MGMT 370 Midterm
What are the major types of government regulation of business?
Economic - aim to modify the normal operation of the free market and the forces of supply and demand Social- are aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions
Reasons for regulation
Market failures, negative externalities, natural monopolies, ethical arguements
Public policy effects
are the outcomes arising from government regulation. some are intended and some are unintended. