Business Ethics exam. Ch 1-3

Organizing for Effective Issue Management

Part of the organization is mobilized to address a particular emerging issue, it often depends on the nature of the issue itself. •Involve the board of directors and top management levels.

Positives and negatives of corporate power

Positive •More resources. •Lower cost production. •New products. •Technologies. Negative •Disproportionate political system. •Dominant public course. •Divide markets. •Squash competition.

Business Reputation

Reputation refers to desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders.

Enlightened Self-Interest

Economic and social goals come together in companies that practice enlightened self-interest. The company's self-interest in the long term to provide: •True value to its customers. •Help for its employees to grow and behave responsibility.

Social Audit Standards

1. Companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners. Example: Apple. Companies within an industry can agree on a common industry-wide standard. Example: Responsible Business Alliance (RBA). 3. Can be developed by global nongovernmental organizations or standard-setting organizations. Example: International Organisation for Standards, Social Accountability 8000, AccountAbility (AA), United Nations Global Compact, The Global Reporting Initiative and others.

The Issue Management Process1

1.Identify Issue •Anticipating emerging concerns, or "horizon" issues. 2.Analyze Issue •Organizations must understand how the issue is likely to evolve, and how it is likely to affect them. 3.Generate Options •Requires complex judgments that incorporate ethical considerations like the company's reputation. 4.Take Action •Once an option is chosen, the organization must design and implement a plan of action. 5.Evaluate Results •Must assess results of the program and make adjustments if necessary.

Corporate Citizenship

: the actions they take to put their commitments to corporate social responsibility into practice. The term global corporate citizenship, similarly, refers to putting these commitments into practice worldwide. Companies demonstrate their corporate citizenship by: •Proactively building stakeholder partnerships. •Discovering business opportunities in serving society. •Transforming a concern for financial performance into a vision of integrated financial and social performance.

Environmental Analysis

A method managers use to gather information about external issues and trends to develop an organizational strategy that minimizes threats and takes advantage of new opportunities

The Meaning of Corporate Social Responsibility

Act in a way that enhances society and its inhabitants and be held accountable. Acknowledge any harm to people and society and correct it if possible. May forgo some profits if its social impacts hurt its stakeholders or if its funds is usable for a positive social impact.

The Role of Social Media inStakeholder Engagement

Address public issues and engage stakeholders. Identify and solve problems faster. Share information better among their employees and partners. Bring customers' ideas for new product designs to market earlier. Platforms to engage with multiple stakeholders, communication has become faster and more effective

Stakeholder Networks

Addressing public issues by: •working collaboratively with other businesses, concerned persons and organizations in stakeholder networks.

Public Issue

Any issue that is of mutual concern to an organization and one or more of its stakeholders.

Corporate Power:

Capability of corporations to influence government, the economy, and society, based on their organizational resources. The tremendous power of the world's leading corporations has both positive and negative effects.

Phases of Corporate Social Responsibility

Corporate Social stewardship (1950s-1960s) Corporate social responsiveness (1960s-1970s) Corporate/ business ethics (1980s - 1990s) Corporate/ global citizenship (1990s - 2000s)

Stakeholder Theory of the Firm2

Corporations serve a broad public purpose: to create value for society. Profit is necessary for survival, but is not the only purpose of the firm. Corporations have multiple obligations and need to consider all stakeholders.

Drivers of Stakeholder Engagement stakeholders

Goal To change corporate behavior on an issue of concern. Motivation Governmental campaigns, protest perceived as inadequate to change corporate behavior. Organizational capacity Experienced staff; core group of activists committed to dialogue with business.

Drivers of Stakeholder Engagement2 Company

Goal To improve corporate reputation; to earn a license to operate; to win approval of society. Motivation Needs stakeholder involvement because of their expertise or control of critical resources. Organizational capacity Top leaders committed to engagement; well-funded department of external (stakeholder) affairs.

Informational Power

Having access to valuable data, facts, or details

The B Corporation

Must meet rigorous, independent social and environmental performance standards. Focus on social responsibility and citizenship by blending their social objectives with financial goals. B Corporation must prove its socially responsible by meeting the B Lab standards. B Lab is a non-profit organization that assesses a corporation's social and environmental performance standards

Shareholder Theory of the Firm1

Sees the firm as property of owners (shareholders). Owners' interests take precedence over interests of others. The purpose of the firm is to maximize its long-term market value and money for its shareholders.

Normative

Stakeholder management is the right thing to do

The Benefits of Engagement

Stakeholder organizations bring a number of distinct strengths: •Alert companies to emerging issues. •Give a firm access to information via networking. •Technical or scientific expertise in specific areas. •Better result in the eyes of the public. •Meet the society's expectations and generate good solutions. Improve a company's reputation.

