BA342 Exam 3
Corporate Performance
Positive social and positive financial
The consumer Magna Carta includes all the rights below EXCEPT? a. Safety b. Informed c. Choice d. Quality e. Heard
Quality
Traditional Whistleblowing
Tell The corporation out of duty to the Company
Product Info must be:
clear, accurate, adequate
BBB Complaint leaders
banks, auto dealers, sporting goods, retail
3 Steps toward stakeholder management
governing philosophy values statement measurement system
2 big groups that regulate
government and industry
What is one of the most ambiguous terms?
"FREE"
Naked Brand Video - Theme
"Image is reality. What you see is what you get." - Business is becoming more transparent throughout the supply chain - "Blood Diamonds" example
Consumer Magna Carta - Rights
*All about transparency* *Enforced by Consumers International* - Safety (everyone has a right to know they are safe) - Choice (multiple options) - Informed (thorough and complete information) - Heard (due process)
Whistle Blowing Traditional Approach
- Employee to the corporation
Amoral and Employee
- treat employees as the law requires, whatever the law allows/doesn't allow
top 3 complaints to the BBB
-Banking -Advertising -automobile
Big 5 Business Stakeholders
-Community -Government -Employees -Consumers -Owners
Coke and Pepsi in India
-pesticides found in soft drinks -company tried to fix with advertising -water usage becomes next big problem -now using corporate social responsibility
What does CPSC do? (6 things)
1. Developing voluntary standards with standards organizations, manufacturers and businesses 2. Issuing and enforcing mandatory standards or banning consumer products if no feasible standard would adequately protect the public 3. Obtaining the recall of products and arranging for a repair, replacement or refund for recalled products 4. Researching potential product hazards 5. Informing and educating consumers directly and through traditional, online, and social media and by working with foreign, state and local governments and private organizations 6. Educating manufacturers worldwide about our regulations, supply chain integrity and development of safe products
The 4 approaches to CSR overtime:
1. Economic model (1700+) - people helping people 2. Legal model (1800+) 3. Social model (1850+) 4. Stakeholder model (1950+)
3 Strategic Engagement Steps to developing a culture
1) National Level - identifying who their stakeholders are and what their stakes happen to be 2) Process Level - gather information about stakeholders, which is then used for decision making 3) Transactional Level - extent to which manager actually engage in relationships with stakeholder and respond to their needs
5 methods to developing a culture
1. Agency Culture 2. Corporate Egoist (shareholder are most important stakeholders) 3. Instrumentalist (shareholder are most important stakeholders) 4. Moralist 5. altruist
Advertising Issues - Consumer Relationship Management
1. Ambiguous Advertising 2. Concealed Facts 3. Exaggerate 4. Psychological Appeals
What are the 4 advertising issues?
1. Ambiguous advertising 2. Concealed facts 3. Exaggerations 4. Psychological appeals
3 views of the firm
1. Production 2. Managerial 3. Stakeholder
What are the FTCs three strategic goals?
1. Protect consumers 2. Maintain competition 3. Advance performance
B Corp Video
2 goals: make money and have a purpose 60 companies using business as a tool for good fasted growing initiative
Number of workplace accidents
2,900,000
Pros of More Walmarts
200m customers/week largest company @ 500b+ 10800 stores in 27 countries give a lot sustainability drives (0 waste, renewable energy) saved the gulf
Corporate Citizenship
3 Part Definition: 1) reflection of shared moral and ethical principles 2) vehicle for integrating individuals into communities where they work 3) form of enlightened self interest that balances stakeholder claims and enhances long term company value Blanket Definition: (views companies as citizens with certain duties to fulfill in order to be "good")
Health in the workplace
4 out of 5 employers offer some sort of incentive for employees to improve health
Number of workplace deaths
4,836
Forbes on service problems
49% consumers switched providers of a service last year
Product Advertising Opinions
60% consumers negative opinion of advertising 61% believe advertising is out of control 69% attracted to products to avoid commercials (Spotify premium)
CPSC Data on costs and damages due to products
8000 deaths 400,000 injuries $1 Trillion in costs per year for death, injury, and property damage
Corporate Social Responsibility Definition
A company moving from shareholder value to stakeholder value by valuing communities, governance, employees, consumers, and understanding the needs of multi-level stakeholders seriously considering the impact of the company's actions on society
Product information that communicates truth not half-truth is called what? a. Adequate b. Informed c. Accurate d. Clear e. Persuasive
Accurate
Corporate Social Responsiveness (book)
Action oriented variant of CSR Responsibility = assuming obligation (focused on motivation rather than performance) Responsiveness = dynamic, action oriented
Ethical Responsibilities
Activities/standards/practices expected and prohibited by a society even though they're not official laws norms that reflect what stake and shareholders regard as fair continually evolving
1. A Wealth of Nations was written by? a. Milton Friedman b. Adam Smith c. John Maynard Keynes d. Friedrich Hayek e. Thomas Sowell
Adam Smith
5 categories of developing stakeholder culture
Agency (not concerned w/ others) corporate egoist and instrumentalist (limited morality considerations, shareholders are important stakeholders, focused on short term profit maximization) Moralist and Altruist (morally based, broadest term for stakeholders)
employment contract
Agreement between an employer and an employee that explains the employment relationship
Council of Better Business Bureau (vision)
An ethical marketplace where buyers and sellers trust each other
Stakeholder Book Definition
An individual or group with a stake in an organization can affect a company or be affected by the company
Ombudsman
An internal official appointed to investigate individuals' complaints against maladministration
Strict Liability
Anyone in the value chain of a product is liable for harm caused to the user if the product as sold was unreasonably dangerous because of its defective condition
What responsibilities does Apple have to its suppliers employees?
Apple should be ensuring that the employees are being treated fairly and aren't experiencing any abuse. Most employees don't even see a finished product of what they are working on
Council of Better Business Bureau (mission)
BBB's mission is to be the leader in advancing marketplace trust by: - setting standards for marketplace trust - encouraging and supporting best practices by engaging with and educating consumers and businesses - celebrating marketplace role models - calling out and addressing substandard marketplace behavior - creating a community of trustworthy businesses and charities
Victoria's Secret and Girls
Bright Young Things (2013 +) - (directed towards college women but teens and tweens are the largest group buying this shit) - "Young women advertising in uncomfortable ways"
Consumer Products Safety Commission CPSC.Gov- Website
CPSC is charged with protecting the public from unreasonable risks of injury or death associated with the use of the thousands of types of consumer products under the agency's jurisdiction.
CSR Language Check
CSR = Businesses engaging with STAKEHOLDERS 55% of companies use "sustainability" when referring to environmental and social programs 25% of companies use "corporate social responsibility" - mostly banks, insurance, & consulting
Caveat emptor verse caveat vendor
Caveat Emptor = let the buyer beware - past Caveat Vendor = let the seller take care - future
3 Traditional Ways we think about Social Responsibility
Corporate social Responsibility - law obligations, accountability Corporate social Responsiveness - action and activity, donations Corporate social Performance *gold standard* - outcomes and results, big issues
New Social Contract
Declining Job Security Norm Job Change Temporary Assignments Loyalty to Career Personal Responsibility Team/Project Focus
The consumer Magna Carta includes all rights below EXCEPT? a. Safety b. Informed c. Choice d. Quality e. Heard
D) Quality
In the list below which BEST captures what we have learned from the Financial Times about "responsible leadership) the baseline definition? A) Builds relationships with consumers and suppliers B) seeks to provide more benefits today than the future C) creates jobs and earns a profit for shareholders D) makes business decisions taking into account stakeholders E) develops long term investments
D) makes business decisions taking into account stakeholders
Safety Data for Occupations
Deaths in 2015: 4,836 Injuries in 2015: 2,900,000
In class we looked at how firms respond to the pressures applied to them to engage in CSR. When a company like DuPont (discussed in class) evaluates an expensive environmental upgrade to a manufacturing facility they are taking what approach to CSR pressure? a. Defensive b. Strategic c. Cost/benefit d. Innovation e. Commercial
Cost/Benefit
In the Ford/Firestone case, the main issue for Ford was? a. Customer death/injury b. Product liability Issues c. Ford Explorer Design d. Who is Responsible e. Their Public Image
Customer Death/injury
In the Ford/Firestone case the main Issue for Ford was? a. Customer Death/Injury b. Product Liability Issues c. Ford Explorer Design d. Who is Responsible e. Their Public Image
Customer death/injury
In the list below which is NOT a principle for advertising to children? a. Consider they can't account for ads b. Don't stimulate unreasonable expectations c. Avoid social stereotypes about people d. Advertising should have education mission e. Direct advertising to parents
Direct advertising to parents
Dutch boy lead paint case
Discovered 1900 that it kills, not banned until 1978 Marketed to kids! Coloring books, free gifts
Due care/Due Diligence
Doing everything so your customers are safe
Emerging Whistleblowing
Duty to Corporation and the Public
T/F older people are more willing to switch products if not happy
False - younger
FDR Mission and what is regulates
Federal Drug regulation - protect public health by ensuring safety, effectiveness, and security of human veterinary drugs,biological products, etc -food, drugs, medical devices, vaccines, tobacco, cosmetics, electronics
Human Capital
Financial Capital
Governing Philosophy
Integrating stakeholder management into the firm's governing philosophy
National Highway Traffic Safety Administration
NHTSA manage safety of vehciles looked at data of the company said " you must do something or else"
Government Regulation:
Negotiated- Ind./govt Ex. coke in India Mandated -legal (Ex: FTC)
Where is the impact the largest in business?
Nevada #1; biggest in states with large tourism
Coke Example
New CEO demoted director of diversity and new issues revealed $192 million federal lawsuit for discrimination brought by employees in 60s, MLK said to boycott coke for discrimination of black workers created solutions program - Alternative Dispute Resolution Coke runs black history campaign in 2002
Ambiguous advertising
None of the descriptors actually tell about product Virtually, exciting, beautiful, efficient, cool, deluxe, cheap, many, helps, virtually, can do, up to, prevent Ex: Mad Men- Lucky Stripe Ad based on happiness "It's toasted."; FREEE STUFF!
Concealed Facts
Not telling the whole truth or communicating information that the consumer should have access to when making decisions availability of this info would make consumers less likely to purchase "airline tickets" "guaranteed to never go up" "Fine print syndrome" Big Pharma commercials & product placement in movies
Stockholders =
Owners
Pros and Cons of Employment at Will
Pros: - increase claims - outs low performers - risks weakening managers leverage - increases hiring - less jobs - favors employee and employer - strengthens managers leverage - more flexibility - company competitiveness better Cons: - U.S. stands alone - less jobs - arbitrary nations - laws against - respect - moral - employee rights - trust expectation - broken culture
Patagonia
Repair centers may not be economical, but decreases consumption "Don't Buy This Jacket"= anti consumerism consumerism?
Patagonia and CSR Pressure
Repairing Jackets - anti consumerism company Defensive: public perception about quality of products Cost/benefit: lots of profits from potential repurchases Strategic: buy and keep for a long time Innovation: repair items: premium price for a premium product
What is the Theme of BA 342?
Responsibility and Leadership
Responsibility and Responsible Leadership Definitions
Responsibility: Ability to decide on one's own without supervision Responsible Leadership: Making business decisions that take into account stakeholders (workers, clients, suppliers, community, future generations)
Economic Invisible Hand - Adam Smith
Scotland 1723-1790 "A Wealth of Nations" Published 1776: free market capitalism "Theory of Moral Sentiments" Published 1756: ethics Social responsibility: people in small towns helping each other - individuals trying to engage
What does OSHA do?
Sets standards for a safe and healthy workplace.
20th Century Focus
Shareholder Value
Smart Phone case
Smart phones are leading to fatalities in driving
Consumerism
Social movement seeking to augment the rights and powers of buyers in relation to sellers
Old Social contract
Stable Job Security Lifetime One Employer Stable Assignments Loyalty to Employer Employer Responsibility Individual Work Force
In the list below which answer is NOT part of the new social contract? a. Stable job security b. Numerous job changes c. Loyalty to career d. Personal responsibility e. Declining job security
Stable Job security
What is not part of the new contract?
Stable job security
Stages of Citzenship development
Stage 1 Elementary Stage 2 Engaged Stage 3 Innovative Stage 4 Integrated Stage 5 Tranforming
21st Century Focus
Stakeholder Value
Power Legitimacy
Stakeholder validity and capacity to produce an effect *Dominant Stakeholder*
Stock= Stake=
Stock=Owners Stake=Interest
Stockholders verse stakeholders
Stockholders: owners Stakeholders: interests
CVS Health
Stopped selling cigs 2014 Almost 10,000 stores Expand minute clinics Whole set of CSR pressures applies to them
Language Check
Sustainability is the language check Corporate social responsibility is the umbrella term
Big issues of Lead paint case
Systemic Pressure lack of oversight
Responsibility
The ability or authority to act or decide on one's own without supervision Can you do the right thing?
FTC guidelines for free products
The offer of "Free" merchandise or service is a promotional device frequently used to attract customers. When making "Free" or similar offers all of the terms and conditions upon which one can receive and retain the "Free" item should be set forth clearly and conspicuously at the outset of the offer so as to leave no reasonable probability that the terms of the offer might be misunderstood.
Amoral Management of Employee
Treat as the law requires
Economist Report Pandemic and Economy April 2020
V U L (length of recession)
False claims act
a provocative piece of federal legislation that was passed to add an incentive for whistle-blowing in the public interest qui tam - provisions that allow employees to blow the whistle about fraud and share with the government in any financial recoveries realized by their efforts can gain up to 50% of recovery
Open Door Policy
a senior level executive's door is always open to hear complaints 3 problems: closed process, one person reviews, tendency for one manager to support another
Consumerism
a social movement seeking to augment the rights and powers of buyers in relation to sellers
"Due process" - sounds like a post office thing (maybe not). Working apart from the legal system to provide due process rights for employees is called what? a) alternative dispute resolution b) viewpoint diversity c) ombudsman protocols c) peer evaluations d) employment at will
a) alternative dispute resolution
Today you've joined a team of all Smeal majors at your company to work on a new ad campaign. You consider using the "discount" option. What ad issue might this reflect?
ambiguous
social contract
an implicit agreement among the members of a society to cooperate for social benefits
Strict Liability
anyone in value chain of product is liable for harm caused to user if defective (manufacture, assembly, sale, delivery)
How companies manage speech
apple: use platforms to drive speech nfl: should players be able to kneel Michael Jordan: I don't talk about religion or politics because my customers are everyone
What makes you a good citizen? (takeaways)
applies to us and every US corporation individuals and corporations have the same dynamics
Walmart 3 major focuses
associates, community, operations
Alta Gracia
clothing company in the Dominican Republic where employee's personal messages are labeled on the clothes. They raise their prices by 105 to afford a good CSR
Remember King John signing a set of laws to give average citizens rights - called it the magna carta. We have a consumer magna carta. Which below is NOT a part of that?
comfort (-safety -informed -choice -heard) are all a part of it
Naked brand trailer theme
companies becoming more transparent
Family and Medical Leave Act
designed to make life easier for employees with family or health problems
Dutch Boy Case Players
designers, manufacturers, children, hospitals, risk mgmt, customers, government, all smeal majors
Children's Advertising Review Unit (CARU)
develops self regulatory guidelines for children's advertising identify areas that need particular attention review child directed ads seek changes
Due care liability
everything done to ensure safety
Disclosure is key, you must tell buyers....
