquisition of information gained from analyzing the multiple environments affecting organizations.
Corporate Citizenship:
the actions they take to put their commitments to corporate social responsibility into practice.
The purpose of the firm is not simply to make a profit, but ____
to create value for all its stakeholders