business ethics

Characterize business, society and government and explain their interrelationships.

A business is a firm that sells a product for a profit. Society includes interest groups and the communities affected by business. Government includes the executive, legislative, and judicial branches at the local, state, federal, and international levels. They are all interrelated because the actions of each group affect the actions of the others.

Compare and contrast grease payments, bribes, and offsets.

Grease payments, bribes, and offsets are similar because, from a U.S. point of view, they are all generally considered to be acts of corruption. The acts of corruption are different. Grease payments involve small amounts of money paid to employees to facilitate the conduct of business, usually paid to lower-level employees. Bribes are given to business and government officials for the purpose of getting or maintaining business, usually paid to high-level officials to buy products. Offsets are government requests to fund nonbusiness projects as a prerequisite to conducting business. All three are considered illegal in the United States. However, under U.S. law, grease payments are not considered illegal in foreign countries. Some countries do not believe any of these acts are corrupt, so they are legal in these countries.

Describe issues of biotechnology and bioethics.

Issues ofbiotechnology include genetic engineering and genetically modified (GM) foods. Two major issues of genetic engineering include stem cell research and cloning. Embryonic stem cell research raises ethical and moral concerns over whether a human embryo is actually a human being. GM foods alter the natural makeup of a living organism to increase productivity. Controversy persists in the matter of safety, ethics, and labeling of GM foods. Along with biotechnology comes the field ofbioethics to deal with ethical questions related to new procedures and products. Business, society, and government are debating ethics in this field as they determine how the government should support biotech research. Some biotech businesses are using bioethics advisory boards.

Compare and contrast mediators, arbitrators, and ombuds.

Mediators, arbitrators, and ombuds are similar in that they are all neutral third parties who help to resolve employeremployee disputes. However, mediators and arbitrators are used primarily during employment negotiating to help settle disagreements and to make a binding decision for them. Ombuds are primarily used to investigate and help settle employee complaints between employers and employees fairly.

Describe the Equal Employment Opportunity Commission (EEOC).

The EEOC is the major federal agency that administers and enforces job discrimination laws to create equal employment opportunities. The five-member commission makes EEO policies and approves all litigation. The EEOC receives and investigates employment complaints and charges of discrimination, including harassment—racial, sexual, and others. In cases of discrimination, the staff mediates between the employers and the people who have been discriminated against. When mediation does not work, the EEOC may file a lawsuit in the federal district court against the employer.

Compare and contrast the World Trade Organization (WTO), World Bank, and International Monetary Fund (IMF).

The WTO, World Bank, and IMF are all similar in that they are all nongovernmental organizations that assist free trade in the global economy. However, they each do so in different ways. The WTO administers trade agreements, develops trade rules, and settles trade disputes between member nations. The World Bank is a lending institution that provides loans and technical assistance to poor countries so that they can conduct trade in the global economy. The IMF acts as a monitor of global currency exchange by helping to maintain a system of payments between all countries. Thus, the WTO sets and enforces trade rules without providing any financial services. The World Bank provides loans to poor countries, and the IMF provides currency exchange services and loans to help with the balance of payments between countries to pay for trade.

List the organizational structure of the federal executive branch of government and the three primary powers of the president.

The federal executive branch of government's organizational structure includes the Executive Office of the president; the cabinet; executive departments and their agencies; independent agencies and government corporations; boards, commissions, and committees; and quasi-official agencies. The primary powers of the president are making executive and judicial appointments (with Senate approval), influencing and vetoing legislation, and making international trade agreements.

Characterize the three levels of corporate social responsibility.

The levels of corporate social responsibility are legal, ethical, and benevolent. Legal CSR focuses on maximizing profits while obeying the law. Ethical CSR focuses on profitability and doing what is right, just, and fair. Benevolent CSR focuses on profitability and helping society through philanthropy.

Differentiate the market and nonmarket environments and state how they influence each other.

The market environment includes owners, employees, suppliers, customers, and competitors, whereas the nonmarket environment includes interactions with society and government. Businesses compete for customers in the market environment to make a profit. The nonmarket environment structures (laws and regulations) how business operates in the market environment and the positions of firms in the market, and it creates opportunities for and threats to business. The market environment creates issues of special interest that are addressed in the nonmarket environment.

Describe the branches of the federal government.

The three branches of government ar the legislative, executive, and judicial The legislative branch, which makes th laws, includes Congress: the Senate ani the House of Representative. The exec utive branch includes the president am cabinet department regulatory agen cies that enforce the laws. The judicia branch includes the courts that deter mine the constitutionality of laws, inter pret their meaning, and conduct trials.

Identify the three-phase process of issues management.

The three phases of issues management are: (1) scanning the environment to identify issues and trends that will affect the business; (2) evaluating the impact issues will have on the firm and ranking issues by priority; and (3) conducting a strategic analysis to develop strategies for dealing with high-priority public affairs issues.

Analyze old and new employment relationship differences.

Under the old employment relationship, job seekers were expected to be hired and trained for the job, whereas in the new relationship employees are expected to have the skills and experience to get the job. The old relationship provided job security, steady pay increases with good benefits, opportunities for advancement, and long-term employment; whereas the new relationship doesn't, and employees are responsible for their own career future, which is likely to entail having multiple jobs. The old relationship called for loyally to and identification with the employer, whereas the new one expects loyalty to self and identification with the profession. The old manager-employee relationship was more adversarial, whereas the new one is more collaborative.