exactly what you are doing
Sales Puffery
exaggerated statements about the performance of products or services
Exaggeration
go out and blow up information; "greatest", "best in class", "top seller"
Unilever Sustainable Living Plan
improve health and well-being for 1 billion people, reduce environmental impact by half, enhancing livelihoods for millions
Workplace Safety
is it the obligation of businesses to provide training and development to ensure the safety of its employees - employers have a duty to prove employes with information on the hazards of workplace Right-to-know laws - access to this kind of information by employees and even communities Occupational Safety and Health Administration (OSHA)
Employee Rights
o Civil o Minority o Women o Disabled o Older o Religious Affiliation o Employee o Privacy o Smokers o Non-Smokers o Children o Animal o Due Process o Appearance
CNH Case
o Closed plant in belleville PA o 500 people lost their jobs Stakeholers were
Alta gracia case
o Knights Apparel Brand o CEO Joe Bozich o Branded merchandise (like PSU merch) o Chasing low cost labor o Paying workers a "living wage" o Workers rights consortium - $2.38/hour People will pay more if they know where a product comes from
Consumer Problems with Businesses
overpriced products poor quality misleading ads hidden fees poor service product failures poor guarantees mishandled complaints dangerous products poor info unclear service help misleading labeling
Coke and Pepsi in India 2 big Issues
pesticides and water
Statutory rights
right provided by the law
Social performance and financial performance: perspective 3
there is an interactive relationship between social and financial performance like the packet view
Tireplayers
victims (271 dead, 1000s injured) ford motor bridgestone/firestone randy roberts NHTSA Consumers other car companies general public government statefarm/other insurance venezuela, saudi arabia, others
Violence in the workplace
violence from an outside source violence stemming from coworkers
Federal Communications Commission (FCC) and Product Placement (Internet example)
"People have a right to know when they are being advertised and by whom" Free Press Guide: - Clear - Extend - Ban - Rigorous
Freedom of Speech
"The right to express your opinions without censorship, restraint or retaliation" - responsibility - first amendment Protesting, lobbying, boycotting The law does not always apply in the workplace (especially in a private company) Hollywood: when people talk about government it reflects the organization NFL: say that we don't talk about politics in the workplace but workforce is very passionate about it (taking a knee, black) Tech: discrimination, policy, suppressing free speech) - they are free speech platform so people can post anything --> now they are trying to manage it because of complaints and problems - they now become a publisher instead of a platform
Advertising to Children
"kid vid" children don't understand persuasive intent until age 8 influence $500B in purchases each year Kids are starting to have their first phone at 11, use smartphones at 7 Victoria's Secret markets to college kids, but teens watch and buy products (age compression) Inapp purchases, Icee
FTC and product placement
"people have a right to now when they are being advertised to and by whom" Free press guide: 1. clear and effective disclosures 2. extend rules to cable/satellite companies 3. Ban product placement in shows for children under 12 4. Rigorous enforcement to curb stealth, embedded ads Have to use generic products with kids because kids take everything literally and don't understand
Safety Data (big 6)
#1 - transportation -assault and violent acts -contact with objects -falls -harmful substance exposure -fires and explosions
Safety in the workplace
#1 role of a manager is to keep your people safe Deaths - 2015 there were 4,836 Injuries - 2015 there were 2,900,000
Responsibility history: Adam Smith
(1723 - 1790) Wrote "A Wealth of Nations" (1776) and "Theory of Moral Sentiment (1759)
CVS Case Study
*CVS uses all 4 responses* - Decides to stop selling cigarettes at all 7,600 locations - Public health hopes others will follow - Add wellness clinics
The Smart Phone Dilemma
- "Smart phones want you dead" 1. Cell phone and driving: texting increased exponentially and fatalities increased even with improved car safety (23x more likely to crash, reaction time like 70 year old, kills 11 teens every day) 2. Cell phone and walking: 1,500 injured, ages 16-25 most likely hurt 3. Cell phone and illness: video describing phone is extension of your hand but never gets washed, accounts for 80% of infections, dirtier than toilet seat. MSU study - 10% don't wash, 33% no soap; 95% don't wash correctly; Women - 7.07 s; Men - 6.27 s
Language Check
- "Sustainability" 50%; today's umbrella - "CSR" 25% - CSR was umbrella in 1990's when only 20% used sustainability
Dutch Boy Lead Paint
- *Systematic pressure (cheaper)* - *Lack of oversight* - Used children in ads - No worker protection in factories - Many symptoms of lead poisoning, especially in children - Consumer Product Safety Commission (CPSC) established - Example of ammoral management - Another example is the Flint lead water
ERC Data
- 41% workers witnessed misconduct - 63% witness reported - 21% experienced retaliation - Misconduct down from 2011 - Focus is now on top 1/3 managers
Customer Care Measurement and Consulting (CCMC)
- 45% had a serious issue last year - 60-70% enraged by how issue handled by management - 45% of CEOs felt they hadn't earned customer loyalty
Customer Data - The Iceberg
- 50% problem with no complaint - 45% complain to front line agent - 1-5% complain to management - People tell about their experience twice as often if it was a bad experience
Consumerism
- A social movement seeking to augment the rights and powers of buyers in relation to sellers
Big 4 Advertising Issues
- Ambiguous advertising - Concealed facts - Exaggerate - Psychological appeals
Better Business Bureau - Complaint Leaders
- Auto dealers - Banks - Sports Merchandise
Advertising Pros
- Beneficial Component of a market system - Efficient way to distribute information - Increases sales and profits for company - Brand awareness built - Increases customers knowledge - Assists people with needs (wants?) - Saves people time (quick understanding)
Product Safety Principles
- Build safety into product design - Do product safety for all foreseeable hazards - Keep informed about and implement latest developments in product safety - Educate consumers - Track and address safety performance - Learn from your (and others) mistakes
Big 3 Requirements
- Can you manage money - Can you mange people - Can you engage with stakeholders (many fall short): Michael Hastings KPMG; Warby Parker and B-corp examples
Cons of CSR
- Classic economics - Business not equipped - Dilutes business purpose - Too much power already - Global competitiveness
3 Requirements of Product Information
- Clear - Accurate - Adequate
Sales / Discounts
- Companies raising base prices but marking it lower to make it look like they are having bigger sales - Deals increased by 63% - Average discount is 36% off, up from 25% - Gross margins flat at 27.9% Ex. JC Penny CEO - 1 of 500 items are full price
Other Ad Issues
- Comparative advertising (showing advantage of one product to another) - Use of sex in ads (targets younger and younger girls) - Advertising to children - Marketing to the poor (higher interest rates) - Advertising alcohol and cigarettes (negative health effects) - Health ads (side effects) - Environmental ads (green advertising/watchdogs)
New Social Contract (p 247)
- Declining job security - the Norm is job changes - Temporary assignment - Loyalty to career - Personal responsibility - Team project focus
4 Ways Businesses Respond to CSR pressure - KNOW EXAMPLES OF EACH
- Defensive (Garments - labor workers) - Cost/Benefit (Dupont - air as an externality) - Strategic (IBM - engagement) - Innovation (Tesla - solar city, electric cars)
Lead - The Players
- Designers - Manufacturers - Consumers - Stockholders - Environment - Smeal majors - Employees - Governments
Sensa & Weight Loss (Psychological Appeals)
- Diet aid for weight loss - Lawsuit for $34 million, sold for $364 million - out of business by 2015 - trying it again
CSR - The History
- Economic (1700's) - Legal (1800's - child labor - "letter of the law") - Social (1850 - Carnegie trusts) - Stakeholder (1950)
5 Stages of Citizenship Development
- Elementary --- Credibility - Engaged --- Capacity - Innovative --- Coherence - Integrated --- Commitment - Transforming
Managerial View of the Firm
- Emerged afterward because businesses began to see their responsibilities with other major constituent groups (owners and employees) as a key to success
Employment at Will
- Employee can leave at any time - Employer can tell employee to go home at any time - HR mag article - Review Pros and Cons list
Whistle blowing: emerging approach
- Employee has a duty to the corporation AND the public - Balance duty to firm and public
Whistle Blowing Emerging Approach
- Employee to the corporation AND the public - Balance duty to firm and public
4 key stakeholder groups that are not owners
- Employees - Consumers - Community - Gov & Non gov - (owners is 5)
4 Key Stakeholder Groups
- Employees - Consumers - Community - Government and non-goverment
Unilever - Sustainability Blueprint
- Enhacing livelihoods (Increase social involvement and grow business) - Improving health and well being - Reduce environmental impact
Pros of CSR
- Enlightened self-interest - Warding off government regulations - Resources available - Proaction better than reaction - Public support
EAP
- Excellent performance - Academic integrity - Professional behavior
Health Initiatives
- Family & Medical Leave Act - Smoking - Americans with Disabilities Act
The Case New Holland - A CSR Story
- Farming equipment manufacturer that decided to close the plant in Belleville, PA Key stakeholders issues: - Employees and their families - Local farmers - Suppliers - Other local businesses - School districts - Stockholders - Taxes - Community / environment - Transitioning people/equipment
Employees and Moral Rights
- Fired with cause shared - Due process and fair treatment - Freedom of speech - Respect and dignity
Employee Moral Rights
- Fired with cause shared - Due process fair treatment - Freedom of speech - Respect & Dignity
Most Dangerous Jobs
- Fishing - Farming - Forestry
ADM & Price Fixing
- Food company that makes basic ingredients - Whistle blower Mark Whitacre - Told his wife and said its either him or her who goes to the FBI - Jailed 8 years - "The Informant" made to show the story
Whistle Blower
- Former or current employee who discloses improper actions by members of the organization
Big 3 Employee Rights
- Good cause - Due process - Freedom of speech
Consumer Product Safety Commission (CPSC)
- Independent regulatory agency created by the Consumer Product Safety Act of 1972 to reduce the risk of injuries, deaths, and property damage from consumer products by mandating standards, conducting research, and banning/recalling products - Cost the US $1 trillion
2 Ways Product Information is Regulated
- Industry - Government
Employee Privacy Bill of Rights
- Informed consent before acquiring info - Disclose nature of surveillance - Set controls on info access - Limit collection/use of medical/health data - Require reasonable cause before drug tests - Respect boundary between work and home
CSR Business Case - The Big 6 Reasons
- Innovation - Cost savings - Brand differentiation - Long term thinking - Customer engagement - Employee engagement
Alta Gracia Case
- Knights Apparel, CEO Joe Bozich - Have "living wage" at $2.83/hr compared to Dominican Republic minimum wage of $.87/hr - Labels clothing with a story of who they support - Example of moral view
False Claims Act
- Law that imposes liability on persons and companies (typically federal contractors) who defraud governmental programs
Victoria Secret Example
- Line of lingerie pitched to college women but teens are one of the major buyers - Example of using sex to sell
Pros of Walmart
- Low prices - Community engagement - Convenience - Sustainability - 2.3 million employees
Coca Cola and ADR
- MLK calls for a boycott of Coca Cola in speech - Demoted CDO - Weren't hiring blacks to high power/income positions - Paid $200M in discrimination settlements
Federal Trade Commission (FTC) 3 Purposes
- Maintain free and fair competition in the economy - Protect consumers from unfair or misleading practices - Advance internal performance of the FTC
Responsibile Leadership
- Making business decisions that take into account all stakeholders such as workers, clients, suppliers, the environment, the community, and *future generations*
3 Views of Employees
- Moral (human resources, treat with dignity) - Amoral (treat employees as the law requires) - Immoral (employees are factors of production, exploit for personal gain)
Management Types and Consumerism
- Moral: customers = partners, fair value and full info - Amoral: law and management rights, profit driven - Immoral: customers exploited norm, cheat/deceive
Advertising to Children
- Negative effects - Children don't understand intent to sell until around ages 8-12 - Until then, they take every word of ads at face value or to be true - Average age of first smart phone use is 7, so they are extremely vulnerable (age compression)
Types of Government Regulation
- Negotiation ex. Coke/Pepsi in India - Mandated (legal - FTC)
CSR Business Case - Core Benefits
- New business - Customer retention - Better stakeholder relations - Attract/retain employees - Decrease costs - Enhanced reputation - Increased investment - Better media relations
OSHA
- Occupational Safety and Health Administration - Created in 1970 by congressional act - 4,821 deaths in 2014 - 2,953,500 injuries in 2014
Toyota Example
- Offers a no-layoff policy to its "core employees" with the rest of the employees working as temps
CSR View Change
- Old shareholder value (20th century) - New stakeholder value (21st century)
4 ADR procedures
- Open door policy (most) - Mediation (non-binding) (50%+) - Ombudsman (16%) - Peer review panel (13%)
Social Progression and Employees
- Personnel (Before) - Human resources - Human capital (After)
Social Progression and employees
- Personnel (Before): it was original and impersonal - Human resources: about people and them as a resource - Human capital (After): think of people as assets
Coke and Pepsi in India
- Pesticides found in soft drinks (36x higher) - Company tried to fix with advertising in India (famous Indian actors drinking Coke) - Water usage becomes next big problem - They originally deny and begin to lobby Indian government - Now using corporate social responsibility
Pyramid of CSR (Responsibility to Stakeholders Today)
- Philanthropic (desired/expected): Be a good corporate citizen - Ethical (expected): Obligation to do what is right, just and fair; avoid harm - Legal (required): Obey the law - Economic (required): Foundation - be profitable
Alternative Dispute Resolution (ADR)
- Resolving disputes without litigation - Way for people to be heard without calling a lawyer and going to court - 36 companies spent $4.1B - Tort US system - $800B +
3 Expectations of Employees
- Safety** (managers biggest role) - Health - Privacy
Employee Legal Rights
- Statutory (discrimination) - Collective (unions) - Contractual (CEO) - Employment (HR)
Employees and Legal Rights
- Statutory (discrimination) - Collective (unions) - Contractual (CEO) - Employment (HR)
Stockholders vs Stakeholders
- Stockholders = owners - Stakeholders = interests
Principles of Advertising to Children
- Take into account that children cannot discern ads - Never deceptive or unfair - Objective information - Don't stimulate unreasonable expectations - Inappropriate products not marketed to children - Avoid social stereotypes - Advertising should be educational - Contribute to parent/child relationship
Principles of Advertising to Children
- Take into account that children cannot discern ads - Never deceptive or unfair - Objective information - Don't stimulate unreasonable expectations - Inappropriate products not marketed to children - Avoid social stereotypes - Advertising should be educational - Contribute to parent/child relationship Video: editorial content verse advertising (artistic verse ad) - fast changing environment - what is advertising and what is programming - needs a common ground with children - food marketing, disclosure, sweepstakes, buyer marketing - buyer marketing: students "advertise" to their friends --> ambassador is okay when you are an adult but not okay for kids Children's advertising review until (CARU) - where these principles come from
Responsibility
- The ability or authority to act on one's own without supervision
Freedom of Speech
- The right to express your opinions without censorship, restraint, or retaliation - Bloomberg 2012 article
6 Safety Issue Categories
- Transportation - Assaults and violence - Contact with objects - Falls - Harmful substance exposure - Fires and explosions
What makes you a good citizen?
- Voting - Paying taxes - Community service - Demonstrates values - Show respect - Open minded - Responsible - Follow laws - Care for public goods - Jury duty - Act with integrity - Donate time/cash - Constitution - Recycle - Be productive - Environment
Advertising Cons
- Wastes resources (direct mail example) - Inefficient way to communicate - Invades customer privacy - Creates materialism culture - Distorts perceptions (children, woman, men) - Decrease standard of living - Debases the culture - Manipulative - Increase prices of products (to cover costs) - Impersonal nature
Advertising Cons:
- Wastes resources (direct mail example) - Inefficient way to communicate - Invades customer privacy - Creates materialism culture - Distorts perceptions (children, woman, men) - Decrease standard of living - Debases the culture - Manipulative - Increase prices of products (to cover costs) - Impersonal nature
Whistle Blowing Components
- Whistle blower - Complaint - Party reported to - Organization accused
Social Contract
- Written or unwritten assumption that goes beyond the employee contract - Can include pay, working conditions, people you work with, where you work, what work you do
PSU Safety Case
- Yik Yak used for terroristic threat at HUB but is also used for bullying, sexual harassment, and bomb threats - September 18, 1996: Shooter on HUB lawn killed 1 and injured another. Know business issues.
IBM responsible marketing video
- ads with a purpose - benches, ramps, overhangs - smart idea for smarter cities - ask customers for advice - be a force of good
What are some specific advertising issues?
- advertising to children - comparative advertising - use of sex - marketing to the poor - alcoholic beverages/cigarettes - health and environmental claims - social media
4 Advertising Issues (What NOT to do)
- ambiguous advertising - concealed facts - exaggerate - psychological appeal
Coca Cola and CSR in India
- benefit and refresh everyone it touches - conservation of water, providing access to clean drinking water, and creating awareness to water conservation and recharge - rain water harvesting - rebuilding structures - agreement to provide children with clean drinking water in schools - utilize physically challenged people - recycling -scholarships and supporting primary eduction - Rural Games to promote sports and well-being
Liberty Mutual Ad Fail
- body shaming - if you get LM, you will lose weight, look better, and have a better life
New version of Employee/Employer social contract
- declining job security - normal to have job changes - temporary assignments - loyalty to career - personal responsibility - team/project focus
Who are some of the "players" in the lead issue?
- designers - manufacturers - customers - government & regulations
Moral and Employee
- employees are a human resource and treated with dignity
Immoral and Employees
- employees are factors of production, and exploited for personal gain
What makes you a good citizen?
- follow law - be kind - pay taxes - ethical actions - respecting environment - work hard/ be productive - investing locally - volunteering - etc. This list applies to us as individuals AND corporations - Individuals and corporations need to do the same thing
Product information that communicates truth, not half truth, is called what?
accurate information
Children and Electronics
age 8 = 16% get smart phones age 9 = 15% 10 = 22% 11 = 15% Average first cell-phone use = 11 Average first smart phone use = 7 Mobile = wild west of advertising - regulatory market has not caught up - parents are giving them access to the internet ex: icy drinks --> high in sugar and bad for you but they have a cool app with fun games (distinguished way to advertise to children)
United Airlines; win/fail
airline business plan was previously to overbook by a certain amount, people cancel, and then you fly with a full plane -voluntary bump (free ticket to fly on next flight) -involuntary bump (choose certain people to bump)
OSHA
assure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education and assistance. assess any workplace
Who tells their experience with a product
average of 10% report issues
A background check practice having Caused the most problems for the EEOC includes: a) Correlation of Background Check & Job b) Blanket No-Hire Policies Based on Criminal Records or Negative Credit Scores c) Hiring policies Based on Credit Scores d) Written Consents From Candidates
b) blanket no-hire policies based on criminal records or negative credit scores
Under the employment at will doctrine, The only illegal reason for firing someone is: a) Poor Financial Performance b) Discrimination c) Fraud d) Belonging to a Union
b) discrimination
Driving cross country to you new job with CNH and you change your mind about working for them. You call them and quit. What legal doctrine are you employing? a) due process of employment b) employment at will c) alternative dispute resolution d) right to free speech at work e) public policy exception on the job
b) employment at will
As we consider social responsibility, we encounter two models of a corporation. One of those models is the stockholder model focused on owners. The other is the stakeholder model focused on a) businesses b) interests c) consumers d) choices e) employees
b) interests
Which of the following is NOT one of the Responsibilities in Carroll's four-part Definition of corporate social responsibility: a) Economic b) Social c) Legal d) Philanthropic
b) social
A Wealth of Nations was written by? a. Milton Friedman b. Adam Smith c. John Maynard Keynes d. Friedrich Hayek e. Thomas Sowell
b. Adam Smith
We have talked about alternative Dispute resolution (ADR). Which Choice below is NOT an ADR? a. Arbitration b. Civil Action c. Open Door d. Ombudsman e. Mediation
b. civil action
Social responsibility has changed over time. Prior to the 1800's which model dominated CSR? a. Stakeholder b. Economic c. Legal d. Social e. Stockholder
b. economic
Consumer Magna Carta
basic expectations of the modern consumer movement safety choice informed heard
Consumer international Expanded Magna Carta
basic need safety choice information representation redress education healthy environment
Dr. Hastings idea of corporations and CSR
being a positive contributor to the needs of the community and the world; connections between the individuals in the company and the opportunities the company can provide to help make a difference in the world
Negotiated regulation
between industry and government coke and pepsi in india
moral - Ben and Jerry's values based hiring those out of the workforce:
big on employee stakeholders -addiction, incarceration, family issues, young people - ban the box program
Advertising pro/con opening examples
bloomingdales spike the eggnog kendall jenner and pepsi nivia white is purity dove evolution of a model
Managerial View of the Firm
business firms began to see their responsibilities toward other major constituent groups to be essential if they were to be successful
Which of the following is NOT one of the Rights in the consumer's Magna Carta: a. Right to Safety b. Right to be Informed c. Right to be Protected d. Right to Choose e. Right to be heard
c) right to be protected
Product information that Communicates truth not half truth Is called what? a. Adequate b. Informed c. Accurate d. Clear e. Persuasive
c. Accurate
Treating workers simply as the law allows is what? a. Moral b. Immoral c. Amoral d. Due Process e. Will
c. Amoral
3 Reasons Law is Inadequate
can't address all topics lags behind reflects personal interests/motivations of law makers
discrimination law
can't fire based on any discrimination
Product Information must be:
clear - no deception nor manipulation - direct and straightforward accurate - communicated truths, not half truths - avoids exaggeration and innuendo adequate - provides enough information for people to make a choice on all the options available
Creating Shared Value (CSV)
companies generating economic value in a way that produces value for society as well
Other Advertising Issues
comparative advantage (one product to another) sex in ads advertising to children marketing to the poor ads to alcohol and cigs health ads environmental ads
Comparative Advantage
directly comparing one product to another earliest form coke vs. pepsi
Key thing for consumer stakeholders
disclosure --> tell the buyers what you are doing - transparency
Customer Stakeholder key principle
disclosure: tell buyers what you're doing
Black Friday Article
discounts priced in from the beginning retail theater: set prices that yield profit margins they want after markdowns
HR Magazine Employment at Will Article
discusses employment at will doctrine POV: doctrine is viable and important because provides fair and reasonable employers with important legal freedom needed to manage human capital Conclusion/Theme: employers should fight to maintain right to arbitrary. When @ will is combined with treating employees fairly, employers can effectively close gaps in employee performance, attendance, or conduct through communication - if firing is inevitable, management can do that with fairness and consistency while respecting the employee
Unemployment side effects
drug and suicide rates go up -illicit drug use double to 17% for unemployed -1 in 5 suicides are attributed to lost jobs
FTC.gov website
dual mission to protect consumers and promote competition
Consumer Magna Carta: Heard
due process, solving problems, communicate grievances to business
Product liability - a critical customer stakeholder issue. Imagine leading new product development at P&G. You decide to take "complete responsibility" for all products. What view of product liability are you applying? a) due cost b) caveat emptor c) contractual d) caveat vendor e) social cost
e) social cost
In the Coca-Cola video they were engaging with which stakeholder? a. Customers b. Employees c. Communities d. Environment e. All of the above
e. All of the above
In the list below which is NOT a principle for advertising to children? a. Consider they can't account for ads b. Don't stimulate unreasonable expectations c. Avoid social stereotypes about people d. Advertising should have education mission e. Direct advertising to parents
e. Direct advertising to parents
Who saved New Orleans? a. FEMA (Fed. Emerg. Mgmt. Agency) b. American Red Cross c. People of New Orleans d. United Way e. The Business Community
e. The business community
Responsibility History: 4 approaches to CSR over time
economic (1700+) legal (1800+ - child labor) social (1850+ - behavioralists, teamwork, people, carnegie, industrialists) Stakeholder (1950+)
Stakeholder culture
embraces the beliefs, values, and practices that organizations have developed for addressing stakeholder issues and relationships
Citizenship 3 part definition: social responsiveness
emphasis on action and activity can i help the communities I want to serve?
