MGMT 320 Final

Stereotyping: The Case of Heidi and Howard

"A successful professional who develops, maintains, and leverages a vast personal and professional network in order to achieve her/his career objectives." - rated female as more power-hungry, self-promoting, disingenuous - viewed female as less likable, less likely to hire, less likely to enjoy working with We often interpret the same actions very differently, depending on the actor

Positive Exemplars

*strategy to reduce implicit stereotyping and prejudice - exposure to positive exemplars reduces implicit racial prejudice - women who are exposed to female science professors show long-term changes in their implicit gender stereotypes

Reasons for the Consumer Movement

- Complex products complicate the choices consumers need to make when they go shopping - Services and products have become more specialized and difficult to judge - When businesses try to sell both products and services through advertising, claims may be inflated or they may appeal to emotions - Technology has permitted businesses to learn more than ever about their customers—potentially violating their privacy. - Some businesses have ignored product safety

Trouble with Uber

- Kalanick responsible for massive risk taking, impatience w/ bureaucracy and contempt for rules, established a combative, aggressive culture --> explosive growth - high profile series of scandals and ethics failures (sexual harassment allegations "boober") - sabotaging of competitors like Lyft (ordered & canceled Lyft rides or recruited to Uber) - Greyball (tool to deceive law enforcement trying to shut Uber down, showed fake version of Uber app to disguise locations of cars and drivers) - Employee defections - Uber detractors started grass roots campaign

Diversity and Inclusion Policies and Practices

- articulate clear diversity goals, set quantitative objectives, and hold managers accountable - spread a wide net in recruitment, to find the most diverse possible pool of qualified candidates - identify promising women and persons of color, and provide them with mentors and other kinds of support - set up diversity councils to monitor the company's goals and progress toward them

Why Corporate Social Responsibility

- balances corporate power with responsibility - promotes long-term profits for business - improves stakeholder relationships - assumes that firm has duties that go beyond its short-term economic functions

Market-Based Mechanisms

- based on the idea that the market is a better control than specific standards - cap-and-trade: allows businesses to buy and sell the right to pollute, a process (eg. european union's tradeable permits) - emissions charges or fees (eg. green taxes or eco-taxes): business is charged for the undesirable waste that it emits - government incentives

Strategic Advantages of Diversity and Inclusion

- boosts innovation - serves a diverse customer base - avoids expensive lawsuits and public embarrassment

The Corvair: A Collision Between Business and Societal Goals

- business tends to take a utilitarian view: the product creates the greatest good for the greatest number - society in the form of consumers wants individual rights protected GM's Goals: - make the corvair simpler, lighter, cheaper, more economical Nader's Goals: - bring attention to what he believed was an unsafe product - protect consumers - both good things - government conducted an investigated and ultimately determined that "the handling and stability performance of the 1960-63 Corvair does not result in an abnormal potential for loss of control or rollover, and it is at least as good as the performance of some contemporary vehicles both foreign and domestic."

An argument for requiring CSR

- corporations are "persons" for purposes of many rights & privileges - corporations have special legal status that protects their owners' personal assets - corporations enjoy many tax and other benefits - corporations have many negative externalities on their communities for which they do not pay

Employee Polygraph Protection Act (1988)

- employee theft has emerged as a significant economic, social, and ethical problem in the workplace Severely limited polygraph testing for employers and prohibited approximately 85% of all such test previously administered in the US

Holland America Case

- environmental impacts of the cruise industry: discharges to water, solid and hazardous waste, air emissions - HAL's sustainability practices: developed advanced wastewater purification system on ships, reduced amount of water used & discharged, reduce solid waste flow, increasing fuel efficiency (energy-efficient equipment) - competitor had reduced fuel use on its vessels by installing two wind turbines (unproven nature & skepticism), found to be very cost effective. would produce only a very small amount of electricity but would contribute to reduced fuel use

Uber Story

- founded by travis kalanick in 2009, started as "black car business" --> developed into ride sharing for everyone - transformed global transportation industry - became "verbicized" - virtually invented the "gig economy", entirely new transportation industry

Benefits of Social Audits

- helps 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' overall performance