Explain how the 5 Is strategic analysis includes the stakeholder approach and ethics.

When making decisions on how to deal with issues, identify the issues, the interested stakeholders, and stakeholder incentives. Then devise objectives to deal with stakeholder issues. Generate and evaluate alternative strategies. Assess each alternative for the consequences to strategic stakeholders using a cost—benefit analysis in both the market and nonmarket environments. Each alternative strategy must pass the test of being legal and ethical to be selected and implemented.

List and briefly explain seven strategies activists use against business.

(a)Grassroots efforts involve getting stakeholder support to pressure organizations to meet a special interest; activists mobilize grass-roots supporters to contact business and government in one or more of the following ways: visits, phone calls, letters, preprinted letters and postcards, grass-tops, and the Internet through e-mail. (b)Activists also use demonstrations (picketing and rallies) to pressure business for change. (c)Activists use boycotts to request that society stop doing business with a firm. (d)Activists give negative stories to the news media about businesses and use advocacy advertising to gain public sentiment for their cause against business. (e)Activists use coalitions with diverse organizations and interest groups working together temporarily for a common interest against business. (f)Activists appeal to government to take action against business; the action can be to investigate business wrongdoing or to change laws and regulations.

Define crisis and discuss the four stages of crisis management, including the 3 As of crisis communication.

A crisis is a major unexpected event that has a large negative consequence. The four stages of crisis management include: 1.Developing a crisis team with a mix of representatives from all sectors of the organization to deal with the crisis. 2.Conducting a risk assessment to determine potential crises, monitoring events to prevent them from becoming a crisis, and planning how to deal with a crisis if it occurs. 3.Managing the crisis by implementing the plan and communicating to: (a) acknowledge or admit to the crisis; (b) state the action you are taking to contain or repair the crisis damage; and (c) state how you plan to avoid a repeat crisis in the future. 4.Analyzing the organization's effectiveness in managing the crisis, with a focus on doing a better job of preventing and managing future crises.

Define "strategy," differentiate market and nonmarket strategies, and describe the need to integrate them.

A strategy guides firm interactions with its stakeholders to achieve objectives. Market strategies are used to compete for customers with the help of suppliers to make a profit, whereas nonmarket strategies guide firm interactions with society and government stakeholders. Society and government create business opportunities and threats that require integrated strategies to guide firm interactions. Nonmarket strategies are used to affect the structure (laws and regulations) of the nonmarket environment that affect how business competes in the market environment. Thus, managers must integrate strategies to influence the nonmarket structure so that they can compete effectively in the market environment.

Compare and contrast acquisitions and mergers.

Acquisitions and mergers are similar in that they both occur when two companies combine. In fact, the lines between the two are blurred, and the terms are commonly used interchangeably. However, they usually have different financial structures. Acquisitions commonly occur when a larger company buys a smaller firm. The acquired company often becomes a division and the stockholders of the acquired company get new stock in the larger acquiring company. Mergers usually occur between two companies that are relatively equal in size. The new merged company has a few options. It can select one of the two names, combine them, or create a new one. The merged company can create new company stock and issue shares to both groups of stockholders, or it can select one of the two companies' shares to replace the other.

Compare and contrast employment contracts in union and nonunion organizations.

All employer-employee relations include employment contacts. Nonunion employment contracts are negotiated on an individual basis; they are usually implicit, informal, and not written. Union employment contracts are developed through collective bargaining and affect all union members; they are usually explicit, formal, and written legal contracts. Thus, employer and employee relations are different in both environments.

Compare and contrast virtues, deontological, and utilitarianism guides to ethical decision making.

All three are guides to aid in making ethical decisions, however their focus is different. Virtues ethics focuses on having personal character traits as the bases for ethical decisions; deontological ethics focuses on using standards of conduct for determining right and wrong behavior; and utilitarianism ethics focuses on making ethical decisions based on the consequences of the behavior. Thus, virtues and deontological ethics focus more on the means to an end, while utilitarianism ethics focuses more on the end result of the decision and behavior.

Discuss how business rules are made and enforced

All three branches of the government have input into the rules of business. Congress passes statutes that the president signs into law. Congress delegates the responsibility ofwriting the rules to regulatory agencies with the power to enforce the rules. The courts can determine if rules are constitutional, interpret rule meanings as they are applied to business, hold trials to determine guilt for violating the rules, and punish guilty parties for breaking the rules.

Compare and contrast ozone depletion, global warming, and the endangerment of biological diversity.

All three of these problems are similar because they are natural environmental issues that have been caused primarily by pollution. However, each is a different problem. Ozone is an oxygen-related gas that floats in a thin layer in the stratosphere between 8 to 25 miles about the earth. Ozone is vital in the stratosphere because it forms a protective layer to block dangerous ultraviolet radiation from the sun, which causes health problems. The atmosphere of the earth is heating up, causing potential danger through the greenhouse effectthe prevention of solar heat absorbed by the atmosphere from returning to space, creating global warming and climate change problems. Biodiversity is the number and variety of species and the range of their genetic makeup. The current rate of species extinction has increased dramatically, cutting our global sources of food and medicine.

Discuss antitrust enforcement.

Antitrust laws are enforced in four major ways. The two main antitrust enforcement agencies are the Department of Justice (DOJ) and Federal Trade Commission (FTC). They investigate allegations of antitrust violations, make settlements, and bring lawsuits against business. The DOJ and FTC also provide guidelines and advisory opinions, especially in merger investigations, which they can prevent by filing a preliminary injunction. However, most lawsuits are brought to court through private citizens and companies who believe they were hurt by antitrust practices, seeking compensation for damages. State attorneys general also investigate antitrust violations and file lawsuits against businesses, sometimes in cooperation with the DOJ and FTC. The federal courts determine the outcomes of litigation, interpret the law, set precedents, and approve consent decrees.

Compare and contrast strategies used by activists and businesses against each other.

Both activists and businesses have strategies they commonly use against each other. Five of the strategies are the same: grassroots efforts, news media relations and advocacy advertising, coalitions, appeals to the government, and litigation. However, activists are usually on the offensive, pressuring business and government for change, and business is on the defensive trying to maintain the status quo. Activists also use demonstrations and boycotts to get businesses to change whereas businesses use lockouts and gaining community public sentiment for being socially responsible as a proactive strategy to help avoid and minimize conflict, and firms develop a grand strategy to react to activist pressure.

Discuss the differences in the use of campaign contributions, lobbying, grassroots lobbying, and testimony strategies used by business to influence Congress versus influencing regulatory agencies.

Business gives direct campaign contributions to members of Congress to help them get elected to support business interests. Conversely, regulators are appointed, so businesses can't give them donations. However, business gives contributions during presidential election campaigns in hopes that, indirectly, the appointed regulators will serve the business interest. Lobbying is contacting members of Congress to influence legislation, commonly by using a professional lobbyist, and campaign contributions help gain access to politicians. Lobbying regulators is similar except that there are some situations in which businesses can't contact regulators outside of public meetings. Grassroots lobbying is having stakeholders contact Congress and regulators; with regulations, businesses commonly ask stakeholders to make online comments supporting businesses' side of the specific rule during the "public comment stage" of the rule-making process, using Regulations.gov (www.regulations.gov). Testimony is not always an available option with Congress; it is not required during the legislative process. However, APA regulatory procedures require public comment about proposed rules, which are a form of testimony.

Identify the role of advisors and the reasons why businesses serve on advisory panels and committees.

Businesses, scientists, and other professional advisors help regulators make better-informed regulatory rulings by providing expert information about the economic and scientific consequences of proposed alternative rules. Four major reasons business leaders serve on advisory panels and committees include the following: (1) public volunteer service helps build a reputation for being socially responsible; (2) serving alerts business to proposed rules; (3) serving can lead to placing proposed rules to benefit business on the agency's agenda; and (4) serving provides access to regulators who will listen to input that can influence the agency's decision to benefit business.

Define community and briefly explain the business—community interrelationship.

Community is the local area in which business operates and affects stakeholders. The business—community relationship is interrelated. Business needs community support with infrastructure, transportation systems, public safety, health care, employees, customers, and other support. The community needs business for economic development, products, jobs and training, taxes to help pay for community services, and help with some social problems, among other reasons. This interrelationship enhances the quality of community life where we live and work.

Discuss community relations and community involvement programs.

Community relations are the organized involvement of business with local society and government. Community relations are often managed by a community relations department. Community involvement is business participation in changing and improving communities. There are three primary types of community involvement programs: (1) volunteer programs encourage and reward employees for doing work for community nonprofit organizations, sometimes during paid work hours; (2) philanthropic programs give resources of products, services, and cash funds to the community; (3) collaborative partnership programs are voluntary relationships among business, social interest groups, and/or government to solve a social problem.

Characterize each of the five consumer rights.

Consumers have five rights. The right to safety protects consumers against products that are hazardous to their health and life. The right to be informed protects consumers against the marketing of products through fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices. The right to choice assures consumers of choosing from among a variety of products at competitive prices, wherever feasible. The right to be heard assures that consumer interests will receive full and sympathetic consideration in the formulation of government policies, laws, and regulation. The right to privacy protects consumers from misuse of personal information.

Compare and contrast corporate social responsibility, citizenship, and social performance.

Corporate social responsibility (CSR), citizenship, and corporate social performance (CSP) all refer to how business operates in society. However, corporate citizenship includes CSR, responsiveness, and CSP. CSR is the conscious effort to operate in a manner that balances stakeholder interests, whereas CSP is the assessment of the firm's CSR and responsiveness. Thus, citizenship is broader in scope and includes CSR (how the firm acts and its activities), and it evaluates the results of its responsiveness performance (CSP).

Compare and contrast cross-subsidization, cost-of-service regulation, privatization, and deregulation.

Cross-subsidization, cost-of-service regulation, privatization, and deregulation are similar in that all of them are a means of reforming regulations to increase efficiencies in government and the market environment. Deregulation is a means of eliminating cross-subsidization and cost-of-service regulation inefficiencies. They are different in that cross-subsidization occurs when one group of customers pays less than the cost and others pay more to offset that loss. Cost-of-service regulation occurs when prices are regulated based on costs that are passed on to customers, which reduces the incentive to keep costs down. Privatization is government allowing business to perform functions and services for it. Deregulation is a significant reduction in the regulation covering an industry.