Citizenship 3 Part definition: Corporate Social Responsibility
emphasis on obligation and accountability want to help people
Citizenship 3 part definition: social performance
emphasis on outcomes and results yes I can help these people
traditional whistleblowing approach
employee reports to corporation loyalty, obedience, confidentiality
Emerging whistleblowing approach
employee reports to corporation and the public balances duty to the firm and the public
4 key stakeholder groups - "4 buckets"
employees consumers community government and non-government
Moral Management & Employees
employees = human resource treated with dignity Ex) Alta Gracia Knights apparel Brand
2 Giant Stakeholders with regards to COVID-19
employees and customers
Moral Managment
employees are seen as a human resource and treated with dignity
Privacy in the Workplace
employees have few privacy rights in (and sometimes out of) the workplace. technology allows employers to monitor many aspects of employees activities
family-friendly workplace
employees less willing to spend long hours at work - more committed to having family time avg hours working in US per year has increased us = no vacation destination companies looking for more ways to improve work/life balance
Right to be not fired without cause
employees should be discharged for only good reasons (good cause norm)
Social contract verse employment contract
employment = salary, tasks, agreement, efforts, benefits, hours a week, I give you money, you give me effort social = how do I treat you, support facilities, training, everything that goes beyond the employment contract
Driving cross country to your new job with CNH and you change your mind about working for them. You call them and quit. What legal doctrine are you employing?
employment at will
Employment at will
employment principle that if there is no specific employment contract saying otherwise, the employer or employee may end an employment relationship at any time, regardless of cause
Product Liability Risk Management Program
ensures product is safe through 5 steps: transfer risk through mgmt of suppliers build safety into product design keep essential records enable/review customer feedback
Food and drug administration
ensuring the safety and effectiveness of products that account for about 20 cents of every dollar spent by American consumers each year - products that touch the lives of every American every day. These include human and animal drugs, 80 percent of the food supply, biological products, media devices, cosmetics, radiation-emitting products and tobacco products
consequences of whistleblowing
excluded from decisions and work activity cold shoulder from coworkers verbal abuse from management almost lost job not given promotion/raise cut in hours/pay relocated/reassigned
Whistleblowing laws
false claims act sarbanes oxley act (sox) dodd/frank IRS
Laws surrounding whistle blowing
false claims act sarbanes/oxley dodd/frank IRS
Alternative Dispute Resolution (ADR)
methods of solving a problem by bringing in an impartial outsider but not using the court system (no litigation)
Smoking in the workplace
most states regulate to some degree everett knopp for smoke-free society allowing smoking in workplace ha several strong regulations
What are our stakeholder's stakes
nature legitimacy power urgency
Arbitration
neutral party resolves dispute between two or more parties - parties must agree before any dispute binding employee contract legal arbitor comes in and you abide by them
Coke & Pepsi India Video (all the ways they are now engaging)
new jobs; water conservation, cleanliness, and awareness; rain water harvesting; rejuvenated traditional water bodies; portable water for kids; partner with UN for clean water in schools; recycle; disability employees; scholarship; fitness; disaster relief
Where Free Speech Goes to Die Article
no right to free speech in the workplace employers can take action against any employee who engages in political speech that company leaders find offensive - constituion only protects right to expression from gvt. interference, not private employers valid reasons to restrict free speech: productive work site, suppressing opinions contrary to mgmt, fear of lawsuits, alleging employer permitted hostile work environment, risk of paying damages
Mediation
non-binding outside firm discusses issue
When JCP marks up prices then adds a discount to still make a profit this means the business model is what?
not a truthful deal
Customer data
o 1-5% complain management o 45% complain front line agent o 50% problem, no complaint
child labor case
o 250 million children impacted 2006 o 200+ million still impacted by 2014 Immoral Management
Customer Magna Carta
o Safety o Choice o Informed o Heard (due process)
HR Magazine Article
o They believe employment at will is good but dumb because other laws protect employment o They preach it but don't practice
Ralph Nadar
o father of the modern consumer movement wrote Convair unsafe at any speed
Ombudsman
one who investigates reported complaint and helps achieve equitable settlements formally & officially neutral handles employee concerns and keeps problem from getting out of hand laws: SOX and Dodd-Frank
Production View of the Firm
owners thought of stakeholders as only those individuals or groups that supplied resources or bought products or services
Stockholders
owners; also a stakeholder
Bowflex plays on exaggeration and psychological appeals because...
people are self conscious of their weight, but they use legitimate body builders to brand their products
FTC and Product Placement
people have the right to know when they are being advertised to and by whom
When Walmart thinks about a disaster they are always going to think about its....
people, operations, and community
Psychological Appeals
persuasive effort aimed primarily at emotion -healthy, protect, keep young, keep safe, look hot, germ free, strong, prevent, become, confidence
The tech industry uses social media as a __________ but some believe it is becoming a ___________.
platform; publisher
Corporate performance - financial and social
positive social <-> positive financial = positive reputation Interdependence of social and financial performance leads to a positive reputation Social company: more customers - better financial Financial company: can afford to invest in social
Due Process Main Requirements
procedure visible and well known predictably effective institutionalized perceived as equitable easy to use applies to all employees
Issues of quality
product and service
Consumer Stakeholder Focus
product information and the product itself
Consumer Magna Carta: Safety
product won't hurt you
Children's Television Act
prohibited the airing of commercials about products or characters during a show about those products or characters and limited the number of commercial minutes in children's shows
Federal Packaging and Labeling Act
prohibits deceptive labeling of certain consumer products and requires disclosure of certain important information administered by FTC but FDA also involved most important issue = ingredient labeling
Guarantee
promise regarding quality less likely to be written
Consumer product safety commission website
protects public from unreasonable risks of injury and death associated with consumer products Roles: safety education, regulation, laws, standards, research/statistics, recalls, business and manufacturing
Our Responsibilities to Stakeholders
provide shareholders a good return on investment give employees fair pay and work conditions provide customers fair prices and safe products provide the local community jobs and minimal disruption give suppliers regular business and prompt payment
Exceptions to "at will"
public policy implied contract good faith principle discrimination law
Exceptions to at will policy
public policy (can't be fired for refusing to commit crimes or taking adv. of entitled privileges) implied contract (promises employer doesn't realize were made) good faith principle (show employee had every reasonable opportunity to improve) discrimination law
We looked at the Coke/Pepsi in India case. As you consider what these corporation giants owe the customers in India, which is NOT a "magna carta" right Coke/Pepsi owe them? a safety b informed c choice d quality e heard
quality
False Claims Act
qui-tam provisions: he who sues for the king as well as himself allows employees to blow the whistle about contractor fraud and share with government in any financial recoveries realized by their efforts ex) James Alderson
Stakeholder View of a firm
radical concept shift from other views encompasses numerous individuals and groups that are embedded in firms' internal and external environments
Conscious Capitalism
refers to organizational policies and practices that both enhance the economic success of a company and advance the economic and social conditions of the communities in which the company operates; also referred to as a shared value approach.
Ad Creep
refers to the way that advertising can increasingly be found everywhere one looks (produce and plot placement are examples)
Philanthropic Responsibilities
reflect current expectations of businesses by the public businesses giving back
FDA
regulates food drugs, vaccines, blood products, medical devices, etc.
Patagonia pressure example
repairs products, reduces consumption, and reduces what people buy - don't buy this jacket ad 1. defensive: public perception about quality of products 2. cost/benefit: charge you more for item and build possibility of repair 3. strategic: buy higher quality things and don't buy them often 4. innovation: changing the industry - don't buy this jacket ad
FDA
responsible for protecting public health by ensuring safety, efficacy, and security of human and vet. drugs, bio products, medical products, the nation's food supply, and products that emit radiation
Economics
retail, entertainment, hospitality; all get hit hard and have costs to pay, but absolutely no revenues
Privacy in the Workplace
right to be left alone right to autonomy claim of individuals and groups to determine when and how information about them is communicated to others
Freedom of Speech
right to express your opinions without censorship, retaliation, or restraint
Privacy
right to keep personal affairs to oneself and to know how information about you is being used
Due Process Definition
right to receive an impartial review of one's complaint and be dealt with fair
2) Due Process
right to receive an impartial review of one's complaints and to be dealt with fairly
Walmart Cons
• Downtown declines • Green becomes pavement • Consumerism - buy more stuff • Closed culture leg many activists to fight the company • Workforce issues (wages, overtime, gender) • Legal issues (63 class actions settled) • Bribery scandal in Mexico (2012) • 17 lawsuits open each day • Most sued company on the planet
Employee Moral Rights
♣ Fired with cause shared ♣ Due process fair treatment ♣ Freedom of speech ♣ Respect & dignity
Top complaints
♣ Product not working ♣ Bad customer service ♣ Talking to machines ♣ False ads ♣ Slow services
Cell phone and driving
- glance at people while driving and see if they are distracted? - Graph: when cell phones first came out they predicted how many fatalities there would be but the actual number is wayyy higher - as tec=xting and number of cell phone go up, fatalities also go up - 23X more likely to crash - talking on phone 21 year old reaction times are like a 70 year old - Texting/driving skills 11 teens everyday cambridge mobile telematics traffic deaths up 14% 2014-2017 - 52% are from phone distraction - national safety council - approximately 40,000 deaths - approximately 4.6 million injuries - costs $432 billion More impaired than if you were drunk deaths going down because innovation of cars
Walmart Cons:
- green areas become pavement - downtown declines - consumerism: buy more stuff - workforce issues (wage, gender, etc) - legal issues (have about 17 lawsuits opened everyday)
Doug McMillon initiatives (Walmart CEO)
- have 0 waste in four largest markets by 2025 - 100% renewable energy - forests (0 net deforestation) - food (2x sales local, less additives, sugar) - 100% recycled packaging - ladder of opportunity jobs/careers (training 250k) - human rights internal sourcing
BowFlex
- just 20 minutes/day of working out video; chad martin body builder; targeting work people 40 years +
What are the issues that come from lead paint being used in children's toys?
- learning disabilities - brain damage - organ failure
Responsible Companies Do?
- make safe products - no pollution - obey laws - honesty - safe workplace - no misleading Ads - no discrimination - no harassment - gives to charity
What are some consumer problems with business?
- overpriced products - poor guarantees and quality - misleading ads - mishandled complaints - hidden fees
Walmart Pros:
- serve about 200 mil customers a week - largest company - 1.4 mil employees - sustainable - saved the gulf
Old version of Employee/Employer social contract
- stable job security - lifetime one employer - stable assignments - loyalty to employer - employer responsibility - individual work focus
Ways company's display facts
- super fast talkers at the end of commercials - fine print - product placement in movies
3 Parts of Citizenship
-Corporate Social Responsibility -Corporate Social Responsiveness -Corporate Social Performance
4 ways business respond to CSR pressure
-Defensive (garment factory) -Cost/Benefit (Dupont) -Strategic (IBM) -Innovation (Tesla)
Big 3 employee rights
-Good cause -due process -freedom of speech
5 Main Stakeholders
-Gov't -Employee -Consumer -Community -Owners
IBM Smarter Cities: Outdoor Utility
-IBM created ads with a purpose, a new function -ads that also functioned as benches, ramps, umbrellas, etc.
Employee Privacy Bill of Rights
-Informed consent before acquiring info -Disclose nature of surveillance -Set controls on info access -Limit collection/use of medical/health data -Require reasonable cause before drug tests -Respect boundary between work and home
Responsibility leadership
-Making business decisions that take into account all stakeholders
OSHA
-Occupational Safety and Health administration
4 ADR procedures
-Open door policy (most) -Arbitration/mediation (50%+) -Ombudsman (16%) -Peer review panel (13%)
Consumer Problems w Business
-Overpriced -Poor Quality -Misleading Ads -Hidden Fees -Poor Service -Product Failures -Poor Guarantees -Mishandled Complaints -Dangerous Products -Poor Info -Unclear Service -Misleading Labeling
BBB Website - Vision
-Setting Standard for Mktplace Trust -Encouraging and supporting best business practices -Celebrating Mktplace role models -Addressing substandard mktplace behavior -Creating a community of charity & trustworthy business
Cons of CSR
-Takes focus away from making profits -Business executives spend shareholder money on environmental initiatives
Caveat Vendor
-The way we are starting to do business now (seller is accountable for products)
Consumerism
-a social movement seeking to augment the rights and powers of buyers in relation to sellers
Responsibility definition
-ability or authority to act on ones own without supervision
ADR
-alternative dispute resolution -way for people to be heard w/o calling a lawyer and going to court
Big 4 advertising issues
-ambigus advertising -concealed facts -exaggerated -psychological appeal
8 principals of adverting to children
-children can't discern ads -never deceptive or unfair -objective information -don't simulate unreasonable expectations -inappropriate products not marked to children -avoid social stereotypes -advertising should be educational -contribute to parent children relationship
advertising to children
-children don't understand intent to sell until around age 12
3 principles of advertising
-clear -accurate -adequate
Free press guide
-clear -extend -ban -rigorous
Naked brand theme
-companies becoming more transparent
Discounts
-companies raising prices, to make it look like they are having bigger sales
Social responsibility and product information issues 7
-comparative advantage one product to another -use of sex in ads -advertising to children -marketing to the poor -advertising alcohol and cigarettes -health ads -environmental ads
Multiple Select Cola 8
-conserve water -rain water harvesting -rejuvenating wells -employing people -recycling -provide scholarship -thumbs up games -helped with natural disasters
2 largest stakeholders
-consumers -employees
3 views on quality and safety
-contractual -due care -social cost
4 Cs of citizenship development
-credibility -capacity -coherence -commitment
4 part pyramid of CSR
-economic -legal -ethical -philanthropic
Corporate Social Responsiveness
-emphasis on action and activity
Corporate Social Responsibility
-emphasis on obligation and activity
Corporate Social Performance
-emphasis on outcomes and results
employment at will
-employee can leave at any time -employer can tell employee to go home at any time
4 Key stakeholders
-employees -consumers -community -government and non-goverment
EAP
-excellent performance -academic integrity -professional behavior
due care
-expanded contractual obligation -product must be safe, and the customer must know how to use it
3 most dangerous jobs
-fishing -farming -forestry
Whistle blower
-former or current employee who discloses improper actions by members of the organization
exaggerate (puffery)
-greatest -best in class -top seller Ex. Vitamin water
psychological appeal
-healthy -confident -protect -look hot -keep safe Ex. Bow flex, Sensa
concealed facts
-hiding important facts -fine print -example (cell phone plans)
Conscious Capitalism 4 tenets
-higher purpose -stakeholder orientaiton -conscious leadership -conscious culture
contractual
-how companies use to sell goods (buyer beware)
Iron law of responsibility
-in the long run those who don't use power in the manner which is responsible, lose it
two ways product information is regulated
-industry -government
Big 6 reasons CSR business case
-innovation -cost saving -brand differntiation -long term thinking -customer engagement -employee engagement
6 part of license to operate
-intangibles -consumers -risk management -employees -investors -operations
Social contract
-is written and unwritten rules between employer and employee -can include pay, working conditions, people you work with, where you work, what work you do
Federal trade commission 2 purposes
-maintain free and fair competition in the economy -protect consumers from unfair or mis-leading practices
3 views of employees
-moral -amoral -immoral
2 types of government regulation
-negotiation -mandated
ADR's (p 533)
-open door policy -ombuds program -peer review panel -mediation (non-binding) -arbitration (binding)
Consumer Problems with Business
-overpriced products -poor quality -misleading ads -hidden fees -poor service -product failures -complaints ignored -poor guarantees -mishandled complaints -dangerous products -poor information -unclear service help -misleading labeling
Dutch Boy Lead Paint Case
-paint was 91% pure lead -used children in the logo, using the paint -created children's book promoting the paint -even though lead was proven to cause problems to your health -Players (designers, manufactures, families, customers, government)
Biggest role of managers
-personal safety
Coke and Pepsi in India
-pesticides found in all of the coke and pepsi samples -company tried to fix their image with advertising with celebrities -water usage becomes next big problem; using water to create these drinks -now using corporate social responsibility and using the stakeholder approach
ADM Mark Witacre
-price fixing whistle blower
Unilever sustainability blue print
-reduce cost -grow business -have a good impact
Unilever Case 3 keys
-reduce environmental impact -enhance peoples quality of life -sanitation and health
Due process
-right to receive an impartial review of one's complaints and to be dealt w/ fairly
OSHA (Occupational Safety and Health Administration)
-safe and healthy working conditions -family and medical leave act -smoking -Americans with disabilities act
3 expectations of employees
-safety -health -privacy
3 types of self regulation
-self discipline -pure by industry -Co-opted ex. BBB
Old Social Contract (p 247)
-stable job security -lifetime one employer -stable assignments -loyalty to employer -employer responsibility -individual work focus
Social cost
-strict liability -absolute liability
Language check %
-sustainability 50% -corporate social responsibility 25% -25% use other
absolute liability
-takes into account for any negative effect it has on society
false claims act
-the federal Government's primary litigation tool in combating fraud against the Government.
caveat vendor
-the way we are starting to do business (seller is accountable for products)
Ford and Firestone case
-tire tread falling off wheels causing cars to flip -ford and firestone pointed fingers at one another -271 deaths
Toyota
-toyota has life time employment ♣ Car sales dropped ♣ Employees would work on the plant to prepare when things would get better again ♣ A lot of training ♣ Community Investment ♣ That way they didn't lose all of their talent Moral Management
6 most common safety issues at work
-transportation -assaults and violence -contact with objects -falls -harmful substance exposure -fires and explosions
Katrina Case
-walmart shipped massive amounts of supplies the Day after -walmart prioritized people, operations, community
caveat emptor
-way we used to do business (buyer beware)
Adam Smith
-would be a ethics teacher -'wealth of nations' -'theory of moral sentiment'
Ralph nadar
-wrote unsafe at any speed
Free Press Guide
1) clear and effective disclosures 2) extend rules to cable/satellite companies 3) ban product placement in shows for children under 12 4) rigorous enforcement to curb stealth and embedded ads
CSR and YOU
1) finance 2) people 3) stakeholders
What should you do?
1) have you been fair 2) consistent with all 3) business related 4) good documentation
Consumer Stakeholder
1) product info 2) the product itself - safety, manufacturing, etc.