Privacy in the Workplace: Electronic Monitoring

- new technologies enable companies to gather, store, and monitor information about the employees' activities - a company's need for information, particularly about its workers, may be at odds with an employee's right to privacy - management justifies the increase in employee monitoring for a number of reasons: employee efficiency, fear of lawsuits if employees act inappropriately

Air Pollution

- occurs when more pollutants are emitted into the atmosphere than can safely be absorbed and diluted by natural processes - results from human activity, especially industrial processes & motor vehicle emissions - special problem: acid rain - efforts of US gov to reduce acid rain = difficult trade-off (high-sulfur coal vs low-sulfur coal)

Water Pollution

- occurs when more wastes are dumped into waterways that can be naturally diluted and carried away - main US law: Water Pollution Control Act (Clean Water Act), goal is to restore or maintain the integrity of all surface water in the US

Principles of Good (Corporate) Governance

- select outside directors to fill most positions - hold more open elections for members of the board - appoint an independent lead director - align director compensation with corporate performance - evaluate the board's performance on a regular basis

Environmental Standards/Command-and-Control Regulation

- standard allowable levels of various pollutants are established by legislation or regulatory action - can be an environmental quality standard (amount of pollutants in local environment/geographical area) or emission standard (amount of pollutants discharged from particular factory)

Objectives of Stock Ownership

- to produce a greater return than they could receive from alternative investments shareholders make money when the price of the stock rises (capital appreciation) or when they receive their share of the company's earnings (capital dividends) - shareholders are not a uniform group (long-term appreciation, short-term returns, capital gains, dividend income) - some investors use stock ownership to achieve social or ethical objectives

Shareholder Legal Rights and Safeguards

- to share in the profits of the enterprise if directors declare dividends - to receive annual reports of company earnings and company activities - to inspect the corporate books - to elect members of the board of directors - to hold the directors and officers of the corporation responsible for their actions - to vote on mergers, some acquisitions, and changes in the charter and bylaws - to bring other business-related proposals before the stockholders - to sell their stock

Stages of Corporate Citizenship

1. Elementary - citizenship undeveloped - managers uninterested & uninvolved in social issues - obey the law but do not move beyond compliance - companies react defensively when threatened - communication with stakeholders is one-way/unilateral: from the company to the stakeholder 2. Engaged - company is more aware of changing public expectations - may adopt formal policies (ie. labor standards) - begin to interact & listen to stakeholders mainly through established departments - top managers become involved - often will commit to specific environmental objectives/increase philanthropic giving 3. Innovative - company may become aware that they lack the capacity to carry out new commitments --> structural innovation - departments coordinate, launching of new programs, social reporting to stakeholders - external groups = more influential 4. Integrated - companies see the need to build more coherent initiatives - may adopt a triple bottom line measures and turn to external audits & ongoing partnerships w/ stakeholders 5. Transforming - visionary leaders & motivated by a higher sense of corporate purchase - partner w/ other orgs & individuals to address social problems (eg. interface & zero net impact) *company may be at more than one stage at once

The Rights of Consumers

1. The right to be informed - protection against misleading advertising, labeling, and to be given the facts to make an informed purchasing decision 2. The right to safety - protection against the marketing of goods that are hazardous to health or life 3. The right to choose - assurance of access to a variety of products and services at competitive prices 4. The right to be heard - assurance that consumer interests will receive fair consideration in government policy and courts 5. The right to privacy - assurance that information disclosed in a commercial transaction is not shared with others

Goals of Consumer Laws

1. To provide consumers with better information when making purchases 2. To protect consumers against possible hazards 3. To promote competitive pricing 4. To promote consumer choice 5. To protect privacy

Characteristics of Effective Sustainability Management

1. Top management commitment 2. Clear goals and metrics 3. Employee engagement 4. Alignment of rewards and incentives

Stages of Corporate Environmental Responsibility

1. pollution prevention: minimize waste before it is create 2. product stewardship: managers focus on all environmental impacts associate with the life cycle of a product 3. clean technology: businesses innovate new technologies that support sustainability

Costs & Benefits of Gov Regulation

Benefits: - reduces discrimination + protects minorities - improves environment - freed competition - reduced corruption - banned dangerous products - strengthened banking system - cut workplace fatalities - controlled communicable diseases Costs: - can limit freedom of individuals and businesses - shift resources from production to compliance - add time and cost to products and services - slow business growth & profitability - expand the reach & power of gov - leave loopholes for exploitation

Management Systems for CSR and Citizenship

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 One emerging trend = consolidation of corporate citizenship efforts eg. GAP

Class Action Fairness Act

Congress passed in 2005 First significant product liability reform in many years Two key elements: - most class-action lawsuits moved from state to federal courts - attorneys in some kinds of cases were paid based on how much plaintiffs actually received & how much time the attorney spent on the case (under the old system, attorneys were often paid % of the settlement amount --> excessive compensation)

Self-Advocacy for Consumer Interests

Consumerism/consumer movement - collective efforts by consumers in many countries to safeguard their own rights in many nations eg. US advocacy organizations include Consumer Federation of America, National Consumers League, and the American Association for Retired People

Four Methods of Protecting Consumers

Consumerism: consumers act to protect their own interests Government regulation: The government regulates product safety Law/courts: people sue when they are injured by a product Industry "self-regulation": businesses and industries protect their customers through product recalls, quality programs, and voluntary codes

Sustainability as a Competitive Advantage

Cost savings - companies obtain significant cost savings by reducing pollution & hazardous waste, recycling materials, and operating w/ greater energy efficiency Brand differentiation - companies that develop a reputation for environmental excellence distinguish their brand and attract like-minded customers Technological innovation - can lead to imaginative new methods for reducing pollution & increasing efficiency Reduction of regulatory risk - companies that are proactive with respect to their environmental impacts are often better positioned than their competitors to respond to new government mandates Strategic planning - companies that cultivate a vision of sustainability must adopt sophisticated strategic planning techniques

Costs & Benefits of Environmental Regulation

Costs: - companies spend large amounts of money to comply - jobs may be lost, esp in "dirty" industries, or because of costs: "job killing regulations" - competitiveness of some capital intensive, dirty industries may be impaired - consumers ultimately pay the cost Benefits: - emissions and pollution drop - air and water quality improves; toxic sites cleaned; natural beauty preserved - people live longer & healthier lives - jobs created in the clean economy sector

Employee Drug Use and Testing

Drug-Free Workplace Act (1988) - required federal contractors to establish and maintain a workplace free of drugs - about 2/3 of companies test employees or job applicants for illegal substances, according to a 2015 study Three Different Occasions: - pre-employment screening - random testing of employees - testing for cause

Types of Gov Regulation

Economic regulations - aim to modify the normal operation of the free market and the forces of supply and demand; the oldest form of regulation Antitrust: Antitrust laws prohibit unfair, anticompetitive practices by business - predatory pricing (selling below cost to drive rivals out of business) - two main antitrust enforcement agencies: antitrust division of the US department of justice & federal trade commission - remedies may involve imposing a fine, breaking up a firm, changing the firm's conduct, requiring the disclosure of information to competitors Social regulations - aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions (consumer protection, employee health and safety, environmental protection)

Rights and Duties of Employees and Employers

Employee Rights/Employer Duties: - right to organize and bargain - right to a safe and healthy workplace - right to privacy - duty to discipline fairly and justly - right to blow the whistle - right to equal employment opportunity - right to be treated with respect for fundamental human rights - right to fair and decent wages Employee Duties/Employer Rights: - no drug or alcohol abuse - no actions that would endanger others - treat others with respect and without harassment of any kind - honesty; appropriate disclosure - loyalty and commitment - respect for employer's property and intellectual capital

Right to Unionize

Employees have a fundamental legal right to organize labor unions and to bargain collectively with employers - workers have a right to hold an election to decide which union will represent them

Alternative Policy Approaches to Environmental Sustainability

Environmental Standards Market-based Mechanisms Information Disclosure Civil and Criminal Enforcement

The Right to Safe and Healthy Workplace

Ergonomics: adapting the job to the worker, rather than forcing the worker to adapt to the job Occupational Safety and Health Act (1970): gives workers the right to a job "free from recognized hazards that are causing or likely to cause death or serious physical harm" - administered by the Occupational Health and Safety Administration (OSHA) - workplace death rate has fallen by more than 2/3 since 1970

Bias Blockers

Familiarity - less stereotyping of people we are familiar with Cooperative Teams - less stereotyping in cooperative work teams where the outcomes depend on each other Objective Information and Standards - commitment to hiring criteria prior to knowing the social categories the applicant belongs to - objective indicators of high performance - reduces ambiguity Blind Auditions - allegations of bias against female musicians (some orchestras added screens during auditions) - reduces discrimination from 20% to 40% female Conscious Correction - with awareness and motivation, people can be consciously correct for implicit biases - through practice, the process of correcting for bias can itself become automatic

Arguments for and against Employee Drug Testing

For: - supports US policy to reduce illegal drug use and availability - improves employee productivity - promotes safety in the workplace - decreases employee theft and absenteeism - reduces health and insurance costs Against: - invades an employee's privacy - may be unrelated to job performance - may be used as a method of employee discrimination - lowers employee morale - unreliable test results

Executive Compensation: Arguments for/against Status Quo

For: - well-paid managers are simply being rewarded for outstanding performance - high salaries provide an incentive for innovation and risk-taking - high compensation reflects a shortage of labor; necessary to attract top talent (not many individuals are capable of running today's large, complex organizations) Against: - high executives pay causes mid and lower-level employees to feel they are not receiving their fair share - empirical evidence finds weak relationship between executive pay and company success - inflated executive pay hurts ability of US firms to compete w/ foreign rivals

The Effects of Gov Regulation

Goal is to have the benefits arising from regulation outweigh the costs Cost-benefit analysis helps the public understand what is at stake when new regulation is sought eg. spending & staffing on US regulatory activities Spending + Staffing is higher for US social regulatory activities Continuous Regulatory Reform - deregulation: the removal or scaling down regulatory activities of gov - reregulation: the expansion of gov regulation (eg. reregulation of securities & financial services industries in the 2000s)

Arguments For and Against CSR

In favor: - improves stakeholder relationships - enhances organizations' reputations - discourages government regulation - improves employee engagement - promotes long-term profits - moral imperative Against: - lowers economic efficiency - imposes hidden costs - businesses don't have the skills - ignores individual responsibility - creates needless distractions - unclear impact on society

Executive Compensation

Key board function agency problem: separating ownership & control, as hired agents, managers might act to benefit themselves rather than owners - mechanism for aligning the interests of the corp and its shareholders w/ top managers' - critics say executive pay has become excessive (very high in the US by international standards)

Reasons for Gov Regulation

Market failure: marketplace fails to adjust prices for the true costs of a firm's behavior Negative externalities: the manufacture or distribution of a product gives rise to unplanned or unintended costs (spillover effects) Natural monopolies: without competition, firms could raise prices as much as they want (eg. electric utility) Ethical arguments: consequences, fairness issues eg. facebook

Upper Big Branch Mine Case

Massey Energy: leading coal producer, CEO = Don Blankenship, operated UBB mine in west virginia - April 2010 mine explosion - 29 miners killed - 3 separate reports found Massey had committed serious safety violations Systemic Causes of the Disaster: - "running coal" outweighed all else - production data every 30 min - squelching of safety concerns - advance notice of safety inspections - compensation of blankenship (bulk of comp production performance related, de-emphasis on safety) - almost no union presence Technical Causes of the Disaster: - rock dust not properly applied (explosive dust built up on mine surfaces) - ventilation problems (fans not properly engineered) - poor equipment maintenance (water sprays on longwall shearer not functioning properly, cutting teeth on shearer worn out, creating sparks) Massey's own report: natural gas release caused explosion

Moody's Case

Moody's provided credit ratings on bonds issued by gov, municipalities, and other sellers of investment vehicles (investment banks) Many investors rely on ratings to determine risk levels when buying for their portfolios Rating structured finance debt (pools of debt obligations with varying risk levels) became a huge part of Moody's business (40% of revenues in 2007) Conflicts of Interest by banks (incentives systems for sales of securities, large commissions for risky but profitable loans) and by moody's (desire to maintain structured finance business put pressure to rate optimistically, even unrealistically) NINJA: no income, no assets, no job - loan officers misled borrowers - people "bought over their heads" - assumption that housing market would remain strong - mid 2000's defaults by unqualified borrowers, collapse of housing market, bonds worthless, interest rates rose, housing prices fell - moody's began downgrading mortgage-backed securities (including 90% of all securities it had rated previously), angered institutional investors

Pay-for-Performance

Objective: create compensation plan that ties executive pay to company results (increasing the stock price raises the value of executive compensation) Critics: Danger of equity-based compensation is that executives fixate on stock price, can lead to pressure that yields unethical acts (eg. WorldCom)

Ventria Bioscience Case

Plants (rice) used to make pharmaceuticals Lactiva & Lysomin = proteins found in human breastmilk, effective against diarrhea Ventria planned to grow rice with those proteins Benefits: - Genetically modified crops (can be modified to add desirable traits eg. insect resistance and herbicide tolerance) - Allows low-cost synthesis of pharmaceuticals "phytomanufacturing" Concerns: - commingling (GM corn tainted soybeans) - cross-breeding (bird transmission) California Rice Commission - jurisdiction over any planting greater than 50 acres - voted narrowly (6 to 5 vote) to approve - CA secretary of agriculture opened to public comment Public Comment - Japanese threat (no GM rice imports) - environmental advocacy organizations contamination "inevitable" flooding, birds, human health risks, cross-breeding "superweeds" Outcome: - Ventria could not satisfy California - Moved to Missouri & ran into similar opposition - Moved to Kansas and was allowed to grow GM rice there - Current HQ in Fort Collins, CO

Positive & Negative Effects of Diversity

Positive Effects: - more creativity and innovation - more adaptability - less groupthink Negative Effects: - worse communication - less group cohesion - increased conflict - increased turnover

Product Liability in Other Nations

Product liability systems of other nations differ significantly from US - In Europe, judges (not juries) hear cases - punitive damages are not allowed - victims' health expenses are not an issue as they are covered by national health insurance - historically, product liability cases have been exceedingly rare in china - changed in 2009 in the wake of china's tainted-milk scandal

Consumer Protection in the Digital Age

Proposed solutions: Consumer self-help - internet users should use technologies that enable them to protect their own privacy Industry Self-Regulation - internet-related businesses advocate being allowed to regulate themselves Privacy legislation - new government regulations protecting consumer privacy online

Social Investment

Shareholder Activism Social investment is the use of stock ownership as a strategy for promoting social, environmental, and governance objectives - through selecting stocks according to various social criteria - by using the corporate governance process to raise issues of concern

The Right to a Secure Job

Since late 1800s, the legal basis for the employment relationship has been employment-at-will *Predominate employment relationship in the US* Employment at will is a legal doctrine that means employees are hired and retain their jobs "at the will of" (ie. at the sole discretion of) the employer However, equal employment opportunity and other laws prevent discriminatory terminations. - Many union contracts say employees can be fired only "for just cause," and workers have a right to appeal the employer's decision through the union grievance procedure (european countries & japan have laws that extend "just cause" protections to all workers, not just union)

Land Pollution

The contamination of land by both solid and hazardous waste Superfund or CERCLA legislation passed in 1980 - established funds to clean up the most dangerous toxic waste sites in the US (funds supported primarily by tax on petroleum & chemical companies)

Uber's Trouble with Apple

Uber secretly was placing tags on iPhones - Camouflaged - remained even after Uber app had been deleted and phone erased (fingerprinting) - apple figured it out, summoned Travis to CEO Tim Cook's office - Cook threatened to ban Uber from App store (would remove access to millions of iPhone customers), Kalanick agreed

Government Rules on Executive Compensation

Under US rules, corporations must disclose top 5 executives' compensation and the rationale for it Dodd-Frank Act say-on-pay provisions requires public companies to hold shareholder votes on executive compensation at least once every three years

The Ecologically Sustainable Organization (ESO)

a business that could operate in a way that would use natural resources no faster than they could be replenished or substitutes could be found could thus continue to operate indefinitely without altering the carrying capacity of the Earth's ecosystem