Explain differences between customers, consumers, and consumerism.

Customers buy products from the business, and consumers use the products. Many businesses sell their products to customers, who in turn sell them to consumers. Interactions between the company and its customers and the consumers of its products are business issues within the market environment. Consumerism is the organized collective efforts to safeguard all consumers by promoting their rights and power. Everyone is a consumer, so consumerism is broader in scope than consumer, and consumerism is a society issue in the nonmarket environment.

List and briefly describe six employee rights, in addition to organizing and collective bargaining.

Employees have the right to reasonable job security; employers generally need a reason to let employees go. Employees have the right to due process, to be treated fairly, and to receive an impartial review of a complaint Kmployccs have the right toasafcand healthy workplace. Kmployccs have the right to personal off-the-job privacy, but not to businessrelated privacy at work. Kmployccs also have the right to freedom of speech and to blow the whistle for wrongdoing at work without penalty.

Compare and contrast ethics, business ethics, and managerial ethics.

Ethics is the moral standard (or principles) of right and wrong (or moral and immoral) and fairness that influences behavior. Business ethics is the application of ethics to issues that arise in business. Managerial ethics differs from business ethics because managers are not only responsible for their individual behavior at work; they are also responsible for developing moral standard policies and procedures to guide employee behavior, and for ensuring that their employees behave ethically.

Explain merger investigation guidelines.

Four important factors are considered in investigating mergers. The first step is to define the market where the merger is to take place and then determine the concentration the merged firm will have. Competitive effects are investigated to ensure adequate competition will continue and that consumer prices will not increase. The investigation includes a determination of the ease of entry into the market to maintain competition. Lastly, merging partners have to specify efficiency gains and consumer benefits.

Differentiate between inside and outside members of the board of directors and the potential problem of insiders.

Inside directors are employees or people who have other ties to the company, such as being a family member or friend or doing business with the firm, including suppliers and customers. Outside directors are not employees and have no ties to the firm, so they are independent. The potential problem of inside directors is that they are often obligated to the CEO and may agree with whatever the executive wants.

Discuss issues of managing technology.

Issues of managing technology include protecting the privacy of consumers, employees, and other stakeholders and providing security to prevent information from being misused. Companies use chief privacy officers to develop and implement privacy policies and to ensure privacy and information security. Managers also need to balance employee privacy with the need to use technology to monitor employees and ensure their performance meets the company's standard. To this end, business is developing codes of computer ethics.

Describe what lobbyists do, access, and the revolving door.

Lobbyists meet personally with government officials to present the special interest political information strategy to influence officials' thinking and action on public policy issues. Access refers to the ability to lobby government officials. To gain access, many businesses hire professional lobbyists. The revolving door refers to people changing jobs between business and government as some business people run for public office or take regulatory jobs and some lawmakers become consultants and lobbyists for business.

Explain the relationship between regulatory impact analysis, the Federal Register, and Regulations.gov.

New major regulations require a regulatory impact analysis (RIA), which includes a statement of the need for the proposed action, an examination of alternative approaches, and an evaluation of the benefits and costs. The RIA ends up in the Federal Register, which is a daily journal publication of rules, proposed rules, notices, and other public regulatory information. In coordination with the Federal Register, the Regulations.gov website enables users to find, view, and comment on regulations for all federal agencies.

Describe what makes a story newsworthy, including its coverage and treatment.

Newsworthy stories are of interest to the audience and have social significance. Newsworthy stories: (1) are generally about people; (2) are about immediate or urgent issues; (3) include controversy or conflict; and (4) are easily told. Media coverage, the stories that make the news, is determined according to the level of interest. Thus, the greater the interest, the greater the coverage, and the greater the significance, the higher the level of treatment. Treatment levels are based on providing more or fewer facts, offering interpretation, highlighting the implications, and stating advocacy.

Explain the difference between peak and trade groups and their advantages and disadvantages.

Peak, or umbrella, interest groups represent businesses from several industries on a broad range of general business interest issues. Peaks are fewer in number and have the advantage of representing large numbers of companies and industries with large resources, but a disadvantage is that the members have different interests, which sometimes conflict, making a unified advocacy difficult. Trade groups represent businesses on a narrower range of industry- or business-specific interest issues. There are more trade associations representing companies from virtually every industry and line of business. Trade groups have the advantage of greater unity of interest but have the disadvantage of smaller size and fewer resources.

Identify reasons why people use unethical behavior and how they justify it.

People use unethical behavior for personal gain and self-interest, because of conflict of interest, external pressure, cross-cultural inconsistency, personality traits and attitudes toward ethics, and situational factors. People rationalize their unethical behavior and convince themselves that their reasons are justified. Four of the justifications include using relativism ethics (based on the circumstances of the situation: "my personal opinion says the behavior is ethical"), moral justification ("I did it for the good of my company"), conventional justification ("everyone else does it"), and displacement of responsibility ("I was only following orders").

Discuss political information strategies and message framing.