Unilever's three big goals:
1. improving health and well-being for more than 1 billion 2. reducing environmental impact by half 3. enhancing livelihoods for millions
Unilever - 3 areas of sustainable living
1. improving health and well-being for more than 1 billion 2. reducing environmental impact by half 3. enhancing livelihoods for millions
Employee Privacy Bill of Rights
1. informed consent before acquiring information 2. disclose nature of surveillance 3. set controls on information access 4. limit collection/use of medical/health data 5. require reasonable cause before drug tests 6. respect boundary between work and home
CSR Business Case - Big 6 reasons
1. innovation 2. cost savings 3. brand differentiation 4. long-term thinking 5. customer engagement 6. employee engagement
The Core benefits for CSR
1. new business 2. enhanced reputation 3. customer retention 4. better relations with stakeholders 5. attract/retain employees 6. decrease costs 7. increased investment
CSR Business case - Core Benefits
1. new business 2. customer retention 3. better relations with stakeholders 4. attract/retain employees 5. decrease costs 6. enhanced reputation 7. increased investment 8. better media relations
4 exceptions to "at will"
1. public policy 2. implied contract 3. good faith principle 4. discrimination law
Principles of Advertising to children
1.Take into account that children cannot discern ads 2.Never deceptive or unfair 3.Objective information 4.Don't simulate unreasonable expectations 5.Inappropriate products not marketed to children 6.Avoid social stereotypes 7.Advertising should be educational 8.Contribute to parent-children relationship
Win/Fail Ford and Adidas
Adidas: CEO said they must keep business going, then reversed the decision 24 hours later after a lot fo backlash Ford: made new ads and partnered with a ventilator manufacturer
In the Coca-Cola video they were engaging with which stakeholder? a. Customers b. Employees c. Communities d. Environment e. All of the above
All of the Above
Today you find yourself out of a job. It turns out your company has been monitoring your emails, phone conversations and all websites you've visited (including some online gaming sites). Below what responsibility does the company have here? a. When collecting information, it should only be use in appropriate ways b. Companies show allow employees to correct inaccurate information c. Companies should collect only employee information that is absolutely necessary d. All of the above
All of the Above
B Corporation
Also know as a benefit corporation, in which the company is legally required to adhere to socially beneficial practices, such as helping consumers, employees, or the environment (using businesses as a force for good)
ADR
Alternative Dispute Resolution
Due process when conducted not in the legal system is called?
Alternative Dispute Resolution
ADR
Alternative Dispute Resolution resolves disputes without litigation using open door policy, ombudsman, peer review, mediation, and arbitration
"Due Process" - sounds like a post office thing (maybe not). Working apart from the legal system to provide due process rights for employees is called what?
Alternative dispute resolution
"Due Process" - sounds like a post office thing (maybe not). Working apart from the legal system to provide due process rights for employees is called what? A) alternative dispute resolution B) viewpoint diversity C) ombudsman protocols D) peer evaluations E) employment at will
Alternative dispute resolution
Example of Amazon and Apple: In-App purchasing
Amazon failed to provide parents with basic information when it comes to In-app purchases Unauthorized easy accessible charges World of mobile called wild west
Amazon/FedEx/UPS and Covid-19
Amazon: ensuring social distancing, giving 2 weeks paid leave, ordering tons of masks, hiring 100,000 more workers UPS: focus was speed over sanitation, if you are sick... stay home
1. Today you've joined a team of all Smeal majors at your company to work on a new ad campaign. You consider using the "free" option. What ad issue might this result? a. Concealment b. Psychology c. Exaggeration d. Ambiguous e. Misleading
Ambigious
Today you've joined a team of all smeal majors at your company to work on a new ad campaign. You consider using the "discount" option. What issue might this reflect? A) ambiguous B) psychology C) exaggeration D) concealment E) misleading
Ambiguous
Treating workers simply as the law allows is what? a. Moral b. Immoral c. Amoral d. Due Process e. Will
Amoral
Dutch Boy Paint Case: What moral management category is this in?
Amoral & Immoral
Investment banking illustration
Amoral Management
Pros of advertising
Beneficial component of mktg system Efficient way to distribute info Increase sales and profits Brand awareness Increase customer knowledge Saves people time (quick understanding) Assists people with needs and wants
B-Lab example
Benefits corporation --> 33 states allow you to legally organize this way (type of business) --> ex: Hershey takes care of local schools B-Lab: nonprofit that provides rewards and certifications to other nonprofits - run my company under benefit for the community
Movie - Concussion (2015)
Biggest Threat to NFL --> Parents aren't putting their kids into football because it is too dangerous - cost of injuries - decreasing football
A background check practice having cause the most problems for the EEOC includes: a. Correlation of Background Check & Job b. Blanket no-hire policies based on criminal records or negative credit scores c. Hiring policies based on credit scores d. Written consents from candidates
Blanket no-hire policies based on criminal recrds or negative credit scores
Concealed facts
Cell phone plans - "Guaranteed to never go up" - "rates increase after two years" - fine print Pharma side effects Today in class you get a free beer - will not be served until 5 year reunion Airplane ticket price - prices + taxes + fees Product Placement in TV and movies - ET and Reeses and, any other examples - transformers uses over 100 products - modern family and ipad example
C.D.C.
Centers for Disease Control and Prevention -authoritative US information
Corvair
Chevy Car People died becasue the cars had no stability bars The company blamed the drivers
We have talked about Alternative Dispute Resolution (ADR). Which Choice below is NOT an ADR? a. Arbitration b. Civil Action c. Open Door d. Ombudsman e. Mediation
Civil Action
Con CSR
Classical Economies Business not Equipped Dilutes Business Purpose Too much Power Already Global Compettivenes page 40
Cons of CSR
Classical economics Businesses not equipped dilutes business people too much power already global competitiveness
What are the three things that product information must be?
Clear, accurate, and adequate
Which below is NOT part of Hershey Foods CSR Initiatives? a. Track & Field b. Farming c. Employees d. Towns e. Colombia
Columbia
Remember King John signing a set of laws to give average citizens rights - called the Magna Carta. We have consumer Magna Carta. Which below is not part of that? A) comfort B) safety C) choice D) heard
Comfort
When considering employee stakeholder, Safety is of paramount importance. What job was considered the most dangerous in the U.S. last year? a. Roofing b. Mining c. Commercial Fishing d. Policing e. Logging
Commercial Fishing
BIG 5- Business and stakeholders
Community - environmental groups, public Government - local, federal, state Employees - union, older, women, minority, activists Consumers - consumer activities, product liability Owners - private, corporate, institution
5 Core Stakeholders
Community (environmental groups, public) Government (local, federal, state) Employees (union, older, women, minority, activists) Consumers (Consumer activists, product liability) Owners (private, corporate, institution)
Big 5 groups related to Business and Stakeholders
Community, Gov, Employees, Consumers, and Owners
Controversial Ad issues
Comparative Advertising Use of sex appeal Advertising to childern Marketing to the poor Advertising Alcoholic Beverages Cigarette Advertising Health and environmental claims
First Amendment
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.
John Mackey - CEO whole Foods
Conscious Capitalism book www.consciouscapitalism.org/ 4 Tenets: - higher purpose: why your business exists (not profit) - stakeholder orientation: care for everyone in the ecosystem - conscious leadership: inspire the best out of people and keep business focused on higher purpose - "we" before "me" - conscious culture: fosters love and care and builds trust between a company's team members and its other stakeholders - culture is the heartbeat of a company Using the free market from a stakeholder perspective
CPSC
Consumer Product Safety Commission
Consumerism
Consumerism is a social movement seeking to augment the rights and powers of buyers in relation to sellers
2 Largest Stakeholders
Consumers & Employees
Consumer Int'l Website
Consumers International is the membership organisation for consumer groups around the world. We believe in a world where everyone has access to safe and sustainable products and services. We bring together over 200 member organisations in more than 100 countries to empower and champion the rights of consumers everywhere.
Product Liability (3 forms)
Contractual Due care/due dilligence social cost
Ethics/ Legal Three views on quality and safety
Contractual = after sold it was up to you - used mostly in the past - how companies always sold goods (let the buyer be aware, just a transaction) Due Care= need to do everything as a company to make sure customers are safe - clear information and high quality --> manuals, systems for serving, videos - an expanded contractual obligation, (I need to make sure that my customer knows how to use the product safely and that the actual product is safe itself) Social Cost - death and injuries - pay for everything connected - Does your product have an inherent damage and do we want you to be responsible for that damage - strict liability: design, manufacturing, deliver, sale --> anything goes wrong and company is responsible - absolute libaility: unknown issues --> liable for unknown issues like tobacco and lung cancer --> your product has a cost that goes beyond the function that it is designed to do Ladder example: - contractual: you should know how to use ladder - due care: once a lot of people were injured it became due care responsibility (safety skills, videos, manuals, instructions - social cost: some percentage of people will fall off ladders, hurt themselves and or die. Should ladder companies be responsible for them? -> people should be smart enough to know how to use a ladder Should company take full responsibility for any negative outcome of product? what if customer did not read protocol or videos and got hurt - company should always be responsible under social cost currently mostly contractual and sue care but headed towards social cost
Ladder Safety Video:
Contractual: I make a ladder, you should know how to use it safely and properly Due care: they have stickers all over them, instructions and stuff on proper and safe usage. " Social cost: some percentage of people will fall off ladders, hurt themselves and or die. Should ladder companies be responsible for them?
5 Stages of Citizenship Development
Elementary - taxes - compliance - defensive - unilateral relationships with stakeholders Engaged - license to operate - philantrophy - interactive stakeholders Innovative - stakeholder management - mutual influence stakeholders - business case Integrated - value proposition - Triple Bottom line - partnership alliance with stakeholders Transforming - change the game - market creation or social change - muti-organization stakeholder relationship 4 links of citizenship development (4C's) - credibility - capacity - coherence - commitment
COVID-19 Pandemic
Emotional responses as they relate to science, economics, stakeholders, and business
Whistle blowing: traditional approach
Employee -> Corporation (Loyalty, obedience, and confidentiality)
1) Fired for Cause
Employee has done something that merits instant firing - stealing, cheating on expense report, violence in workplace, sexual harassment, etc.
Immoral Management & Employees
Employees = factors of production Exploit them for personal gain ex) child labor
Moral Management of employee
Employees are a Human Resource
Immoral Management
Employees are a factor of production and exploited for gain
good faith principle
Employers may lose lawsuits to former employees if they cannot show that employees had opportunities to improve their performance before termination
Good Cause
Employers need a good reason to fire
What problems did both Coke and Pepsi run into while in India?
Finding pesticides in the water, communities were having to ration their water
Dismissing with Care (What TO do)
Fire Employees in a Private Space Be Mindful of Employees' Logisitcs Perserve Employees' Dignity
FDA
Food and Drug Administration
Why is Warby Parker a B-corp?
For every pair of glasses bought they give a pair to someone in need. They also train people in low income areas to give proper eye exams
Warby Parker (certified B-corp)
For every pair they sell, they distribute one to a person in need; give training; donate money as well
Ford and Firestone case
Ford and Firestone were married companies until Ford Explorer tires were experiencing tread separation causing many deaths and injuries
Iron Law of responsibility
In the long run, those who do not use power in a manner which society considers responsible will tend to lose it
The Iron Law
In the long run, those who do not use power in a manner which society considers responsible will tend to lose it!
The Iron Law
In the long run, those who do not use their power in a manner which society considers responsible will tend to lose it
1. Which below is NOT a business benefit from investing in CSR suggested in class? a. Customer loyalty b. Workforce satisfaction c. Community support d. Increased production e. Better image
Increased Production
Consumer Product Safety Commission
Independent regulatory agency created by CPS act of 1972 reduces risk of injuries and death from consumer products by: developing standards w industry enforcing standards banning prpducts recall and repair conducting research informing consumers and responding to inquiries
How product information relation happens
Industry Regulation: - self-discipline (regulating yourself) - Pure - by industry ex: International Federation of pharmaceuticals manufacturing - co-opted - ex: BBB (seek help) Government Regulation - negotiated - industry/governemnt ex: coke/pepsi india - mandated - legal (ex: FTC) Government tells companies they are not operating well - government said you can't be here anymore unless you engage with the community - nicer play
What are the 5 ways government and industry regulate?
Industry regulates through: - self discipline - purely by industry - co-opted Government regulates through: - negotiated - mandated (legal)
Discounts-Black Friday retail theatre
Inflated prices and added discount- people wanna feel that they're getting a good deal Gross margins stay the same Discounts=part of ambiguity
Business and Responsibility License to Operate
Intangibles (53% total value of fortune 500) Consumers (reputation, responsibility key) Risk Management (Gvt, NGOs, legal) Employees (want to work for values corp) Investors (86% institutional investors) Operations (energy, waste, water)
Corporate Performance: Financial & Social (packet)
Interdependence drives reputation positive social ⇆ positive finance 🠒 positive reputation
Stakeholders =
Interests
Pure - by industry regulation
International Federation of Pharmaceutical Manufacturers Association - companies as an industry come together to make regulations so government does not get involved https://www.ifpma.org - regulatory systems and customer trust - companies do it together AICPA: American Institute of certified public accountants https://www.aicpa.org - ethics enforcement - accounting and tax companies come together
Employee Rights are ....
JOINT legal & moral
Better Business Bureau - Get to know us
Vision: An ethical marketplace where buyers and sellers trust each other Mission: BBB's mission is to be the leader in advancing marketplace trust. We do this by - Setting standards for marketplace trust - Encouraging and supporting best practices by engaging with and educating consumers and businesses - Celebrating marketplace role models - Calling out and addressing substandard marketplace behavior - Creating a community of trustworthy businesses and charities BBB sees trust as a function of two primary factors - integrity and performance. Integrity includes respect, ethics and intent. Performance speaks to a business's track record of delivering results in accordance with BBB standards and/or addressing customer concerns in a timely, satisfactory manner
Primary verse secondary shareholders
Primary = direct - employees - investors - consumers - communities - suppliers - natrural envionrment - future generations - nonhuman species secondardy = indirect - governemnt - institutions - social pressure - media - comprtitors - trade bodies - envionment - animal welfare organizations
Privacy laws
Privacy act of 1794 USA Patriot Act Fair Credit Reporting Act Employee Polygraph Protection Act Americans with Disabilities Act Electronic Communication Privacy Act
1. Corporate Citizenship encompasses all but which element below? a. Responsibility b. Performance c. Responsiveness d. Problem Solving e. None of the Above
Problem Solving
Amazon/apple Case
Problems with inapp purchasing kids buying games too easily without regulation from the app store FTC claims they're misleading children
Collective bargaining
Process by which a union representing a group of workers negotiates with management for a contract
Stakeholder Thinking
Process of always reasoning in stakeholder terms throughout management process and especially when organization's decisions and actions have important implications for others
What are the big issues we think about with consumer stakeholders? a. Product quality & product safety? b. Product itself & product safety c. Product safety & product information d. Product information & product itself e. Product information & product quality
Product Information & Product itself
Coke and Pepsi in India case
Product Safety case study NGOs took products off shelves, tested them, and found pesticides The whistleblowers: SCE and IRC in India Pesticides in soft drinks because they were using pesticides on their plants - used marketing and PR to fix it - Hollywood stars Coke Used to market their product to the indian market after the pesticides scandel Aamir Khan and Aishwaya Rai video coke ad - didn't work that well Water contamination - They are stealing the clean water and causing water issues in India Coca Cola is NOW helping conserve water in every community they serve - rainwater - health and education --> scholarships - disaster relief - They are working to be a stakeholder company
Consumer Stakeholder Focus (always these 2 things)
Product info and product itself
2 types of consumer stakeholder focus
Product information Product itself
3 Views of a firm
Production Managerial Stakeholder
Three views of firm
Production Manager stakeholder
Views of the firm
Production view - The most traditional - Owners think of stakeholders as only those individuals or groups that supplied resources or bought products or services - supplier of raw materials --> The firm (processor) --> consumers of products Managerial view - Emerged afterward because businesses began to see their responsibilities with other major constituent groups (owners and employees) as a key to success - owners, employees, consumers, suppliers all have a two way relationship with the firm (managers) Stakeholder view - The radical conceptual shift to the firms multilateral relationships with constituent or stakeholder groups - Where the "Big 5" stakeholders and their subsets are taken into account - encompassed numerous different individuals and groups that are embedded in the firms internal and external environment - Business has a two way relationship with government (federal, local, state), employees (minorities, older employees, unions, activists, women), Owners (private citizens, institutional groups, board members), consumers (average consumers, product liabilities, social activists), community (general public, environmental groups, civic groups) - shareholder map
Children's Television Act
Prohibits airing commercials about products/characters during a kids show about those products/characters limits number of commercial mins in kids shows
Pros and Cons of CSR
Pros - Enlightened self-interest - Warding off government regulations - Resources available - Proaction better than reaction - Public support Cons - Classic economics - Business not equipped - Dilutes business purpose - Too much power already - Global competitiveness
Walmart Pros and Cons
Pros: - customers - 200M/week visiting - largest compay - $5000B/ year - 10,800 stores, 27 countries - 1.4M employees in US (2.3 total) - $1.4B cash and $2.2M hours donated - Sustainability drives - Saved the gulf Walmart and Sam's club graphic - when you have many stores you can make a huge difference during a disaster Positives verse negatives but can do that for any company - no company is perfect Cons: - downtown declines - puts mom/pop stores out of business - green becomes pavement - consumerism - buy more stuff - closed culture led many activists to fight company - workforce issues (wages, overtime, gender) - legal issues (63 class actions settled) - bribery scandal in Mexico 2012 - 17 lawsuits opened each day
FTC 3 purposes
Protect Consumers Maintain Competition Advance Performance
You considered the BowFlex advertisements - only 20 minutes/day 3x a week and you too will have the body of a fitness model. Don't you feel just a bit manipulated - your professor surely feels like this. What type of negative approach to product information was this? a. Exaggeration b. Psychological c. Ambiguity d. Concealment
Psychological
Advertising Issues (4)
Psychological appeals Exaggerate Concealed Facts Ambiguous Advertising
Exceptions to "At Will"
Public Policy: I cannot tell you to do something illegal Implied contract: code of conduct Good Faith Principle Discrimination Law
BBB Website
Vision: an ethical marketplace where buyers and sellers must trust each other Mission: to be leader in marketplace trust by: -setting standards -encouraging, supporting best practices -celebrating mktplace role models -calling out substandard behavior -creating a community of trustworthy businesses and charities
Warby Parker and B-Corp
WB Commercial video - each pair of glasses bought, one is given to someone in need - companies can do good in the world, be affordable, and be beneficial - 1 million glasses distributed - goal: "using business as a force for good"
Explain the Toyota social contract example:
Toyota has a no layoff policy so that employees will have jobs during both the good and bad times. They have flex workforce that allows them to contact agencies when business is booming and then go back down to their permanent workforce during slow times
Whistle blower approaches
Traditional Employee ---> corporaton Emerging Approach Corporation <-- Employee --> public Whistle blower (Balance duty to firm and public)
Traditional verse newer concepts regarding Citizenship
Traditional three - coprorate social responsibility (obligation and accountability) - corporate social responsiveness (action and activity) - corporate socail performance (outcomes and results) Newer five with similar meanings - corporate citizenship (view companies as citizens) - corporate responsibility (broadly focuses on all categories) - sustainability (people, profit, planet) - creating shared value (economic value in a way that produces value for society) - conscious capitalism (higher purpose, stakeholder orientation, conscious leadership, and conscious culture)
United Airlines- Win or Fail?