Shared Value Creation

a meaningful benefit for society that is also valuable to the business. Low social impact, high business impact = business as usual Low business impact, high social = philanthropy High business, high social = shared value initiatives

Social Responsibility Shareholder Resolutions

a resolution on an issue of corporate social responsibility placed before shareholders for a vote at the company's annual meeting significant rise in social responsibility shareholder resolutions in recent years securities and exchange commission allows shareholders to place resolutions concerning appropriate social issues on the proxy ballot in some cases, managers enter into a dialogue with shareholder activists and resolve an issue before the election

Social Audit

a systematic evaluation of an organization's social, ethical, and environmental performance 1. companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners ex. Apple 2. companies within an industry can agree on a common industry-wide standard (eg. Electronic Industry Citizenship Coalition) 3. can be developed by global nongovernmental organizations or standard-setting organizations. (eg. united nations global compact, global reporting initiative)

Environmental Auditing and Reporting

a way for leading companies to track their progress toward meeting sustainability goals many firms have moved to integrate their social & environmental reporting into a single sustainability report triple bottom line reporting: occurs when companies report to stakeholders not just their financial results but also their environmental and social impacts

Corporate Power

ability of corporations to influence government and society based on their economic and organizational resources. positive effects of world's leading corp power: - more resources - lower cost production - new products - technologies negative effects: - disproportionate political system - dominate public course - divide markets - squash competition

corporate citizenship

actions companies take to put their commitments to corporate social responsibility into practice global corporate citizenship - putting these commitments into practice worldwide by building stakeholder partnerships, discovering business opportunities in serving society, and transforming a concern for financial performance into financial & social performance. can be considered a strategic investment

Behavioral Advertising

advertising that is targeted to particular customers, based on their observed online behavior; intended to be tailored to a user's interests and preferences Benefits: - the buyer is more likely to receive messages that are relevant - the seller is more likely to reach prospective customers Risks: - the consumer may be denied opportunities, such as credit, based on their online profiles - information collected by behavioral advertisers may not be kept private and secure

Boards of Directors

an elected group of individuals who have a legal duty to establish corporate objectives, ensure integrity of financial accounting, develop broad policies, and select top-level personnel to carry out these objectives and policies - vary in size, composition, and structure to best serve the interests of the corporation and shareholders - elected by shareholders at the annual meeting, absent owners vote by proxy - process is not truly democratic; board membership tends to be self-perpetuating (board nominating committee works w/ CEO and chairman to list candidates. names of individuals are placed on proxy ballot & alternative candidates rarely presented) - in the americas, europe, and asia pacific average board size was 12 members w/ 10-11 outside directors

Alternative Dispute Resolution

approach to settling disagreements between companies and consumers, other than going to court mediation: a voluntary process to settle disputes using a neutral third party arbitration: the use of an impartial individual to hear and decide a case outside of the judicial system benefits: - faster and less expensive way to resolve company-consumer disputes - does not tie up the judicial system with minor issues controversial: the use of mandatory arbitration clauses that limit consumers' right to sue

Ralph Nader

became famous for his book "unsafe at any speed" - purported to show dangers of chevrolet corvair - advocated aggressive litigation to provide relief to consumers - tort law - frequent presidential candidate

Enlightened Self Interest

economic and social goals come together in companies that practice enlightened self-interest company's self-interest in the long term to provide: - true value to its customers - to help its employees grow and behave responsibility

Types of Public Policy

fiscal policy: patterns of government collecting and spending funds to stimulate or support the economy monetary policy: policies that affect the supply, demand, and value of a nation's currency taxation policy: raising or lowering taxes on business or individuals industrial policy: directing economic resources toward the development of specific industries trade policy: encouraging or discouraging trade with other countries social assistance policies: policies that concern social services for citizens such as healthcare and education

The Christchurch Call

initiative by prime minister of NZ to reduce online extremism (non-binding) - signed by 17 countries and ALL the large tech firms - not by the US - cooperative agreement between tech industry players - also a coalition of stakeholders

Elements of Public Policy

inputs: external pressures that shape a government's policy decisions and strategies to address problems goals: can be broad and high-minded or narrow and self-serving tools: incentives and penalties that government uses to achieve policy goals effects: the outcomes arising from gov regulation

Environmental Protection Agency

main agency charged with pollution control, established in 1970

Securities and Exchange Commission

main government agency charged with protection of shareholder interests, established in 1934 mission is to protect shareholders' rights by making sure that the stock markets are run fairly gov regulation is needed because shareholders can be damaged by abusive practices recent enforcement efforts have focused on improving the accuracy ad transparency of financial info provided to investors

Strict Liability

manufacturers are responsible for injuries resulting from use of their products, whether or not they were negligent or breached a warranty.