Politicians' primary concern is getting reelected and serving their constituent voters. Therefore, political information strategies focus on how the business side of the issue will benefit politicians and their constituents. Businesses give information containing facts and figures using outside sources, experts, and stakeholders' support to inform the politician of the consequences offuture public policy. Message framing is important to a business because the terms it uses to tell its side of an issue influence public sentiment for or against the firm.

Discuss who benefits and who pays the cost of protectionism.

Protectionism benefits special interest business and its employees by providing profits and jobs that may have been lost through foreign competition. Society pays the cost of protectionism through decreased efficiency in the allocation and utilization of the country's resources by providing resources to inefficient industries while taking resources away from the industries that have competitive advantages. Consumers pay higher prices, with fewer product choices, to finance business profits and employee wages.

Differentiate public affairs management from issues management.

Public affairs (PA) management is the process of developing corporate public policies and strategies regarding how the business will interact with stakeholders in the business, social, and government environments when dealing with a current issue needing nonmarket strategies; it includes issues management and crisis management. Issues management is a public affairs management approach to identifying, monitoring, analyzing, and selecting public issues that may warrant nonmarket strategies. Thus, PA management is broader in scope and provides general guidelines. It also encompasses issues management, which has a specific three-phase process for dealing with PA issues.

Compare and contrast societal interest groups' and business interest groups' operations and financing.

Societal and business interest groups are similar in that both are nonprofit organizations representing their members and other stakeholders. However, business interest group members are primarily business firms whereas societal members are individuals. They both get revenues from members. On the other hand, societal interest groups also get revenues from donations, fund-raisers, and government funding whereas business interest groups do not. They both get revenues from selling products. However, business interest groups tend to provide more services to their members than societal interest groups, so they raise more revenue by selling products.

Describe the five stages of corporate citizenship.

Stage 1 Elementary: the focus is on profits. Stage 2 Engage: the firm gives away money and other resources to help society through philanthropy, and it may also help with social issues, such as the sustainability of the environment. Stage 3 Innovative: companies are active in stakeholder management by seeking to help society and tend to set up a structure to support its efforts and report its corporate social performance. Stage 4 Integrated: companies build more coherent initiatives, such as entering ongoing partnerships with stakeholders, and may adopt triple-bottom-line measures. Stage 5 Transform: companies tend to have extensive partnerships with individuals and organizations across businesses, industries, and national borders to address broad social problems and to reach underserved markets, often in less-developed nations. Multilevel: companies can be at more than one stage at once by progressing faster in some areas than in others.

Describe stakeholder management and the need to balance stockholder and other stakeholder interests.

Stakeholder management is based on attempting to make decisions on specific issues that provide value to strategic stakeholders. Managers have a responsibility to make a profit to give stockholders a return on their investment. However, at the same time they must operate in a legal and ethical manner and not take advantage of other stakeholders. Thus, managers attempt to create a win-win situation for all stakeholders.

Compare sustainability concepts.

Sustainability is meeting the needs of today without sacrificing future generations' ability to meet their needs, while sustainable development balances the need for economic growth and the need to maintain our natural environment. Green management refers to the activities businesses engage in to ensure sustainability and sustainable development.

Explain how the winner takes most of the market share.

Technology and online business create opportunities and market strategies that are different from traditional business operations in that technology provides the company a way to recap its initial cost to produce a product, because as production increases, the cost of producing each additional unit decreases. Economies of scale create winnertake-most market situations. Furthermore, creating the industry standard and being the first-mover are important market strategies that go hand in hand to dominate a market. Being the first to develop the standard creates a first-mover advantage to become the strong winner-take-most of the market share leader.

Describe the relationship between technology and productivity and the difference between production and productivity.

Technology is the process of transforming resources into products, and technology is used to increase productivity. Production is a performance measure indicating how many products were produced whereas productivity is a performance measure that relates outputs to inputs. The goal is to increase productivity; however, a firm can increase production while decreasing productivity. Thus, business needs to focus on productivity.

List general guides to ethical decision making.

Ten general guides are critical to ethical decision making. Follow the Golden Rule and treat others as you want to be treated; act from the postconventional moral level; consider the rights of others; be fair by seeking justice; use common sense; seek advice; don't do things that violate your comfort or that will embarrass you through disclosure; use the 4-way test of Rotary International; and apply the 5-question test of Sears, Roebuck and Co.

Describe the 3-way ethics test.

The 3-way ethics test is used to determine whether an action is ethical. The test has three parts, and to be ethical the behavior must pass all three—virtues, generalization, and utilitarian—tests. To pass the virtues test, the behavior must be honest, be based on good character traits, and maintain one's integrity and relationships. To pass the generalization test, the reasons for the action must be consistent, and everyone in the same situation with the same reasons will use the same behavior. To pass the utilitarian test, one specific action leads to more favorable consequences than any alternative decision.

List and briefly describe the 5 Is strategic analysis.