Transparency Anyone - April 2017 customer dragged off an overbooked flight forcefully - he is a paid customer and was not at fault - he was a physician Bumping people off planes - offer to give money to people bit if no one takes it they do it involuntarily which is not okay
Safety Categories
Transportation Contact w/ objects Harmful Substance exposure Assaults & Violent Acts Falls Fire & Explosions
Safety Data categories
Transportation --> most common Assualts and Violent Acts Contact with objects Falls Harmful substance exposure Faires and explotions
Amoral Management
Treat employees only as the law requires
T/F Every stockholder is a stakeholder
True, but not every stakeholder is a stockholder
3 Enclaves
Vatican City and Rome, Italy San Marino and Italy Lesotho and South Africa
Stakeholder View of the Firm
View of a firm that sees multilateral relationships among various stakeholder groups in the firm's internal and external environments
Workplace Violence Stats
Violent acts in 1993 - 2.1M Deaths in 1993 - 1,068 Violent acts in 2009 - 572k Deaths in 2009 - 463
Houston and Florence Hurricane/ Walmart Business Case
Walmart emergency cop center 2018 - close stores for the safety of the employees - keep shelves stocked in stores that remain open Walmart donations - water, batteries, generators, cereal, fruit/vegetables, meat, bars, pop tarts, mops - 730 trucks water, 660 trucks emergency stuff
Hurricane Cases
Walmart had to become a stakeholder company to survive - saved New Orleans and others by thinking about people, community, and operations (in that order) CEOs have to think about stakeholders
In class, we looked at how firms respond to the pressures applied to them to engage in CSR. When CVS eliminates cigarettes because of the threat to government and public pressure, they are taking what approach to CSR? a) defensive b) strategic c) cost/benefit d) innovation e) commercial
a) defensive
Ambiguous Advertising
Virtually, exciting, efficient, effective, long-lasting, beautiful, fast, deluxe, cool, cheap, many - lots of terms that can mean almost anything ex: 9 out of 10 dentists suggest collgate - but they only surveyed 77 dentists Helps: fight, protect, germ free, stop, prevent, virtually, can do, up to "Smoking can help you fell better" - they are still irritating but just less example: - "Advertising is based on happiness" - "it is toasted" - can tell your customers anything - this is talking about cigarettes
In the Ford/Firestone case the main Issue for Ford was? a. Customer Death/Injury b. Product Liability Issues c. Ford Explorer Design d. Who is Responsible e. Their Public Image
a. Customer Death/Injury
Safety in the workplace is managed By what agency? a. Occupational Safety & Health Adm. b. Occupational Safety & Health Law c. Occupational Standards & Health Adm. d. Occupational Standards & Help Law e. Occupational Standards & Help Adm.
a. Occupational Safety & Health Adm.
In the list below which answer is NOT part of the new social contract? a. Stable job security b. Numerous job changes c. Loyalty to career d. Personal responsibility e. Declining job security
a. Stable job security
Cons of More Walmarts
Downtown declines Green to pavement Consumerism closed culture - activists fight workforce issues (wages, OT, gender) legal issues bribery (Mexico 2012)
KPMG video
Dr. Michael Hasting - Director of corporate citizenship for KPMG - CSR opportunity individuals have to be a positive influence on the community - People should love to make a difference like they love to do anything - connecting corporations to responsibility CSR is the opportunity individuals have to contribute to the needs of the community
Social responsibility has changed overtime. Prior to the 1800s which model dominated CSR? a. Stakeholder b. Economic c. Legal d. Social e. Stockholder
Economic
4 Part Definition of CSR
Economic Legal Ethical Discretionary/Philanthropic
In class we looked at how firms respond to the pressures applied to them to engage in CSR. When CVS eliminates cigarettes because of the threat of govnt and public pressure, they are taking what approach to CSR?
defensive
Dismissing Employees with Care
have you been fair consistent with all business related good documentation
Vulnerable Jobs theme
highest -> food services, retail trade, healthcare and social assistance lowest -> utilities, maintenance, management
Free and Sale
highly ambiguous
Business
how will businesses step up and respond to the outbreak in a positive way
Unilever - CEO Paul Polman - Sustainability plan for future
https://www.unilever.com/sustainable-living/ Plan for future: Double size by reducing environmental impact and increasing positive social performance
public policy
i cannot fire you if i asked you to violate a law
Toyota example social contract
if you come work at Toyota, we will not lay you off if don't have a lot of business - we will give you community service, improvement projects and maintenance may cut your salary if necessary but won't fire you (unless poor behavior or something)
Amazon Case
illegally billed parents for in-app purchases
Unilever Website - Sustainable Living Goals
improve health and well-being for more than 1B people by 2020 (health, hygiene, nutrition) reduce environmental impact by half by 2030 (GHG, water use, waste/packaging, sustainable sourcing) Enhance livelihood for millions by 2020 (workplace fairness, opportunities for women, inclusive business)
Product Liability
includes the liability of any or all parties in the chain of manufacture and sale of a product and for any damage caused by that product
Employment at will pros
increase claims out low performance favors employee and employer increase hiring
Coke and Pepsi in india Case
india's center for science and environment tests reveal high level of pesticide residue in soft drinks - companies accused of overconsuming scare water and polluting sources coke and pepsi initially denied allegations: coke conducts own tests and reveals that other companies also have pesticides, runs ad campaign using bollywood stars pepsi runs ads promoting safety - Indra Nooyi promoties positivity in India and increases in sales both begin CSR initiatives and form Indian Beverage Assocation
Industry regulation
industry trade associations/multiple companies coming together international federation of pharma manufacturers/ AICPAs
Employee Bill of Rights (policy guidelines on issues of privacy)
informed consent before requiring information disclose nature of surveillance set controls on information access limit collection/use of medical/health data require reasonable cause before drug tests respect boundary between work and home
6 Reasons for Engaging in CSR
innovation cost savings brand differentiation LT thinking customer engagement employee engagement
As we consider social responsibility we encounter two models of a corporation. One of those models is the Stockholder Model focused on owners. The other is the Stakeholder model focusing on:
interests
Whistleblowing Checklist - fig. 17.4
is there an alternative? does the proposed disclosure advance public interest rather than personal or political gain? have you thought about the outcomes of blowing the whistle for yourself and family? have you identified sources of support inside and outside of the org? do you have enough evidence? have you identified and copied all supporting records?
Whistle blower approaches
is there an alternative? Does the proposed disclosure advance public interest rather than personal or political gain? Have you thought about the outcomes of blowing the whistle for yourself and your family? Have you identified the sources of support both inside and outside the organization on which you can rely on during the process? Do you have enough evidence to support your claim? Have you identified and copied all supporting records before drawing the suspicion to your concerns?
Marketing to the Poor
issue = vulnerability b/c of less education and less aware of the true price of products/services being advertised suprime loans, payday loans, tax preparation services same tactics apply to the elderly
cell phones and illness
it is very dirty Cell/phone and bateria - phones have a lot of germs and bateria that can cause issues - acne - more bacteria than a public toilet - touch screens in bhuilding are really gross 10% don't wash hands , 33% any soap 95% don't wash correctly women 7.07, men 6.27 apple iphone manual - use soft lint-free cloth - no cleaning product and avoid moisture - gets rid of warranty - NOT RESPONSIBLE
What does a license to operate mean?
it means you are being a stakeholder corporation
remember
it's cool to be young & responsible
Pros of Investment Banking
jobs modern facility benefits expense accts. social interaction career path prestige wealth
Lead paint causes
learning disabilities brain damage low iq academic failure neuropsychological defects adhd
Mandated regulation
legal FTC
Benefits Certified Corporation (B Corp)
legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment
Employment at will cons
less jobs abitrary nature laws against respect/moral employee rights broken culture
Caveat Emptor
let the buyer beware
Caveat emptor
let the buyer beware Buyer has as much knowledge as the seller
Caveat Vendor
let the seller take care
caveat vendor
let the seller take care businesses held responsible for all products they're selling on the market challenge = making products as safe as possible while making them affordable and useful to consumers
Amoral and Consumer
letter of the law and management rights, it's more about profits rather than customer driven (don't think of customers as stakeholders)
Advertising alcoholic beverages
links drinking with valued personal attributes (social, physically attractive, relaxation) primary concern = underage/binge drinking
What do responsible companies do?? (fig. 2.5 - know themes)
make safe products don't pollute obey all laws promote honest behavior safe workplace no misleading ads no discrimination limit impact of packaging no harassment recycle respond to customers help with medical energy conservation give to charity
In the list below which BEST captures what we have learned from the Financial Times about "Responsible Leadership" (the baseline definition)?
makes business decisions taking into account stakeholders
Responsible Leadership
making business decisions that take into account stakeholders, such as workers, clients, suppliers, the environment, the community, and future generations
Responsible Leadership
making business decisions that takes into account stakeholders, such as workers, clients, suppliers, the environment, the community and future generations
Absolute Liability
manufacturer liable for damages even if there was no way of knowing if problem would cause a problem later
Case New Holland (CNH) - Case
manufacturer of farming equipment in Belleville, PA, closed down Stakeholders: - employees, community, gov, taxes, environment, land, buildings, traders, managers, severance, education, supply chain, shareholders, relocation
Consumer International website "Who we are"
membership org for consumer groups worldwide empower and champion rights of consumers to ensure fair and honest treatment voice in international policy-making forums and global marketplace independent, unconstrained by business or political parties work in partnership - exercise influence with integrity, tenacity, and passion
Alta Gracia pays their employees a living wage. What is a living wage?
the amount an employee makes is dependent on how much they need to support their families
Who saved New Orleans?
the business community
Comparative Advertising
the practice of directly comparing a firm's product or service with the product or service of a competitor
Employment-At-Will
the principle that the relationship between employer and employee is a voluntary one that can be terminated at any time by either party
Age Compression
the process in which the media promotes 'getting older, younger'; things once targeted toward teens is now being targeted to 8/9 year olds
License to Operate
the right to do business informally conferred by society on a business firm; must be earned through socially responsible behavior Operating as a stakeholder company - Positive CSR is key to our license to operate Business and Responsibility - Intangibles: 53% of total value of fortune 500 or about $24.27 trillion (Coke 96% of value) - Consumers: 85% reputation responsibility key (competitiveness and market positioning) - Risk management: Government, NGO's, legal - Employees: 3 of 5 want to work for a values company - Investors: 86% institutional investors - Operations: innovation, energy, waste, water
3) Freedom of Speech
the right to express your opinions without censorship, restraint or retaliation
Freedom of Speech
the right to express your opinions without censorship, restraint, or retaliation
Due Process
the right to receive an impartial review of one's complaints or opinions and to be dealt with fairly
Consumer Magna Carta
the right to safety, the right to be informed, the right to choose, and the right to be heard
What does the FDA do?
they are responsible for protecting public health by assuring safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, the nation's food supply, cosmetics, tobacco products, and products that emit radiation
What does the Federal Trade Commission do?
they develop policies and research tools to help protect consumers and promote competition
Ambiguous Advertising Words
this product helps: fight, protect, stop, prevent, virtually, can do, up to, etc.
Conscious Capitalism
this says we are in the free market creating and selling goods but always thinking about being a good citizen
Ralph Nadar
took on automotive industry and led to amazing change in safety (wrote a book and had a chapter on the dangers of the GM Corvair)
Dutch Boy Lead Paint Case
toys were painted with 91% pure lead paint and kids died in the 1900s Thomas the train engine
Safety Categories
transport contact w/ objects harmful substance exposure assaults and violent acts falls fires and explosions
Amoral Management & Employees
treat employees as law requires ex) investment banking
Jon Taffer on saving the bar and restaurant industry
trust and transparency are key
PSU Red Folders
understanding when people are struggling
collective bargaining
union contracts, by contrast, provide workers with rights established through this process
Employment at Will Doctrine
voluntary relationship between employer and employee you have the right to be with or without a company (can leave at any time) A company can also end your employment at any time Can't be fired for race, religion, color, age, sex orientation, etc not widely understood
What makes you a good citizen? (list)
voting pay taxes help others follow laws enhance education environmental care politeness leadership help others top donate to NGOs honesty, ethics create community volunteering respect others empathy use blinker
B corp video
want companies to compete to not only be the best in the world, but also the best FOR the world
Sale/ Discount
we like "feeling" like we got a deal - started as sales at end of seasons but has progressed 31 department stores 2009-2012 - deals increased by 63% - average discount 36% up from 25% - gross margins - flat at 27.9% Black friday - deals and discounts increased but gross margins stay the same - just inflating price of original product JCPnney example - "we must compete to win. That means initially marking up our goods to sufficient levels to protect our margins when the discount or sale is applied" - CEO of JCP - 2012 -1 of 500 items full price - average discount 60% Needs to be sold at original price for one day - $100 one day and $40 the next day - people realized they were not getting a deal at JCP
Contractual Liability
whatever you do after sale is up to you
Contractual liability
when the product is made and sold, whatever happens to the buyer is on them
Components of whistleblowing
whistleblower compliant party reported to org accused
Stakeholder management
who are the firm's stakeholders What are the stakeholders stakes? - legitimacy, power, urgency What opportunities and challenges do out stakeholders present? - potential or threat What responsibilities does the firm have toward stakeholders? - economic, legal, ethical, philanthropic? What strategies or actions should the firm take to best address stakeholders?
CVS announcement
will put beauty marks on photos that have not been edited
Benefits of CSR Policies
win new businesses increase customer retention develop & enhance relationships (customer, supplier, network) become employer of choice manage risk/save money differentiate from competitors improve reputation investment and funding opportunities publicity and media opportunities
Consumer Product Safety Commission (CPSC)
works to reduce the risk of injuries and deaths from consumer products
Peer Review Panel
wronged employee presents his/her side of dispute to a small panel of employees and supervisors trained on dispute resolution less used key: ensure people involved in process are respected members of the org
Young Bankers Social Contract
young bankers work 70-100 hours per week and sacrifice personal life and health - less finance majors entering banking industry and instead opting for smaller tech firms with bigger chance of making difference looking for work-life balance banking firms are changing their structure and forcing associates to take time off and monitor hours worked to improve working conditions
Doug McMillian Walmart Initiatives
zero waste in 4 largest markets by 2025 100% renewable energy transparency and quality leader zero net deforestation 2x sale of local food, less additives/sugar 100% recycled packaging ladder of operations, jobs/careers (250k training) human rights international sourcing $1.4B donations/yr to communities $25M fund disaster relief sustainability throughout supply chain
Apple Foxconn
• 12 hour days; 2 breaks a day • Many leave their families/towns to work • $2/hour - 60 hour work week • High suicide rates, they recently added suicide nets outside their facilities
Walmart Pros
• Customers 200 mil/week visiting • Largest company $480 billion/year • 10,800 stores, 7 countries • Employees - 1.4 million in the US (2.3 million total) • 2012 - gave $1 billion cash & 22 million hours • Sustainability drivers o Zero waste o 100% renewable energy o Product innovation • Save the Gulf (among many other philanthropic activities)
Better Business Bureau Complaint Leaders
1. Banking 2. Auto dealers 3. Sports Goods retail
What are the top three major complain leaders according to the Better Business Bureau?
1. Banks 2. Auto Dealers 3. Sporting Goods
Product Safety Principles
1. Build Safety into product design 2. Do Product safety testing for all foreseeable hazards 3. Keep informed about and implement latest developments in product safety 4. Educate consumers about product 5. Track and address your products' safety performance 6. fully investigate product safety incidents 7. Report product safety defects promptly 8. If a defect occurs, promptly offer a comprehensive recall plan 9. work with the CPSC 10.Learn from mistakes yours and others
What are the top ten product safety principles?
1. Build safety into product design 2. Do product safety testing for all foreseeable hazards 3. Keep informed about and implement latest developments in product safety 4. Educate consumers about product safety 5. Track and address your products' safety performance 6. Fully investigate product safety incidents 7. Report product safety defects promptly 8. If a defect occurs, promptly offer a comprehensive recall plan 9. Work with the CPSC to make sure your recall is effective 10. Learn from your mistakes and others as well
Product Information Must Be:
1. Clear: straightforward with no deception/manipulation 2. Accurate: communicates full truths 3. Adequate: enough information provided to make an educated decision
Unilever - 3 key areas that allow them to grow
1. Climate change - fight deforestation 2. food scarcity - sustainable agriculture 3. water, sanitation, hygiene
4 important issues with workplace privacy:
1. Collection and use of employee information 2. Integrity testing 3. Drug testing 4. Monitoring of employee work, behavior, conversations, and location by electronic means
5 sectors under business and stakeholders:
1. Community 2. Government 3. Employees 4. Consumers 5. Owners
The 5 elements that go into a stakeholder corporation:
1. Community 2. Government 3. Employees 4. Consumers 5. Owners
Citizenship 5 Part Definition
1. Corporate citizenship 2. Corporate responsibility 3. Sustainability 4. Creating shared value 5. Conscious capitalism
Citizenship 3 Part Definition
1. Corporate social responsibility: emphasis on obligation and accountability 2. Corporate social responsiveness: emphasis on action & activity 3. Corporate social performance: emphasis on outcomes and results
3 Types of Corporate Social Responsibility - Citizenship
1. Corporate social responsibility: emphasis on obligation and accountability 2. Corporate social responsiveness: emphasis on action and activity 3. Corporate social performance: emphasis on outcomes and results
CSR - The history
1. economic model - 1700+ (Adam Smith) 2. legal model - 1800+ (responsibility - child labor, pay very little, dangerous jobs, injuries and death) - "letter of the law" - Can't hire children --> Fair Labor Act (more education), Exceptions (farming, family business, child actors) 3. social model - 1850+ (taking into account working conditions, addressing that employees are people, Andrew Carnegie donated many libraries around the country (philanthropic approach)) 4. stakeholder model - 1950+
How Firms Respond to CSR Pressure
1. Defensive (garments): Doing very little with CSR and if something happens you deal with it - protecting themselves from government and public pressure 2. Cost/benefit (DuPont): Is it more expensive to fix the problem or pay the fines with it - plant was making people sick - add process for $30M - protect employees - social responsibility 3. Strategic (IBM): Entire business model is based around CSR - Becoming more and more valued - Important even during the recession 4. Innovation (Tesla): Using CSR to create new processes - Elon Musk
How firms respond to CSR Pressure:
1. Defensive (garments): Doing very little with CSR and if something happens you deal with it 2. Cost/benefit (DuPont): Is it more expensive to fix the problem or pay the fines with it 3. Strategic (IBM): Entire business model is based around CSR 4. Innovation (Tesla): Using CSR to create new processes
CPSC website
1. Developing voluntary standards with standards organizations, manufacturers and businesses; 2. Issuing and enforcing mandatory standards or banning consumer products if no feasible standard would adequately protect the public; 2. Obtaining the recall of products and arranging for a repair, replacement or refund for recalled products; 3. Researching potential product hazards; 4. Informing and educating consumers directly and through traditional, online, and social media and by working with foreign, state and local governments and private organizations; and 5. Educating manufacturers worldwide about our regulations, supply chain integrity and development of safe products.
What are 5 things to keep in mind when "dismissing an employee with care"?
1. Fire employees in a private space 2. Be mindful of employees' logistics 3. Preserve employees' dignity 4. Choreograph the notification in advance 5. Use transparent criteria for layoffs
What are the Big 3 rights (moral)?
1. Fired with cause 2. Due process 3. Freedom of speech
Big Three Employee Rights
1. Good Cause (if fired) -- fired for cause 2. Due Process 3. Freedom of Speech
The stakeholder corporation - what we owe
1. Governing Philosophy - shareholder value = responsibility 2. Values statement - accountability to all stakeholders 3. Measurement system - stakeholder performance system that includes profit and responsibility
The Stakeholder Corporation (3)
1. Governing Philosophy: Shareholder value=responsibility 2. Values Statement: Accountability to all stakeholders 3. Measurement System: Stakeholder performance system that includes profit and responsibility
The Stakeholder Corporation
1. Governing philosophy: shareholder value = responsibility 2. Values statement: accountability to all stakeholders 3. Measurement system: stakeholder performance system that includes profit and responsibility
Conscious Capitalism (Big 4)
1. Higher purpose 2. Stakeholder orientation 3. Conscious leadership 4. Conscious culture
What are the 4 tenets of conscious capitalism?