Reputation Index

measures a company's social reputation - evaluates critical intangible assets that constitute corporate reputation - rating research, a british firm, distributes the index and ratings to interested parties

Product Recalls

occur when a company, either voluntarily or under an agreement with a gov agency, takes back or fixes items found to be defective problem: the public may not be aware of them, so dangerous products continue to be used four major gov agencies responsible for most mandatory recalls: - food and drug administration - national highway traffic safety administration - environmental protection agency (can recall polluting motor vehicles) - consumer product safety commission

Insider Trading

occurs when a person gains access to material, non-public information about a company's financial condition and uses that information, before it becomes public knowledge, to buy or sell the company's stock for a profit or to avoid a loss Illegal under Securities Exchange Act of 1934 to: - use nonpublic information to trade a stock - trade a stock based on a tip from someone who had an obligation to keep quiet - pass information to others with an expectation of gain

Labor Unions

organizations that represent workers on the job - labor unions have the right to negotiate wages, working conditions, and other terms of employment - employers are required to bargain with unions in good faith - if agreement cannot be reached, a strike might occur - influence of labor unions has varied during US history, but is currently in decline - in the wake of the great recession, elected officials in several states sought to weaken unions by limiting the rights of public sector workers eg. In 2015, 25 states have adopted right-to-work laws

Information Disclosure

regulation by publicity or regulation by embarrassment government encourages companies to pollute less by publishing information about the amount of pollutants individual companies emit each year

The Rise of Institutional Investors

shareholder activism As holdings by institutional investors have increased significantly they have become more assertive in promoting interests of their members - having large blocks of stock not easy to sell if become dissatisfied - strong incentive to work to change management policy Council of Institutional Investors - represents institutions and pension funds - developed a shareholder bill of rights Research shows that involvement of institutional investors can improve company performance

Stock Screening

shareholder activism a growing number of mutual funds & pension funds use social screens (social responsibility as an investment criterion) to select companies in which to invest socially responsible investing has rapidly grown in Europe & beyond social criteria may also be used when selling stocks (divestment)

corporate social responsibility

the idea that business should act in a way that enhances societal interests & enhances stakeholder interests and should be held accountable for any actions that affect people, their communities, their environment - origins = start of 20th century bc corps were under attack for being too big/powerful and guilty of antisocial & anticompetitive practices

Social Contract

the implied understanding between an organization and its stakeholders. not a legal contract, but rather a set of shared expectations *cultural values, traditions, and norms of behavior play important roles in the right to a secure job *expectations of both sides in the employment relationship have been altered over time by globalization, business cycles (investment in employees=expensive), etc

Shareholders

the legal owners of business corporations (also called stockholders or investors) types of shareholders: individual - people who directly own shares of stock issued by companies institutional - eg. pension funds, mutual funds, insurance companies, and university endowments (institutional investors)

Product Liability

the legal responsibility of a firm for injuries caused by something it made or sold in US and some other countries, consumers have right to sue and collect damages if harmed by unsafe products - consumer advocates and trial attorneys have supported these legal protections - by contrast, some in the business community have argued courts and juries have unfairly favored plaintiffs and have called for reform

Civil and Criminal Enforcement

the threat of fines or even prison to deter companies from doing environmental damage regulators have actively pursued environmental criminals US sentencing commission has established guidelines for sentencing environmental wrongdoers

tragedy of the commons

theory that common areas, over which all have access, but none has responsibility to maintain, will deteriorate

Social Reporting

when a company decides to publicize information collected in a social audit transparency: when companies clearly and openly report their performance (financial, social, environmental) eg. australia, NZ - emerging trend = integration of legally required financial information w/ social & environmental information into a single integrated report