The 5 Is strategic analysis stages include: 1.Issue identification. The business identifies issues of stakeholders who want the firm to take some action to meet their special interest. The business identifies which stage of the life cycle the issue is in to determine the strategic focus. 2.Interested strategic stakeholders. The firm determines which specific strategic stakeholders will be for and against its stance on the issue. 3.Incentive of stakeholders. The business determines stakeholder: (a) legitimacy (What responsibility does the firm have to the stakeholder?), (b) power (Can the stakeholder help or hurt firm performance?); (c) urgency (Is quick action needed?); and predicts the (d) likelihood (costs vs. benefits) of their taking action, and (e) what action they will take to help or oppose the business on the issue. 4.Information—objectives. The firm states the end result it wants to achieve in trying to create value for the stakeholders of the issue. Information is classified as fact (can be proven), assumption (not factual), or sentiment (feelings about the issue). The firm presents its side of the issue, using information facts and figures to meet its objective through information-gaining strategies—outside sources conducting research, expert testimony, and using information of supportive stakeholders. 5.Interaction strategies. Developing interaction strategies involves: (a) generating alternative strategies to meet the objective; (b) forecasting the market and nonmarket reactions and the consequences of each alternative; (c) selecting strategies; and (d) implementing and evaluating strategies.

State what the federal consumer protection regulatory agency acronyms CFPB, CPSC, FTC, FDA, NHTSA, and SEC stand for, and discuss their regulatory responsibilities.

The Consumer Financial Protection Bureau (CFPB) regulates financial products. The Consumer Product Safety Commission (CPSC) protects the public against unreasonable risks of injury associated with consumer products, through setting and enforcing safety standards. The Federal Trade Commission (FTC) regulates practices that are anticompetitive or deceptive or unfair to consumers. The Food and Drug Administration (FDA) regulates the safety of human and veterinary foods, drugs, vaccines, cosmetics, and medical and radiation devices. The National Highway Traffic Safety Administration (NHTSA) regulates standards of excellence in motor vehicle and highway safety. The Securities and Exchange Commission (SEC) protects investors; maintains fair, orderly, and efficient markets; and facilitates capital formation.

Contrast U.S. business ownership and government-business relations with those in the EU, China, and Japan.

The U.S. government generally does not own any business enterprises, does not have joint business ownership, and doesn't even invest in company stocks. However, the EU, Chinese, and Japanese governments do engage in business ownership. Generally, the U.S. government acts more like a referee by setting and enforcing the rules of business impartially; it has no conflicts of interests. But in the EU, China, and Japan, the government has ownership in business, making the government sensitive to what happens to business, and it generally gives more help and subsidies to business. So EU, Chinese, and Japanese governments are more like allies with business than like referees as in the United States.

List the arguments for and against corporate social responsibility.

The arguments for CSR: (1) being socially responsible promotes business long-term self-interest; (2) CSRimproves business value and reputation—public sentiment; (3) society expects business to be socially responsible; (4) business is responsible for correcting the social problems it causes; (5) CSR discourages government regulation. The arguments against CSR: (1) the sole responsibility of business is to maximize profits while obeying the law; (2) the cost of social responsibility is passed on to stakeholders; (3) competitors who are less socially responsible may gain a cost advantage; (4) a business involved in social issues can lose its focus on operating as effectively as possible; (5) dealing with social problems is the job of the government, not business.

Describe how a bill becomes a law.

The common legislative process is as follows. Committee action is the development of a bill by committees and subcommittees that specialize in issue areas. If the committee votes in favor of the bill, it progresses to the floor; however, most bills never make it through committee action. Floor action entails the House and Senate versions of the same bill going to the full chamber for debate, revisions, and a vote; if both chambers pass their bill, it is sent to conference. Conference action is a committee with members from both chambers that works out the differences between the two versions and sends one bill to both chambers for a vote. The vote by both chambers requires a majority of both chambers to progress to the president. The president can either sign the bill into law or refuse to sign it-vetoing it back to Congress. If vetoed, Congress can create the law if two-thirds of both chambers vote to override the president's veto.

List and briefly explain eight non-market strategies businesses use against activists.

The eight nonmarket strategies businesses use against activists are as follows: 1.Gaining community public sentiment for being socially responsible is a proactive strategy to help prevent activists from taking issues to business or for resolving them in the early stages. 2.Grand nonmarket strategies include donating, ignoring, opposing, negotiating, and working with activists; grand strategies are developed for the specific issue and do change. 3.Lockouts occur when business does not allow employees to come and work. 4.Grassroots efforts involve mobilizing business stakeholders from the market environment, which can include stockholder owners, employees, customers and consumers, suppliers, and competitors who will also be affected by a change in business practices to meet activist interests. 5.News media relations are developed to get favorable press cover-age, and advocacy advertising is used to present the business side of the issue to influence public senti-ment and corporate reputation. 6.Businesses build coalitions to join forces with other stakeholders to promote their common cause through joint action. 7.Businesses commonly appeal to government to stop changes in the current laws and regulation that will harm them in some way. 8.As a threat, and often last resort, business can use costly litigation.

Characterize the three levels of moral development.

The higher the level of moral development, the more ethical is the behavior. (1) Preconventional (self-centered): At the lowest level of moral development, behavior is motivated by selfinterest—avoiding punishment and seeking rewards. (2) Conventional (social-centered): At the second level, individuals are motivated by meeting social group and societal expectations to fit in, and therefore they copy others' behavior. (3) Postconventional (ethics-centered): At the highest level, behavior is motivated by the desire to do the right thing, even at the risk of alienating the group.

Explain how the government helps to protect stockholders.