1. Higher purpose 2. Stakeholder orientation 3. Conscious leadership 4. Conscious culture
Employee Privacy Bill of Rights
1. Informed consent before acquiring info 2. Disclose nature of serveillance 3. Set controls on info access 4. Limit collection/use of medical/health data 5. Require reasonable cause before drug tests 6. Respect boundary between work and home
The Big 6 Reasons for CSR
1. Innovation 2. Cost savings 3. Brand Differentiation 4. Long-term thinking 5. Customer engagement 6. Employee engagement
7 most common causes of workplace accidents:
1. Shortcuts 2. Overconfidence 3. Poor/lack of housekeeping 4. starting a task before getting all necessary info 5. neglecting safety procedures 6. mental distractions 7. lack of preparation
The 4 types of Legal rights
1. Statutory 2. Collective 3. Contractual 4. Employment
The Big 6 Safety Categories
1. TRANSPORTATION 2. assaults and violent acts 3. contact with objects 4. falls 5. harmful substances 6. fires and explosions
BBB Complaint Leaders
1. Used Auto Dealers 2. Telephone companies 3. Insurance companies Tend to talk more about what we don't like
Newer corporate social responsibility - citizenship
1. corporate citizenship 2. corporate responsibility 3. sustainability 4. creating shared value 5. conscious capitalism
Advertising Pros
Beneficial Components of a market system Efficient way to distribute information Increase sales and profits for company Brand Awareness Built Increases customers knowledge Assistis people with needs Saves people time
Advertising Cigarettes
2 issues: promotion of dangerous products and ethics of tobacco industry in ads to young people and those with less education experiences most criticism and regulation includes e-cigs and smokeless tobacco
Forbes on Consumers and product/service problems
2016 lost revenue to Business $62 billion 49% consumers switched provides of service last year (62% young willing to switch if not happy) 60-70% enraged by issue management CPSC Data - 8,000 deaths - 400,000 injuries $1 trillion in costs/year (deaths, injuries or property damage) 45% had a serious issue last year 45% of CEOs felt they hadn't earned customer loyalty - 50% problem with no complaint - 45% complain to front line agent - 1-5% complain to management
Forbes on service platforms data, costs, damages
2016 lost revenue to businesses - $62b 49% consumers switched service providers last year 62% of young people willing to switch if unhappy 60%-70% engaged by how issues are managed
Shareholders
20th century value Owners
Past verse future stakeholder model
20th century: shareholder value (profit) 21st century: stakeholder value
Stakeholder Value
21st Century Value Interest
immoral - the fight against child labor
250 million children impacted in 2006, 150 million still impacted in 2018
Co Opted Regulation
3rd party better business bureau
Which term do corporations use the most - sustainability or CSR?
50% - sustainability 25% - CSR 25% - other
Disability fact
56 million people disabled (20% of the population)
Cons of Investment Banking
85-100 hour weeks no work life balance drug and alcohol abuse family issues psychological issues suicide
Who Tells - experience with product or service
9 to 1 9 - If you didn't like you will tell 9 people 1 - if you did like you will tell 1 person
Ralph Nader
A leftist American politician who promotes the environment, fair consumerism, and social welfare programs. His book Unsafe at Any Speed brought attention to the lack of safety in American automobiles.
Social Contract
A set of reciprocal understandings that characterize the relationship between business and society
Consumerism
A social movement seeking to augment the rights and powers of buyers in relation to sellers
The Case New Holland - A CSR Story
A stakeholder story CNH- make agricultural and construction equipment Bellville, PA - manufacturing plant - population 1,800 - 2010 census - very small Amish town - 2011 - going to close this plant because it is literally not necessary Stakeholder issues? - people losing their jobs, families, communities, government, local companies, future workers, investors, relocation, media, customer, suppliers, competitors, etc. - what to do with building, equipment in building, opportunities in town are low, don't have a lot of education Could cause a lot of harm is don't handle stakeholders well
In class we looked at how firms respond to the pressures applied to them to engage in CSR. When CVS eliminates cigarettes because of the threat of government and public pressure, they are taking what approach to CSR? A) Defensive B)Strategic C)Cost/benefit D) innovation E) Commercial
A) Defensive
Moral Management and employee stakeholder- Amoral
Amoral: - treat employees as the law requires ex: finance industry - Kenneth - Georgetown - large amount of suicides in finance industry (1.5x more likely) - overworked and underwhelmed - Wall Street = high stress - more likely in young bankers because they haven't learned how to cope - First-year analyst (age 22) - 85-110 hours per week and $80K + $50k bonus - Second-year associates (age 28) - 55-105 hours per week and $100k +$150k bonus Pro: jobs, modern family, benefits, expensive accounts, social interaction, career path, prestige, wealth con: 85 -100 hours per week, no work/life balance, high stress, drug/alcohol abuse, health issues, family issues, psychological issues, suicide Losing talent so now they need to try to change social contract - much less people going to wall street
What are the 2 big categories for being a responsible company in terms of the consumer stakeholder?
Being responsible of product information and being responsible about the product itself
Advertising Pros:
Beneficial Component of a market system Efficient way to distribute information Increases sales and profits for company Brand awareness built Increases customers knowledge Assists people with needs (wants?) Saves people time (quick understanding)
Cell phone and walking
Apple iPhone manual (2013) "distraction: using iphone is some circumstances may distract you and may cause a dangerous situation" "observe rules that prohibit the use of mobile devices or headphones (driving a car or riding a bicycle) - they give very limited details 2012 saw 5,987 pedestrian deaths - age 16025 most likely to get hurt - talking on phone 69% of injuries - taking account of all injuries it is estimated almost 2 million injuries social cost of injuries -what companies owe people using this device
ADM
Archer Daniels Midland
ADM & Mark Whitacre
Archer Daniels Midland = one of the largest Agriculture companies involved in price fixing (illegal b/c of SOX) Mark Whitacre = whistleblower worked with FBI to take down the company got nervous and embezzled $10m went to jail for 9 years cost ADM $9m
Legal Responsibilties
Articulate basis of fair practices established by law makers comply with laws
1965 Corvair/GM/Nadar example
Automobiles Book - unsafe at any speed - Ralph Nadar goes after GM because of unsafe car - in return GM attacked Nadar back. GM used prostitutes to blackmail Nadar - Cost the, $500,000 in lawsuit Ralph Nadar --> Father of modern conservative movement Cool car but unsafe - embrace life wear a seatbelt video - fake driving and car accident - seat belts save lives but this car did not have one
Advertising pros
Beneficial Component of a market system Efficient way to distribute information Increases sales and profits for company Brand awareness built Increases customers knowledge Assists people with needs (wants?) Saves people time (quick understanding)
Young Bankers Fed Up With 90-Hour Weeks Move to Startups - article
Bankers have very long work weeks and miss many personal events, sleep deprivation, friends with other bankers because they understand why you cancel --> forgoing a personal life to make a lot of money --> people entering investment banking and technology majors are dropping --> companies need to rethink their cultures --> war for talent - 80 hour weeks are are the norm --> fatigue and stress are killing people in the industry --> forcing people to take time off stresses them more because they have more work when they return (financial capital verse human capital) --> forming committees to help with adjustment for junior bankers --> 2 year training programs to reduce young bankers work loads --> chronic pain, insomnia, disorders, weight gain, hair loss, anxiety, depression --> young bankers are leaving because they want to do something more meaningful --> your life is not your own --> need to like the people you work with --> more choice for students, they don't have to be a banker--> work-life balance is important
What is the essence of "License to Operate"?
Being a stakeholder corporation
Product Information fails examples
Bloomingdales christmas 2015 catalog - Ad copy: "Skie your best friends eggnog when they are not looking"??? Pepsi Ad 2017- only lasted 1 day - Kendall Jenner joining a protest and they made a protest seem like a party - telling the wrong store Misleading Ads Models and Make up - false advertising - saying a product can do something that it cant - Julia Roberts is naturally beautiful so why edit her? - l'oreal - only tested it on 100 women - saying the make up will make you look like that but it wont - bad influence for young igirls Nivea Ad 2017 -"white is purity" - black and white product From Real to unreal ad - evolution of a model (Dove) - how they change a person with make up and software editing - do it with men also - looks like different people
Victoria Secret and Girls example
Bright young things - for older teens and college age women - had ads with 15 year old girls so 8-12 year olds started to want the same thing Companion brand = pink - the 8-12 year old girls do not understand "sexy" yet and victoria secret is marketing that way - got in trouble with parent groups
Walmart Case Study - Textbook
Buy American Plan (helped with the loss of jobs - Buy American Products) and Environmental awareness (help clean up the environment) --> Walmart way (basic consumer goods and services provider) --> epitome of capitalism (a lot of people disliked walmart when it was beginning) --> people protested and accused walmart of stripping towns of local stores --> people do not like the culture walmart brings to the community--> there were anti-walmart campaigns --> in spite of all the opponents, there are also a lot of supporters because they are very socially responsible --> still has a lot of opposition from competitors, small towns, labor unions, and activist organizations--> make employees work long hours with low wages and have had discrimination cases from women --> Bribery scandal in Mexico - walmart bribed officials to get building permits faster --> fire in one of their sweatshops in Bandladesh --> was supposed to be an American brand but moved production abraod --> higher minimum wages lead to stores closing --> MAIN THEME = a lot of positives and negatives about Walmart but every company has that
Doug McMillion (CEO) Initiatives
By 2025 0 waste in largest markets 100% renewable energy Transparency & Quality Leader Forests- Zero Net Deforestation Food- 2x Sales Local, less additives, sugar 100% recycled packaging Ladder of Opportunity jobs/careers $20 billion WBE,MBE Human Rights Internation Sourcing
Exaggerate
Can't be substantiated by any evidence (puffery) "greatest" "best in class" "top seller" "must have" BK whopper food enhancements & vitamin water false claims
Carroll's four‐part definition of corporate social responsibility includes
Economic Legal Ethical Philanthropic Corporate social performance model - social responsibility - philosophy (or mode) or social responsiveness - social (or stakeholder) issues involved
Consumer Product Safety Commission
CPSC.Gov - need to look at website 1. developing voluntary standards with industry 2. issuing and enforcing mandatory standards 3. banning consumer products if no feasible standard would adequately protect the public 4. obtaining the recall of products or arranging their repair 5. conducting research on potential product hazards 6. informing and educating consumers through the media, state and local governments, private organizations, and by responding to consumer inquiries Death, injury, property damage = $1 trillion cost in US Group that regulates safety in U.S. and all nations have their own version There have been many unsafe products and companies have trouble taking responsibility Buyer should not have to guess if the product is safe or not Independent regulatory agency created by the Consumer Product Safety Act of 1972 to reduce the risk of injuries, deaths, and property damage from consumer products by mandating standards, conducting research, and banning/recalling products Consumer product safety improvement act (2008) = new regulatory and enforcement tools, third-party testing, certification, ATVs, civil and criminal penalties, etc.
Pyramid of CSR
CSR Approach today Top to bottom: Philanthropic (citizenship approach) Ethical (do right and avoid harm) Legal (obey society's laws) Economics (foundation/make profit)
Sensa
Can eat anything if you shake it on Disclaimer-results not guaranteed FTC $34 M fine Sold $364 M 2012
Where Free Speech Goes to Die: The Workplace - article
Can say whatever you want where ever you want but not in the workplace --> can't betray or talk badly about your organization or you can get fired --> no political speech or encouraged to support a certain candidate, can force them to donate money to time to a political candidate (as long as no state law prohibits it), can force you to work in a call center --> political discrimination is not covered by any law --> freedom of speech only applies when dealing with the government --> reasons to restrict political speech: a fear of lawsuits alleging that an employer permitted a hostile work environment, and the risk of having to pay damages --> keep your mouth shut, especially when working for a private firm
Under the employment at will doctrine, the only illegal reason for firing someone is: a. Poor Financial Performance b. Discrimination c. Fraud d. Belonging to a Union
Discrimination
Dimissing with Care (What to NOT do)
Don't Fire on a Friday Don't say that downsizing is finished Don't terminate and employee via email Stick to the topic and avoid platitudes Don't rush through the meeting
CSR- The History Timeline
Economic- 1700+ Legal- 1800+ Social-1850+ Stakeholder- 1950+ 1938 child labor banned
4 Ways firms respond to CSR Pressure
Defensive (Garments) Cost/Benefit (Dupont & smoke stacks) Strategic (IBM & lens of responsibility) Innovation (tesla and electric cars)
Values of stakeholder model
Descriptive value - language and concepts to describe organization in stakeholder terms Instrumental value - effective stakeholder management - similar to strategic appraich normative value - how stakeholder SHOULD be treated
LEAD - The players
Designers Manufacturers - produce/sell/account for - finance, marketing, supply chain, accounting, risk management, management Customers Governments/regulators Employees The kids and their families It is used because it has a lower price, it is more durable, and it has brighter colors
The Dirty Secret of Black Friday Discounts - article
Discounts aren't really discounts - they are priced into in the beginning - Retail Theater (illusion) --> items are priced so after discounts they get the margins they want --> buyers like to feel like they got a good deal --> retailers like JCP face problems --> number of "deals" has increased 63% in 2009-2012 and discount price increased as well but gross margins have stayed the same --> some deals can hurt the margins but most either raise it or keep it the same --> needs to be original price for at least 1 day --> fewer than 1/500 items sells for full price --> original prices increase by 33% to have he sales --> Amazon is a prime example of this who shows the most recent price and you can see how the price of the product is increasing --> raising selling prices ahead of the holidays --> JCPenny, Koh's, etc.
Employment at will preserves needed flexibility, but don't arbitrarily give employees the boot - article
Employment at will: employee hired for an indefinite period may be discharged for any or no reason, cause or no cause, unless specifically prohibited by law. --> this rule is controversy because is it unfair? --> it is still important ad provides reasonable employers with important legal freedom --> so many exceptions that people think there is no point, not in the english law which we are based off of, some states have eliminated it --> A brand-new right to sue for wrongful termination will mean lots of brand-new employee lawsuits (wrongful discharge), employers will tolerate worse behavior, give neutral job references (pass bad employees on), employment at will is based on contract, mutually binding from both sides, exceptions are made based off public interests, the states that past these laws are employee > employer --> "Good employers will continue to follow just cause principles and use a fundamental fairness approach to employment decisions; they just don't have to worry about spending thousands of dollars defending those decisions in unwarranted wrongful termination suits." --> people preach it but don't practice it --. fair, consistent, business means, good documentation --> ask HR (new set of eyes looking at situation) --> train supervisors
A country completely surrounded by another country is called what?
Enclave
Pros of CSR
Enlightened Self Interest Warding Off Government Regulations Resources Available Proaction Better than Reaction Public Support
Pros of CSR
Enlightened self-interest wading off gvt. regulations resources available proaction better than reaction public support
Other Product Information Issues (& laws that prevent them)
Equal Credit Reporting Act - prohibits discrimination in consumer credit Truth in Lending Act - all suppliers of consumer credit must fully disclose all terms and permit 3 day right of recission in any transaction involving consumer's home residence Fair Credit Reporting Act - Ensure's consumer reporting agencies provide info in a manner that's fair and equitable Fair Debt Collection Practice - regulates 3rd party debt collection agencies
Vitamin water
Exaggerated Claims: Defense, Multi-vitamin, Restore, Nutrition Enhanced. So much sugar not good for you at all.
Warby Parker
Example of a b-corp for every pair of glasses sold, they distribute to someone in need partner with vision strong to catalyze private sector and solve global issues lifestyle brand
Unilever Video
Example of interdependence driving reputation want to double the size of the business while reducing environmental and social impact
EAP
Excellent Performance Academic Integrity Professional Behavior
EAP
Excellent Performance Academic Integrity Professional Behavior
Benefits Corporation
Exist to do a product/service while doing a nonprofit cause (ex: Hershey)
Immoral Management of Employee
Exploit for personal gain
Warby Parker & B Corp
Eyeglass firm who wanted to flip market Every glasses they sell they donate a pair to countries
Free
FTC (Federal Trade Commission) and Free - nothing for "free"- very ambiguous - no more than regular price for the other item Bogo: buy one get one - but they first is just more expensive - it is not really free ex: signing up for this service and get HBO or Starz for free for 3 months - you must cancel or it will automatically keep charging you
N. Federal Packaging and Labeling (FRPLA of 1967):
Failed to report nutrition facts on food until Nutrition Act of 1990
Dutch Boy Lead Paint example
Failed toy --> advertised with lead --> lead was found to kill kids --> calls it: Dutch Boy Lad Paint" instead of Lead Lead paint on Thomas the train - lead paint cannot be on toys - can be on things like bridges - toys coming in from around the world are painted with lead paint - major scandals Lead paint can lead to a lot of mental and physical problems in children - causes a ton of problems - little kids even put the toys in their mouths - employees are using the paint without gloves and they can get sick. They also need to have their mouth covered Starting in 2004 millions of toys recalled including 30+ million in 2014 - Jewelry, magnets, small toys, painted toys -$1 trillion annually in harm
Mandated regulation
Federal Packaging and Labeling (FRPLA of 1967) - label recently changed to make it easier to read Nutrition Act 1990 - nutrition fact sheet on all foods because companies were being deceptive organic, natural low fat are all abused terms Industry would not do it so government MANDATED them to do so
Negotiated - industry/government regulation
Federal Trade Commission FTC has 3 purposes - maintain free and fair competition in the economy - protect consumers from unfair or misleading practices - advance internal performance of the FTC they get involved when you are really in a lot of trouble https://www.ftc.gov - protect consumers and promote competition - develops policy and research tools through hearings, workshops, and conferences - stopping unfair, deceptive or fraudulent practices in the marketplace - enforcing antitrust laws - price, selection, and service Amazon and Apple and other in app purchasing - apps are free but buy stuff in the games - kids can easily spend their parents money in amazon and other apps - added passwords but still have 15 min window where kids can make purchases without permission - in app purchasing = 80% of these apps profit - kids don't realize when spending money
Corporate Social Responsibility - Language check
Sustainability is the most used term (50%) --> environment, social, community Corporate social responsibilty (CSR) --> 25% Other --> 25% (responsibility, citizenship)
For/Firestone case study
Ford is one of Firestones customers for a very long time (100 years) - joined by marriage long ago - Ford explorer (2000-2001) had tires separations which lead to bad outcomes --> tires fall apart and vehicle flips at high speeds - many people skilled and injured - issue with labor in a manufacturing facility that was closed after this case - safety problems were disguised by how both companies handled the claims --> kept accidents as separate causes until one attorney asked other attorneys around the country what was going on - one say the case broke - corporate divorce and battle between firestone and ford The companies needed each other for many years - Firestone voluntarily recalled and CEO apologized --> said very small percentage is defensive - some tired still on Ford cars --> Firestone blames ford for the accidents - next day For recalled all the tires At end of video - both CEOs were yelling and blaming each other --> divorce
B Corp (Benefits Corporation):
Formed for social purpose/mission Private, for profit Around stakeholders Ex: Patagonia, Warby Parker
Whistle Blowing
Formed/current employee who discloses improper actions by members of the organization with the goal to effect change Components - Whistle blower - Complaint - Party reported to - Organization accused National Whistle Blower Center PWC study 2007 43% fraud uncovered by whistle blowers Laws: - false claims act (start 1863) - Sarbanes/Oxley (Start 2002) - Dodd/Frank (start 2010) - IRS (start - beginning of time) when there is no way in an organization to make a complaint ex: Archer Daniels Midland - Fortune 50 company - agricultural --> take in corn, beans, etc. --> turn them into other things - example: steak (proteins and nutrients added) ADM and price fixing - get competitors together and change prices Mark Whitacre - hired as senior manager --> working to fix pricing --> set world prices - $100M fine - his wife said "you call the FBI or will" - he wore a wire for 3 years to bring down his own company - while he was wearing a wire he was embezzling money --> he went jail for 9 years --> not works for cypress - when you are a whistleblower you get a percentage of the settlement --> Sarbanes/Oxley (sox) - now working for cypress
Whistleblowing
Former/current employee who discloses improper actions by members of the org with the goal to effect change
iFactory and Foxconn
Foxconn is a contract manufacturer for apple in trouble since 2011 for suicide of employees, low wages, long hours Apple finally decides to look into conditions (Poor treatment of human capital????)