Competitive Intelligence

The systematic and continuous process of gathering, analyzing, and managing external information about the organization's competitors that can affect the organization's plans, decisions, and operations

Social audit

a systematic evaluation of an organization's social, ethical, and environmental performance.

Stakeholder map

a visual representation of the relationships among stakeholder interests, power, and coalitions with respect to a particular issue

Social entrepreneurs

are driven by a core mission to create and sustain social rather than economic value.

Boundary-spanning departments

departments or offices within an organization that reach across the dividing line that separates the company from groups and people in society.

Social entrepreneurship

is the process of identifying a social need and using their entrepreneurial skills to address this need

External stakeholders

may have important transactions with the firm, but are not on its payroll.

Descriptive

realistic description of how companies really work

Successful firm

s one which finds ways to meet each of its critical responsibilities and develops strategies to enable the obligations to help each other.

Iron law of responsibility

says in the long run, those who do not use power in ways that society considers responsible will tend to lose it.

Instrumental

stakeholder consideration key for effective corporate strategy

Salient

stands out from a background, is seen as important, or draws attention.

Environmental Intelligence

the acquisition of information gained from analyzing the multiple environments affecting organizations.

Stakeholder analysis

the identification of relevant stakeholders and an analysis of their interests and power.

Internal stakeholders

work "inside" the firm and contribute their effort and skill to everyday operations.

Political Power

•Actions taken through legislation, regulations, or lawsuits.

integrated report.

•An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single integrated report.

In Support for Corporate Social Responsibility

•Balances corporate power with responsibility. •Discourages government regulation. •Promotes long-term profits for business. •Improves stakeholder relationships. •Enhances business reputation.

Six dynamic forces powerfully shape the business and society relationship

•Changing societal expectations. •Growing emphasis on ethical reasoning and actions. •Globalization. •Evolving government regulations and business response. •Dynamic natural environment. Explosion of new technology and innovation

Nonmarket stakeholders

•Community, government, business support groups, etc. •People or groups who—although they do not engage in direct economic exchange with the firm—are affected by or can affect its actions.

Multiple responsibilities of business include

•Economic responsibilities. •Social responsibilities. •Legal responsibilities.

Six Benefits of Social audits by Simon Zadek:

•Help businesses know what is happening within their firm. •Understand what stakeholders think about and want from the business. •Tell stakeholders what the business has achieved. •Strengthen the loyalty and commitment of stakeholders. •Enhance the organization's decision making. Improve the business's overall performance

The Origins of Corporate Social Responsibility

•In the United States, the idea of corporate social responsibility appeared around the start of the 20th century. •Corporations under attack for being too big, too powerful, and guilty of antisocial and anticompetitive practices. •To use their power and influence voluntarily for broad social purposes rather than for profits alone. → Example: Steelmaker Andrew Carnegie, Henry Ford. → Example: "new" philanthropists—Mark Zuckerberg, Priscilla Chen.

Over time, the nature of business's relationship with its stakeholders often evolve through a series of stages.

•Inactive - Companies ignore stakeholder concerns. •Reactive - Companies act only when forced to do so, and then in a defensive manner. •Proactive - Companies try to anticipate stakeholder concerns. •Interactive -Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust.

Reputation Index

•It evaluates critical intangible assets that constitute corporate reputation. •Rating Research, a British firm, distributes the index and ratings to interested parties.

Legal Power

•Lawsuits filed against the focal company for harm caused by the firm.

Concerns about Corporate Social Responsibility

•Lowers economic efficiency and profit. •Imposes unequal costs among competitors. •Imposes hidden costs passed on to •stakeholders. •Requires skills business may lack. •Places responsibility on business rather than individuals.

Failure to understand stakeholder concerns and to respond appropriately will

•Permit the performance-expectations gap to grow. •The larger the gap, the greater the risk of stakeholder backlash or of missing business opportunity.

Market stakeholders

•Shareholders, suppliers, employees, etc. •They engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services.

Economic Power

•The ability to grant or withhold transactions with the focal company.

Businesses for Social Responsibility (BSR) survey:

•The goal of a global citizenship management system is to integrate corporate responsibility and citizenship concerns into a company's values, culture, operations and decisions at all organizational levels.

Voting Power

•The legal right to cast a shareholder vote.

Effective global leadership on public issues requires three basic capabilities

•Understanding of the changing business context. •Ability to lead in the face of complexity. Connectedness: the ability to engage with external stakeholders in dialogue and partnership

There are 5 types of stakeholder power:

•Voting power. •Economic power. •Political power. •Legal power. •Informational power.

Transparency

•When companies clearly and openly report their performance—financial, social, and environmental.

What are the elements of stakeholder analysis

•Who are the relevant stakeholders? •What are the interests of each stakeholder? •What is the power of each stakeholder? •How are coalitions likely to form?

Social ventures

•are the organizations founded by social entrepreneurs.