The legislature passes laws to protect stockholders, such as the Sarbanes-Oxlcy Act that reformed corporate governance. The Department of Justice's primary government agency that protects stockholder rights is the Security and Exchange Commission (SEC). The SEC'S mission is 10 protect stockholders' rights by regulating the stock market to make sure it is run fairly and that investment information is fully disclosed. Stockholders can use the judicial branch of the government to interpret the law and determine whether stockholder rights have been violated.

Discuss the major environmental laws and regulations.

The major environmental protection laws are categorized into three areas: air, water, and land. The Clean Air Act requires the Environmental Protection Agency (EPA) to set national standards that limit pollution harmful to people and the environment. The Clean Water Act sets broad environmental quality goals and an implementation system for the federal and state governments. The National Pollutant Discharge Elimination System (NPDES) was created to specify maximum permissible discharge levels and timetables for installing state-of-the-art pollution control equipment. The Solid Waste Disposal Act gives regional, state, and local governments the main responsibility for nontoxic waste management, with the EPA assisting them with research and other help. However, for dealing with hazardous waste, the Resource Conservation and Recovery Act created a federal (cradleto-grave) system. The EPA is the primary U.S. regulatory body responsible for administering environmental laws and coordinating federal, state, and local efforts. The regulatory trend is to prevent pollution through the use of incentives under the Pollution Prevention Act.

Compare the motivation and activity for corporate social responsibility (CSR) and corporate social performance (CSP) and the social audit.

The motivation for CSR comes from a moral obligation and implies corporate social performance (CSP). However, CSP can be motivated by being moral, by social pressure, by managerial perquisites, or by benefits of corporate citizenship. CSP activities involve going beyond legal requirements to engage in philanthropy, or CSP is at the third level of CSR—benevolent. The social audit measures CSR and responsiveness to report company CSP. The trend toward including social audits as part of the annual report is growing, and global organizations are working to standardize the audits worldwide.

Explain the nonmarket society and government environments and how they affect business.

The nonmarket society environment includes societal interest groups and communities, whereas the nonmarket government environment includes the executive, legislative, and judicial branches at the local, state, federal, and international levels. Social interest group activists pressure business to meet their special interest. They commonly use community public sentiment and the news media to help them. The government creates and enforces the laws, rules, and regulations that firms must abide by when conducting business in the market environment.

Describe the objective and roles of activists.

The objective of activists is to pressure business and government to take action that they would not have taken on their own to meet activists' special interests. Activists play three roles: (1) provide information about business activities to business, society, and government; (2) develop nonmarket agenda issues for business; and (3) work with business to set voluntary standards and with the government to influence the development of laws and regulations.

Describe the objectives and roles of business interest groups.

The objectives of business interest groups are to advocate to society and government and to provide services to their members. Business interest groups play four roles: (1) provide information to business, society, and government; (2) advocate the business side of the issue to society and government; (3) provide a variety of services to their members; and (4) set voluntary standards for their members, work with societal interest groups to set standards, and work to influence the development of laws and regulations.

Contrast the political and legal environments, briefly stating what each branch of government does, and summarize their balance of power.

The political environment includes the government legislative branch, which initiates and passes the laws, and the executive branch, which enforces the laws and regulations, whereas the legal environment includes the judicial branch, which interprets and determines the laws. The government is pluralistic so that no one branch has too much power. The power of the president is checked by Congress whose members must approve presidential selections for cabinet positions, judicial appointments, and budget, and Congress has power over regulators. The power of Congress is checked by the president, who can veto its bills. The courts can change the laws and regulations made by Congress and executive-branch regulators.

Explain the business—government relationship, public policy, and the tvpes of economic public policies.

The relationship between business and government is complex and continues to change with different elected officials. The business—government relationship also varies based on the issue. For some issues in which the government and business have common interest, their relationship is often cooperative, whereas for other issues in which they have conflicting goals, the relationship is often more adversarial. Public policy is the action government takes to deal with issues. Economic policy focuses on national prosperity. Primary economic policies include: fiscal policy of taxing and spending to support and/or stimulate the economy and monetary policy of the supply, demand, and value of the U.S. currency. Secondary economic policies include: industrial policy directing resources to the development of specific industries, taxation policy raising and lowering taxes on individuals and businesses to encourage or discourage spending, and trade policy encouraging or discouraging international trade with specific countries.

Discuss the role of business and its managers, including stakeholders.

The role of business is to create value for stakeholders, who are affected by the business and can affect firm performance. Thus, they have an interest in business activities. The role of managers is to integrate market and nonmarket environmental strategies ethically to create value for stakeholders.

Describe the rule-making process.

The rule-making process was set forth in the Administrative Procedures Act (APA) and includes the following steps. (1) The regulatory agency writes the proposed rule. (2) The rule goes to the Federal Register for public comments by anyone, and public hearings and administrative judicial testimony may take place. At the same time, the rule goes to the Office of Management and Budget (OMB) for potential revisions and approval. (3) The agency revises and finalizes the rule. (4) The rule is published in the Federal Register with OMB final approval. (5) Rules take effect in a minimum of 30 days. (6) Business may challenge the legality of the rule, and it may be stopped. (7) The agency enforces the rule.

Define the corporate stakeholders and describe their primary power.