Consumer International
From the US consumer protection act - 200+ organizations - 100+ countries - United Nations April 1985 adopted Basic Need, Safety, Information, Choice, Representation. Redress, education, a healthy environment
Microsoft and Gates Foundation example
GatesFoundation.org - we are impatient optimists working to reduce inequality - empower the poor, combat diseases, and inspire people to take action - we are going to work on outcomes
Health and Environmental Advertising
Gluten free, organic, functional foods, natural products, green advertising can all be misleading to consumers
Big Three Employee Rights
Good Cause (if fired) Due Process Freedom of Speech
Big 3 Employee Rights
Good cause if fired Due Process Freedom of Speech
Regulation on product information/performance
Government Industry When government gets involved = failure of business - iron law of responsibility
What are the 2 big categories that regulate product information?
Government and Industry
Exaggerate
Greatest, best in class, top seller, must have ex: bus services - can be funny because people know you are exaggerating - people obviously know that buses aren't amazing New York - Elf - worlds best cup of coffee Food Enhancements - in order to make the burger used in commercials, they use pins to hold it together and cotton to fluff it Coke's Vitamin Water - defense, multi-V, restore, nutrition enhanced - it is basically sugar water with a few vitamins - Labrone James DOES NOT actually drink this!!! It is just sugar
Psychological Appeals
Healthy, protect, keep young, keep safe, look hot, germ free, strong, prevent, become, confident - play on people's emotions - disclaimers ex: Bow Flex: - workout machine that will change how you look and feel - 1 workout, 20 min a day, 3 days a weel - FALSE - men selling it works out everyday all day - parents are who they are selling to because it is expensive and they have slower metabolisms ex: Sensa and weight loss - disclaimer - results not guaranteed - FTC $34 million fine (4 company settle 2014) - Sensa 2008 - 2012 sold $364 million - show young fit and healthy people singing in the commercial - crystals to put on cake and you will lose weight?
Hurricane Katrina/ Walmart case
Hurricane destroyed New Orleans - 1700 killed, 700 missing (sweep to sea, eaten by alligators) Walmart decided to be a stakeholder corporation during this time - 100 stores in the area destroyed - brought 500 trucks with supplies - when there is a tragedy they need to get back online very quickly - During Hurricane people want water and pop tarts Most important things 1. support associates (people, jobs) 2. community (opened stores) 3. operations (free supplies: bulldozed entrance) Least important thing is making a profit Who saved New Orleans? - The Business community (Walmart, Home Depot, Lowes)
Moral Management and employee stakeholder-Immoral
Immoral - employees: factors of production - exploit for personal gain - In cities $15/hr minimum wage --> causing people to lose jobs - places close - Kiosks --> McDonalds, {anera, Self-Checkout Child Labor 2016 UN Goals - 250 million children impacted 2006 200+ million still impacted in 2014 - large amount around the world --> decreasing with help from education programs
New Social Contract
declining job security norm = job changes temporary assignments loyalty to career personal responsibility term/project focus
Advertising to Children
Kids do not understand advertising the way we do - get children to want the brand - get their support for a long time - will buy it their whole life but not always appropriate advertising - affects how they grow and develop Video: why we could be hurting children futures. The ethics of advertising to children - American child has viewed per 360,000 advertisements before high school graduation - Buying power of youth to influence over $500B spending a year - Companies spend $15M annually to advertise to children - Eight - the age in which the American Acadmy of pediatrics says children do not understand the notion of intent to sell and frequently accept advertising at face value - take it literally - easily manipulated - Food advertisements market products in high fat and low in nutritional value to children (characters verse nutritional value) - Logo - it is estimated that by the age of 36 months children can recognize over 100 brand logos - Policies exist that protect children, including those prohibiting the licensed of characters to sell products - Research that is linking the correlation between advertising to children and childhood obesity, children and materialism, and native parent/children interaction - You who control corporate advertising and all ethical practices of marketing toward children STAND UP AND BE THEIR VOICE
Ladder Case
Ladder companies are constantly being sued, many are out of business
Employee rights
Legal - Statutory (discrimination) - Collective (unions) - Contractual (CEO) - Employment (HR) Moral - Fired with cause shared - Due Process Fair Treatment - Freedom of speech - Respect & Dignity Joint = Legal/Moral Privacy - Saftey - Health Civil, minority, women, disabilities, older, religious affiliation, employee, privacy, smokers, non-smokers, children, animal, due process, appearance, etc.
What two types of rights do employees have?
Legal and moral
Benefits Corporation (B-Corp)
Legal form of business where you combine looking at environment, social, and corporate goal: make money and meet purpose adopted by 35 states
Stakeholder attributes
Legitimacy Power urgency
Science
Look at data and figure out how companies should respond
Psychological Appeals
Look at what we're afraid/weak on designed to persuade on basic of human emotions and emotional needs rather than persuasion "healthy" "Protect" "keep young" "look hot" "Strong" "prevent" Aimed at insecure middle-aged people Bowflex & Sensa Examples
Responsible leadership
Making business decisions that takes into account stakeholders, such as workers, clients, suppliers, the environment, the community, and future generations Financial Times Definition
The smart phone dilemma
Modern technology - company liability = apple, Samsung - services liability = T-mobile, Verizon, etc. cell phone and driving cell phone and walking cell phone and illness Others: - decrease in personal responsibility - decrease in civility - increase in bullying behavior - decline in emotional intelligence - health hazards (posture) - decrase on academic performance - decrease in work productivity - decline in family connectedness - and it goes on and on ex: instead of helping someone, people pull out their phones to document it Cell phone responsibility - contractual -cue care - social cost - what is their responsibility because right not the society pays
3 requirements for an executive resume video
Money: how much have you managed? trust? can you manage money? People: can you recruit and develop people? being able to lead a group of large amounts of people? Giving back to stakeholders: nonprofit boards, volunteer program (ex: KPMG video and B-Corp video)
Moral Management and Consumer Stakeholders
Moral - customer equal partners - Give fair value and full information Amoral - letter of law and management rights - profit not customer driven Immoral - customers exploited norm - intent to cheat and deceive
Moral Management and Consumer Stakeholders
Moral, Amoral, Immoral
Moral Management and Employee Stakeholders
Moral, Amoral, Immoral
The 3 elements of Moral Management
Moral, amoral, immoral
Moral Management and employee stakeholder-Moral
Moral: - employees are a human resource - treat with dignity ex: Altra Gracia - Kighnt Apparel brand - CEO Joe Bozich - Textile workers - chasing cheap labor - then something happened to his family and he changed his mindset - Alta Gracia --> messages from people who made the clothes on the tags - making more money for employees - clothes are more money but customers see the impact - huge change in lifestyle - 3x minimum wage - changes from 85 cents to $2.83
Moral MGMT + Consumer Stakeholders Moral: Amoral: Immoral:
Moral: Customers are equal partners; give fair values and full info Amoral: Letter of law + management rights; Profit not customer driven; "Buyer beware" Immoral: Customers exploited; intent to cheat and deceve
Coke/Pepsi India case - book
Not uncommon for multinational companies to face problems around the world --> water shortage leads to problems in many companies --> dangerously high levels of pesticides and over consuming water during a shortage found by Indian Special groups --> hold them accountable and ordered them to put warning labels on products --> country has worst water in the world and companies have to be aware of that before doing business there (spiritual meaning) --> companies tried to deflect the problem because other companies had the same problem (they used advertising but still did not solve the issue) --> states started banning the drinks --> COKES RESPONSE = advertising with popstars saying the product is safe, weeks later the product was found to have little or no pesticides. --> PEPSI'S RESPONSE = also used ads, cut down on water, Indian women became CEO, created environmental programs --> both companies created corporate social responsibility initiatives --> only singled out foreign companies for environmental and pesticide stuff --> many protests lead to more programs --> coke and pepsi formed an alliance in Inida because of their mutual problems --> issues are still prevalent 1)underestimates the amount of water it uses, 2)has bad water balance techniques, does get the water issues, 4) 1/4 plants operating in a water stressed area, 5) lacks commitment to community
Economic Responsbility
Objective = produce goods and services that society wants and sell them at a fair price management concepts directed towards financial effectiveness
Safety in the workplace is managed by what agency? a. Occupational Safety & Health Administration b. Occupational Safety & Health Law c. Occupational Standards & Health Admin. d. Occupational Standards & Help Law e. Occupational Standards & Help Admin.
Occupational Safety & Health Adminstration
OSHA
Occupational Safety and Health Administration
OSHA
Occupational Safety and Health Administration - people should be able to go to work and go home the exact same way - reaction to lack of responsibility - monitors all companies - OSHA commercials are very graphic Created in 1970 by a congressional act https://www.osha.gov - assure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education and assistance. - Assistant Secretary of Labor for Occupational Safety and Health United States department of Labor
OSHA
Occupational Safety and Health Administration fed. agency responsible for overseeing safety and health of america's workers Mission: assure safe and healthful working conditions for working men and women by setting and enforcing standards and providing training, outreach, education, and assistance
Social Contract Old verse new
Old - stable job security - lifetime one employer - stable assignments - loyalty to employer - employer responsibility - individual work focus New: - declining job security - norm - job changes (sometimes even career changes) - temporary assignments - loyalty to career (always loyal but willing to leave) - personal responsibility - team/project focus
Consumer Problems with business
Overpriced products Poor quality Misleading ads Hidden fees Poor service Product failures Complaints ignored Poor guarantees Mishandled complaints Dangerous products Poor information Unclear service help Misleading labels
Stakeholders (PSU)
PSU - anyone with the virus; safety of: students, staff, faculty, administration; families; local businesses; athletics; events; graduation; recruiters; uncertainty; research; isolation issues
JC Penny + Discounting
Past CEO had consistently low prices + sales fell! New CEO (Mike Ullman) has it back to marking up + down 1 in 500 items sold full price, average disc. 60%
FTC
People have a right to know when they are being advertised to and by whom
Social Progression & Employees
Personnel to Human Resources to Human Capital
Doug McMillion - CEO of Walmart video
Philadelphia (Nov 2016) - Net impact continued - sent 500 trucks of supplies after hurricane - How to become a stakeholder in a company? - Technology, healthy foods, engaged employees - By 2025 zero waste in 4 largest markets - 100% renewable energy - Transparency & quality leader - Forests: zero net deforestation - Food: 2x sales local, less additives and sugar - 100% recycled packaging - Ladder of opportunity jobs/careers (training 250k) - $20 billion WBE, MBE - Human rights: international sourcing - Communities: $1.4 billion in donations/year - $25 million fund disaster relief - Sustainability throughout supply chain
4 part pyramid for CSR = Total corporate social responsibility
Philanthropic: take a citizenship approach - desired/expected by society Ethical: do right and avoid harm - expected by society legal: obey the societies laws - required by society economic: foundation - make a profit - required by society
Firestone and Ford case study - book
Randy Roberts was the lawyer that took on Firestone and discovered the other lawsuits about tire spreading that they kept hidden (more than 1,100 incidents) --> NHTSA got interested when a lot of reports were coming in and they spoke to Roberts --> NHTSA voluntary recalled --> finger pointing (Ford told customers to use lower tire pressure than Firestone recommended - and Firestone thought it was a weight issue from Ford's end) --> venezuelan wanted to charge both companies with criminal negligence --> tires were made in a manufacturing plant when they were on strike --> they had to widen the recall --> these lawsuits have been going on for many years and both companies new about the problem --> both companies got a very bad reputation --> Was Firestone or Ford responsible?? --> provided a manual of all of their info so anyone can sue the companies --> Firestone got a new CEO to fix the problem --> corporate divorce, plant closed, recalls and lawsuits continued, Ford payed over $3B on issue, movie made --> MAJOR THEME = both companies want to protect customer safety
Why is investment banking amoral?
Receive amazing benefits but have a job that is not very sustainable when it comes to health and well being
Which of the following is NOT one of the rights in the consumer's Magna Carta? a. Right to Safety b. Right to be Informed c. Right to be Protected d. Right to Choose
Right to be preotected
Product itself
Safety Quality
CSR of Product Itself
Safety and Quality
Consumer Magna Carta or Rights of the Consumer
Safety: not get hurt Choice: no monopolies Informed: now all about it Heard: have your complaint taken care of, due process All about transparency Enforced by Consumers International
Co-opted regulation
Seek help Council of Better Buisness Bureaus - advertising code - become accredited - they will assess how you engage with consumers and certify you Third party agency help to certify we are doing things ethically and according to standards
Self- Discipline Regulation
Self Regulation Codes of ethics - internal single company - in general companies try to do this Code of ethics might include how we will treat our customers ex: Patagonia will tell you everything about products - full information - no disguise (even the bad stuff)
Industry regulation:
Self discipline ii.Pure-by industry i.Ex: int. Feb. of Pharma. Manufacturers ii.Co-opted-seek help (Ex. BBB)
1. Which of the following is NOT one of the Responsibilities in Carroll's four-part definition of corporate social responsibility: a. Economic b. Social c. Legal d. Philanthropic
Social
The Naked Brand Documentary
Social media and reviews are making companies accountable for their actions, and brands are realizing that looking good isn't going to cut it anymore - being a great company that produces great products is the new brand
Power Legitimacy
Stakeholder validity and capacity to produce an effect Dominant Stakeholder
Production View of a Firm
Stakeholders are people who supply resources traditional view
CVS pressure example
Started as health and beauty store - then added pharmacy and bought other pharmacies (target) - then minute clinics - then changes name to CVS Health and stopped selling cigarettes in 2014 - socially responsible - uses all 4 responses 1. defensive: wants to be a health company and cigarettes are not compatible - good public relations 2. cost/benefit: lose $2M but doctor will come work for them now 3. strategic: switching to become a health company - bought a health insurance company 4. innovation: changing the industry
Fired for Cause
Steve Jobs - movie - yelling at someone that they were fired in front of 20 people - very common when he was young Can hire or fire any moment in time - ex: financial crisis Employment-At-Will Doctrine - Only United States does this - Fairness Standard or "Good Cause Norm" - The employer and employee can sever a relationship at any time for just reason, or no reason as long as it is not illegal - but may lead to wrongful termination lawsuit so it is smart to not fire anyone for no reason "Good Cause Norm" - most companies will use this - although I can fire you for no reason or explanation, I won't
CVS and CSR Pressure
Stopped Selling Cigs Defensive: government regulations and public perception Cost/Benefit: $2B vs. $5B revenue Strategic: very pharmacy to health care Innovation: flip health care model to urgent care style
Foxconn Case study
Taiwaneze electronic manufacturers with plants in China - #3 with most employees in world (Mcdonalds and Walmart are ahead) -Gigantic campuses --> company town, live, eat, entertain, work - Apple is their major client Foxconn: an inside look - low pay - never seen an iPad finished - families live far away - love in a dorm with other employees - high suicide rate so they added suicide nets so no one can jump anymore - In US earn $23 hours a week building electronic sand work 41 hours a week - In Foxconn $2/week and 60 hours/week - wants better pay and benefits - I want customers to know me --> SHE IS AN ACTUAL PERSON Pro: (employment) - jobs, modern family, some benefits, shelter, food, social interaction, build resume, learn skills Con: (social) - 12 hours a day, unscheduled overtime, no privacy, company food and dorm, low interest in work, suicides, few connections, low advancements, depression and no feeling of purpose Foxconn is planning on building a huge campus in Wisconsin but a lot of things to consider what is Apple's responsibility in this?
Principles of Advertising to children
Take into account that children cannot discern ads Never deceptive or unfair Objective information Don't stimulate unreasonable expectations Inappropriate products not marketed to children Avoid social stereotypes Advertising should be educational Contribute to parent/child relationship
Social Cost
Taking full responsibility of all negative outcomes
Absolute Liability
Taking responsibility even if the issue is unknown
Naked Brand Video Trailer - theme
Talks about how consumers are becoming aware of corporate wrong doings. Good business practices and awareness
1. Who saved New Orleans? a. FEMA (Federal Emergency Management Agency) b. American Red Cross c. People of New Orleans d. United Way e. The Business Community
The business Community
Who Saved New Orleans after Katrina 2005?
The business community! $110 B spent Ex: Walmart people, operations community; opened stores as shelters, supplies Massive distribution system allows them to respond faster than Red Cross
Consumer Problems with Business
The high prices on many products The poor quality of many products Misleading and deceptive Advertising Hidden fees
Concealed Facts
The practice of not telling the whole truth or deliberately not communicating information the consumer ought to have access to in making an informed choice
Freedom of Speech
The right to express your opinions without censorship, restraint or retaliation
What responsibility does Foxconn have to their employee stakeholder?
They always have work that needs to be done and offer their employees food and shelter, but they have long days and no privacy. Had to implement suicide nets
Why is Unilever a world leader?
They set out a clear vision to double their business size while reducing their environmental footprint and increasing social engagement
Iron law of Responsbility
Those who don't use power in a responsible manner tend to lose it in the long run
Walmart Book Case
Walmart initially targeted middle american rural towns approach: promote associate (hourly employee) to new level of participation within organization buy america plan and environmental campaign - early social responsibility innovations some protests in established towns because of low-cost reputation, small merchandisers, capitalism achieved: global responsibility and sustainability achievements, commitment of money to different causes, reduce global waste/greenhouse emissions (through sustainable suppliers, responsible use of antimicrobials, eliminating animal abuse, cage free eggs) Issues: threat of putting other merchants out of business, created urban sprawl, concern of property values, traffic low wage, no overtime pay, low benefits, undocumented immigrants, gender discrimination bribery scandal in mexico fire in bangladesh McMillon New CEO: create a walmart size e commerce business, omnichannel, innovation, bring back sam's spirit - raised minimum wage and closed stores
Mark Whitacre and ADM
Was part of price fixing scandal and his wife found out and turned him into FBI, had to wear a wire fro 3 years and went to jail
Advertising Con
Wastes Resources Ineeficent way to communicate Invades customer privacy creates materialism culture Distorts perceptions Decrease standard of living Debases the culture Manipulative Increases prices of products Impersonal Nature
Advertising Cons
Wastes resources (direct mail example) Inefficient way to communicate Invades customer privacy Creates materialism culture Distorts perceptions (children, woman, men) Decrease standard of living Debases the culture Manipulative Increase prices of products (to cover costs) Impersonal nature
Cons of advertising
Wastes resources (mail) Inefficient way to communicate Invades privacy Materialsim culture Distorts perception Manipulative Debases culture Increases costs of product to cover costs Impersonal
Corporate Social Performance (book)
What companies are able to achieve is what really matters results of accepting CSR and adopting responsiveness view
Dismissing Employee with care
What should you do? 1. have you been fair 2. consistent with all 3. business related 4. good documentation --> warnings always maintain dignity and respect --> private setting and have a 3rd person there fire employees in a private space, be mindful of empoyees' logistics, preserve employee's dignity, choreograph the notification in advance, use transparent criteria for layoff, do not fire on a Friday, do not say that downsizing is finished do not terminate an employee via email, stick to topic and avoid platitudes, do not rush through the meeting
Business Case for CSR
Why business people believe CSR brings benefits to orgs & community Directly benefits bottom line helps stay competitive impacts company and society
W.H.O.