The stockholders are the legal owners of the corporation. Their primary power is to select the corporate board of directors. The board of directors provides strategic direction and governance and oversees the managers of the corporation. The board's primary power is to select, advise, supervise, and evaluate the top managers. Managers plan, organize, lead, and control a firm's resources to achieve corporate goals. Their primary power is in their day-to-day control of operations. Employees do the work to provide the products and other functions. The employees' primary power includes collective bargaining and striking.

Describe the types of laws, lawsuits, courts, and court functions.

The three basic types of laws are legislative, executive, and judicial. The legislative law includes those laws enacted by Congress, state legislatures, and local government bodies. The executive branch of government agencies and commissions make the rules of business. The judicial courts create common laws through precedents. The three types of lawsuits include criminal, civil, and public. Criminal suits are cases brought by the government against a person or group for breaking the law. Civil suits are cases brought by a plaintiff against a defendant seeking compensation for damages. Public lawsuits are cases brought by a plaintiff against the government for failure to act in accordance with its statutory obligations. Of the three types of courts, federal and state courts have a similar structure with district courts that hear the cases, courts of appeals that hear contested cases, and a supreme court that has final authority over court decisions. The third type, local courts, deals with misdemeanors and minor cases. The court has three major functions: law interpretation, litigation determination, and individual protection. It interprets the laws through judicial review to determine whether the laws are legal under the Constitution or whether officials have exceeded their authority. Courts determine the outcomes of litigation. Courts also protect the rights of all individuals so that everyone is treated equally under the law.

Explain the reasons for political campaign contributions, the role of PACs, and the difference between hard and soft money.

The three reasons for political campaign contributions are to affect outcomes of elections, to obtain access to officeholders, and to influence regulations. Political action committees (PACs) are company-sponsored methods of obtaining campaign funds from employees and distributing the funds to candidates. Hard money is a direct contribution to a candidate's political campaign. Soft money is a contribution to a political party committee for use in party-build-ing activities. Thus, hard money can be given directly to a political campaign whereas soft money cannot.

Describe the systems of free trade that the EU has in common with the United States.

The three systems of free trade the United States and the EU have in common are as follows. The EU has its laws (all countries must follow) and state law (each country/state has its own laws) similar to U.S. federal and state laws. The EU has a common currency, the euro, similar to the U.S. dollar. The EU has a central bank system under the European Central Bank (ECB), similar to the U.S. Federal Reserve.

Compare and contrast the types of businesses in the global economy.

The three types of businesses in the global economy are domestic, international, and multinational. They are similar in that they all compete for business in the global economy. However, a domestic company conducts business in one country. Many buy and sell foreign products locally. An international company is based primarily in one country but transacts business in other countries. Internationals are commonly in the import and export business. A multinational company (MNC) has significant direct investment operations in more than one country.

Describe the different types of mergers.

The three types of mergers are horizontal, vertical, and conglomerate. Horizontal mergers combine two companies in the same industry, which are commonly direct competitors. Vertical mergers combine two companies at different stages of the supply chain between raw materials to delivery to consumers. A merger moving away from the consumer is a backward vertical merger, and moving closer to the customer is a forward vertical merger. Conglomerate mergers combine a company with a firm in an unrelated industry.

Compare and contrast four antitrust laws.

The various antitrust laws are similar because they have the same objective of preserving capitalism by protecting competition to benefit consumers. The Sherman Act was passed first to prohibit unreasonable restraints of trade and monopolization. However, its terms were vague, so Congress passed the Clayton Act to prohibit anticompetitive mergers, price discrimination, director interlock, and tying contracts. The same year, it passed the Federal Trade Commission Act to prohibit unfair competition and deceptive practices, creating the FTC to help enforce antitrust laws. Years later, the Antitrust Improvement Act strengthened the other antitrust laws by requiring premerger notification and approval, and it allowed states to sue businesses for price-fixing.

Identify the legislative stage business should focus on to influence lawmaking and who should be the strategic focus.

To influence laws being made, business should focus on the committee action stage because the further along in the legislative process a bill is, the harder it is to influence the bill. Business needs to focus primarily on the pivotal voting members of the committee because they are undecided on how they will vote; therefore, they are the most likely to listen to the business side of the issue and meet its special interest through the bill or to kill bills business is against.

Compare and contrast types of trade barriers and explain why they are not always successful.

Trade barriers are similar because they protect domestic business from foreign competition so that domestic products can compete with imports. However, how the trade barrier protects business varies. Subsidies are government funds given to business to lower its cost. Tariffs are a tax on imports and exports, making them more expensive. Quotas set limits on imports and exports, driving up product prices. Bans prohibit the import or export of products. Trade barriers are not always successful because they result in increased costs to consumers or retaliation from the foreign country via their own trade barriers that offset the benefits.

Compare and contrast various types of warranties.

Warranties are contracts in which the seller guarantees the nature of the product and the buyer is entitled to compensation for any consequent harm. However, variations in warranties include express versus implied and full versus limited warranties. An express warranty is an explicit claim made by the producer to the consumer, whereas an implied warranty is an unwritten guarantee that the product is adequate to meet reasonable expectations for intended purposes. A full warranty must express unconditional assurance that the product will be replaced or repaired within a reasonable time and without charge, whereas a limited warranty conditionally excludes certain parts of the product or particular types of defects from coverage.