World Health Organization -global information
Warranty
Written contractual promise that attests to the quality and durability of a product purchased for a specific period of time implied: unspoken promise Express: explicitly at time of sale (written or oral) Full: repair within reasonable amount of time & unconditional Limited: certain products/defects excluded Extended: extends & offered for additional cost (usually too high)
Whistle-blower
a former or current organization member who discloses illegal, immoral, or illegitimate practices under the control of their employers, to persons or organizations that may be able to effect action
Consumer Product Safety Commission
a governmental agency responsible for setting and monitoring safety standards for all consumer products
Product liability
a legal concept, includes the liability of any or all parties in the chain of manufacture and sale of a product and for any damage caused by that product ex: illness, harm, or death tort reform: an act that injures someone in some way and for which the injured person may sue
False Claims Act (FCA)
a piece of federal legislation that was passed to add an incentive for whistle-blowers in the public interest, share with the government any money realized by their efforts
Today you've joined a team of all Smeal majors at your company to work on a new ad campaign. You consider using the "discount" option. What ad issue might reflect this? a) ambiguous b) psychology c) exaggeration d) concealment e) misleading
a) ambiguous
Remember King John signing a set of laws to give average citizens rights - called it the Magna Carta. We have a consumer Magna Carta. Which below is not apart of that? a) comfort b) safety c) informed d) choice e) heard
a) comfort
In the Ford/firestone case the main issue for ford (and firestone) was? a) customer injury and death b) product liability issues c) Ford Explorer design d) who is responsible e) their public image
a) customer injury and death
Social responsibility and Product Information issues - Ad issues
comparative advantage: one product to another - Generates conflict between companies, negative ads use of sex in ads: targeting younger and younger girls - portray women as sex objects - physical and mental health issues for girls advertising to children: they have bad spending habits - gain their loyalty at a young age - children's advertising review unit (of the council of better business bureaus) - age comparison - kids are getting older younger marketing to the poor: higher interest rates -Ads about quick loans, but really high interest rates - giving poor greater access to credit cards advertising alcohol and cigarette: negative health effects - Always under fire for misleading ads, these cause many deaths in US - rise of underage binge drinking - food and drug administration - tobacco control health ads: side effects - Companies make statements that aren't true, can't back up claims - labeling - "gluten free", healthy options, organic foods (currently no rules saying that any company can't say there food is organic so there needs to be rules put in place) - FTC (federal trade commission) environmental ads: green advertising/watchdogs - green advertising is when companies claim their products are environmentally friendly and sustainable but they are not - watch dogs: certification groups Ad creep: ads can increasingly be found anywhere one looks social media advertising: virtually, tv ads, and others --> rapidly growing
Archer Daniels Midland
conspired with foreign rivals to control international market for lysine (important feed additive) -"Our competitors are our friends, and our customers are our enemies" - now the plot of a movie "The Informant" starring Matt Damon
Disclosure
consumer stakeholder Key principles for business TELL BUYERS WHAT YOU ARE DOING not wrong to want to be a discounter - Walmart - but don't deceive customers Product communication provides the truth
2 largest stakeholders
consumers and employees
Smartphones and Liability example
contractual: whatever you do after you buy iphone is your choice Due Care: "please follow laws when using iPhone, beware of distracted driving, etc.", offer "dnd while driving" and other features Social Cost: accepting all responsibility even for people texting and driving
Ladders and Liability example
contractual: whatever you do after you buy it is up to you Due care: offer safer ladders and high impact communication (manuals) Social Cost: accepting all responsibility even for consumer negligence
Self-discipline regulation
control of business conduct and performance by business itself and business assocation proactive strategy internal single company patagonia code of ethics
CSR Related Concepts (Fig 2.2)
corporate citizenship sustainability conscious capitalism creating shared value Corporate responsibility
5 part
corporate citizenship, corporate responsibility, sustainability, creating shared value, conscious capitalism
Citizenship 3 part definition
corporate social responsibility corporate social responsiveness corporate social performance
Values Statement
create shareholder inclusive values statement
Consumerism & immoral management
customer exploitation is the norm intent to cheat and deceive customers = atms
Consumerism & Moral Mangement
customers = partners give fair value and full information
Moral and Consumer
customers are equal partners, give fair value and full information good product, good info (stakeholder approach)
Immoral and Consumer
customers are exploited, intent to cheat and deceive all about managers making money
In the list below which BEST captures what we have learned from the financial times about "responsible leadership" (the baseline definition)? a) builds relationships with customers and suppliers b) seeks to provide more benefits today than the future c) creates jobs and earns a profit for shareholders d) makes business decisions taking into account stakeholders e) develops long-term investments
d) makes business decisions taking into account stakeholders
Which below is NOT a business benefit from investing in CSR suggested in class? a. Customer loyalty b. Workforce satisfaction c. Community support d. Increased production e. Better image
d. Increased production
As you looked at the video on Email monitoring what word Comes first to mind? a. Health b. Safety c. Arbitration d. Privacy e. Mediation
d. Privacy
What are the big issues we think about With consumer stakeholders? a. Product Quality & Product Safety b. Product Itself & Product Safety c. Product Safety & Product Information d. Product Information & Product Itself e. Product Information & Product Quality
d. Product Information & Product Itself
Today you find yourself out of a job. It turns Out your company has been monitoring Your emails, phone conversations and all Web sites you've visited (including some Online gaming sites). Below what responsibility does the company have here: a. When collecting information, it should only be used in appropriate ways. b. Companies should allow employees to Correct inaccurate information c. Companies should collect only employee Information that is absolutely necessary d. All of the above
d. all of the above
Corporate Citizenship encompasses All but which element below? a. Responsibility b. Performance c. Responsiveness d. Problem Solving e. None of the above
d. problem solving
We looked at the Coke/Pepsi in India case. As you consider what these corporate giants owe the consumers in India which is NOT A "magna Carta" Right Coke/Pepsi owe them? a. Safety b. Informed c. Choice d. Quality e. Heard
d. quality
Workplace Health
family and medical leave act - entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reason - 12 weeks of unpaid leave for pregnancy - employees must be reinstated in their old jobs - must have health benefits - protected from retaliation smoking - smokers are hurting not only themselves but the nonsmoking people around them - second hand smoke disadvantages: - higher rates of absenteeism among smoking employees - shortened equipment life - higher cleaning and maintenance costs - higher health, life, and property insurance costs - loss of worktime due to smoking activities - more fires and other accidents - difficulty hiring employees who are sensitive to smoke americans with disableties
Ralph Nadar and Corvair
father of modern consumerism wrote "unsafe at any speed" that discussed how there are no safety measures in cars, especially the Corvair Interested in power of business in relation to consumers
Psychological appeals prey on...
fear and weaknesses
Social performance and financial performance: perspective 2
financial performance drives social performance
Dismissing with Care do's
fire in a private space be mindful of employee logistics preserve employee dignity choreograph notification in advance use transparent criteria for layoffs
Dismissing with Care don'ts
fire on a friday say "downsizing is finished" don't terminate via email stick to topic/avoid platitutdes don't rush through meeting
Moral Employee Rights
fired with cause shared due process and fair treatment freedom of speech respect and dignity
implied contract
firing without good cause violates code of conduct
Managerial View of a firm
firms' responsibilities toward major constituent groups are essential Owners and employees are acknowledged
FDA and Labeling History
first require companies to put nutrition information on products because they weren't being honest about what is in food later update nutrition labels to make easier for consumers to read (Federal packaging and labeling act)
Privacy in the workplace
flux as the implications of new technology options are considered. At this stafe, private employees has few privacy rights - no clear legal definition - but: right to be left alone, right to autonomy, and claim individual or groups to determine how, and to what extent information about them is communicated to others Privacy act of 1974: set certain controls on the right to the government to collect, use, and share information about individuals USA Patriot Act: restrictions Background checks: limited to the use of credit and criminal history --> Ban The Box
Strict liability
focus only on design manfufacture, deliver, sale
Consumerism & amoral management
focus: letter of law and management rights profit driven not customer driven management not concerned with what is fair from customer perspective
Ford/Firestone Case
ford deflects and pins blame on firestone firestone reatliated and blamed ford explorers (tendency to roll over, decatur plant, customer driving, heavy weight) firestone initaties corporate divorce, hurts ford brand, CEO Nassar fired no one accepts responsibility - related to liability
Whistle Blowing
former or current employees expose improper actions by members of the organization with the goal to effect change
The Naked brand documentary
from Quests consulting and founder Jeff Rosenblum - Author of "Friction" 2017 - being a great company is the new brand - customer experience, reduce advertising - There are so many negative things happening that must be changed - advertising has evolved - can't just say you are great anymore - you actually have to be great - the world will change if many companies get on board - dictate future - don't predict future - "Image is reality. What you see is what you get." - Business is becoming more transparent throughout the supply chain
Consumer Magna Carta: Informed
full, complete, accurate info with no deception
CNH Case - stockholders impacted
future customers employees and families farmers recruiting other plants real estate town economy NGOs environment
Stakeholders
has interests
Due Process
right to receive an impartial review of one's complaints and to be dealt with fairly - complaints MUST be managed well and fairly Alternative Dispute Resolution (ADR) - resolving disputes without litigation Due law school survey on litigation - 36 companies spent $4.1B Tort system in U.S. ($426B plus in 2016) ex: coca cola case - racial discrimination lawsuit - speech Martin Luther King made day before he died called for a boycott of coca cola - did not hire blacks in leadership positions --> only heavy lifting jobs - Chief diversity officer did not report to CEO - no due process system so problems went straight to lawusits MWI - due process and conflict resolution company - mediation Examples of due process - open door policy: manager Ombudsman: internal person that is trained in conflict resolution - Perr review Panel - Mediation (non-binding) - Arbitration (binding ) Compliance Director or EThics officer
Statutory rights
rights provided by the law (ex. can't discriminate)
enterprise rights
rights the employer promises or grants
Coronavirus Emotional Responses (4)
science, economic, stakeholders, business
5 ways to regulate (3 industry and 2 government)
self discipline pure - by industry co - opted negotiated mandated
Social Contract
set of reciprocal understanding that characterizes the relationship between business and society goes beyond a basic employee contract key driver of an org's ability to survive and thrive into the future promises things like clean bathrooms, adequate workspace, etc.
Magna Carta definition
set of rights
Most common causes of workplace accidents
shortcuts overconfidence poor/lack of housekeeping starting before all necessary information neglecting safety procedures mental distractions lack of preparation
Consumer Magna Carta: Choice
should have options and choices
Sex Appeal
showing sex in advertising targeting younger girls and boys that they can be sexy too hardees and carls junior
When looking at corporate performance, there is an interdependence of what two things to create a positive reputation?
social and financial
Product liability - a critical consumer stakeholder issue. Imagine leading new product development at P&G. You decide to take "complete responsibility" for all products. What view of product liability are you applying?
social cost
Social performance and Financial performance: perspective 1
socially responsible firms are more financially profitable
Ambiguous Advertising
something about the product not made clear because it's stated in a way that can mean many different things using weasel words like exciting, fast, helps, effective, cheap, long-lasting, free, cool legalese
In the list below, which answer is NOT a part of the new social contract
stable job security
Old Social Contract
stable job security lifetime one employer stable assignments employer responsibility individual work focus
Doug McMillon says Walmart needs to be a _________ corporation to stay alive
stakeholder
The Case New Holland story is a ________ story
stakeholder
Measurement System
stakeholder performance system that includes profit and responsibility evidence of intent to achieve results
Legal Employee Rights
statutory (discrimination-provided by law) collective (unions negotiating contracts) contractual (CEO) emeployment (HR)
Stockholders vs. Stakeholders (Equal slide)
stockholders = owners stakeholders = interest
2 big issues related to lead paint case:
systemic pressure & lack of oversight
Lead - Big Issues
systemic pressure and lock of oversight -manufacturers are being pressured to continue to lower the prices of products
social cost liability
taking full responsibility for all negative outcomes strict and absolute
PSU Stakeholders
teachers, students, alumni, sports, facilities, costs, health
Responsibility
the ability or authority to act or decide on one's own without supervision
Business & Responsibility - A License to Operate
*Positive CSR is key to our license to operate* - Intangibles - Consumers - Risk management - Employees - Investors - Operations
What Makes a Good Citizen
*Same exact list goes for a company* - Conscious of actions - Get involved / help those in need - Respect - Pay taxes - Recycle - Productivity / contribution to society
Katrina/Walmart Case (2005)
- 18,000 dead; 600,000 pets dead; 200 people unaccounted for - Over 100 stores in hurricane zone; sent 2,500 trucks in for relief (Hub and Spoke system) - Walmart prioritized 3 main categories 1. People: jobs 2. Operations: opened stores 3. Community: free supplies (bulldozed entrance)
Child Labor Case
- 250 million children impacted in 2006 - 200+ million still impacted in 2014 - 2016 UN child labor goals aren't progressing - Supply chain is working together to reduce child labor - "ABCs" video - Example of immoral view
Liabilities Related to Social Cost
- Absolute liability: unknown issue but still need to take responsibility for all problems that arise - Strict liability: design, deliver, sale
Consumer Stakeholder Focus - 2 Categories
1. Product Information 2. Product Itself
FTC Violation Examples
- Amazon in-app purchasing: illegally charged parents for unauthorized payments by children - Nutrition fact labels: Nutrition Act of 1990 forces companies to include nutrition facts on foods and updating them; cost companies lots of money
Better Business Bureau - Complaint Leaders
- Auto dealers - Cable - Insurance
IBM Study on CSR
- Becoming more and more valued - Important even during the recession
Product Information Examples
- Bloomingdale "spike egg nog" - 2017 Pepsi ad with Kendall Jenner - Nivea "white is purity" - Dove ad "from real to unreal"
Doug McMillon - CEO Walmart
- By 2025 zero waste in 4 largest markets - 100% renewable energy - Transparency & quality leader - Forests: zero net deforestation - Food: 2x sales local, less additives and sugar - 100% recycled packaging - Ladder of opportunity jobs/careers (training 250k) - $20 billion WBE, MBE - Human rights: international sourcing - Communities: $1.4 billion in donations/year - $25 million fund disaster relief - Sustainability throughout supply chain
8 Principles of Advertising to Children
- Children can't discern ads - Never deceptive or unfair - Objective information - Don't simulate unreasonable expectations - Inappropriate products not marked to children - Avoid social stereotypes - Advertising should be educational - Contribute to parent children relationship
Ladder Example
- Companies have ladder safety videos, but they still get sued constantly - There is a social cost associated with the risk of ladders
MS Question - Coca Cola CSR
- Conserve water - Rain water harvesting - Rejuvenating wells - Employing people - Recycling - Provide scholarship - Thumbs up games - Helped with natural disasters
3 Views on Quality and Safety
- Contractual: the way people always used to sell things (danger/risk is on the buyer) - Due care: forced companies to teach consumer how to use safely (instructional booklets and videos) - Social cost
3 Parts of Citizenship
- Corporate social responsibility (obligation and accountability) - Corporate social responsiveness (action and activity) - Corporate social performance (outcomes and results)
New Social Contract
- Declining job security - Norm job changes - Temporary assignment - Loyalty to career - Personal responsibility - Team project focus
4 Ways Businesses Respond to CSR pressure
- Defensive (Garments - labor workers) - Cost/Benefit (Dupont - air as an externality) - Strategic (IBM - engagement) - Innovation (Tesla - solar city, electric cars)
Investment Banking Social Contract
- First year analysts (22) work 85-110 hours a week but paid $80k + $50k bonuses - Second year associates (28) work 55-105 hours a week but paid $100k + $150k bonuses - "Overworked and Underwhelmed": pros and cons of banking - Doctors, Lawyers, Finance most suicides
The Tire Players
- Ford Motors as well as other car companies - Bridgestone/Firestone - Randy Roberts Attorney - NHTSA - Consumers and general public - Government - Insurance companies - Venezuela, Saudi Arabia, others
Exaggerate (Puffery)
- Greatest - Best in class - Top seller - Must have Ex. Coke's Vitamin Water - claims defense, multivitamin, restore, nutrition enhanced Ex. Burger King - deceived to be different in ads than what you actually get at the restaurant
Psychological appeals
- Healthy - Confident - Protect - Look hot - Keep safe Ex. Bowflex machine, Sensa weight loss powder *Disclaimers*
Concealed Facts
- Hiding important facts - Fine print syndrome Ex. airline tickets not including taxes and fees Ex. cell phone plans "guaranteed to never go up" but "rates increase after two years"
Consumer Problems with Business (Theme)
- High prices and poor quality of products - Misleading info, hidden fees - Wasted time, breaks easily - Inadequate guarantees and warranties
Iron Law of Responsibility
- In the long run, those who don't use power in the manner which society considers responsible will tend to lose it
Stakeholder Model - "The Big 5"
- Owners (private, corporate, institution) - Government (local, federal, state) - Employees (union, older, women, minority, activists) - Consumers (consumer activists, product liability) - Community (environmental groups, public)
Apple/Foxconn Example
- Pros include jobs, shelter, social interaction - Cons include $2/hr for 60 hours a week, no privacy, suicides, few connections, crowds of applicants, single file food lines, no advancement
Exceptions to "At Will"
- Public policy - Implied contract - Good faith principle - Discrimination law ex. Uber independent contractor vs employee
1965 Corvair/GM/Nadar
- Ralph Nadar (lawyer) - "Wear a seatbelt" - Car with no safety features (seat belts optional) - $500 on style, $5 on safety - Changed industry driven towards safety
Types of Industry Regulation
- Self discipline (Code of Ethics) - Pure by industry (Int. Fed. of Pharma Manu.) -Co-opted (BBB, AICPA)
Old Social Contract
- Stable job security - Lifetime employer - Stable assignments - Loyalty to employers - Employer responsibility - Individual work focus
Corporate Performance - Financial and Social
- The best companies have positive social and positive financial intertwined, not one before the other, which leads to the most positive reputation
Production View of the Firm
- The most traditional - Owners think of stakeholders as only those individuals or groups that supplied resources or bought products
Stakeholder View of the Firm
- The radical conceptual shift to the firms multilateral relationships with constituent or stakeholder groups - Where the "Big 5" stakeholders and their subsets are taken into account
Due Process
- The right to receive an impartial review of one's complaints and to be dealt with fairly ex @ PSU - class conflicts, cheating
Caveat Emptor
- The way we used to do business (buyer beware)
Ford and Firestone Case
- Tire tread falling off wheels causing cars to flip which resulted in 271 US deaths and thousands injured - Ford and Firestone eventually split off and pointed fingers at one another - The National Highway Traffic Safety Administration (NHTSA) didn't have a combined data set and failed to recognize the connection
Ambiguous advertising
- Using loose terms (weasel words) - Examples: "9 out of 10 dentists who TRIED it would recommend" - Colgate n = 77 "Smoke a FRESH cigarette" "Give your throat a vacation" "Free checking if you deposit $10,000" "HBO free for 3 months" ... then they'll charge
Cons of Walmart
- Workforce issues - Downtown declines - Closed culture - Legal issues (17 new lawsuits each day) - Bribery in Mexico
Economic Invisible Hand - Adam Smith
- Would be a ethics teacher and love BA 342 - "Wealth of Nations" (1776): free market capitalism - "Theory of Moral Sentiment" (1759): ethics
Unilever - 3 Key Areas
1. Climate change (fight deforestation) 2. Food security (sustainable agriculture) 3. Water/sanitation/hygiene
The Stakeholder Corporation - What We Owe
1. Governing Philosophy (shareholder value = responsibility) 2. Values Statement (accountability to all stakeholders) ex. CNH stakeholder analysis 3. Measurement System (stakeholder performance system that includes profit and responsibility)
Dismissing Employee with Care
1. Have you been fair 2. Consistent with all 3. Business related 4. Good documentation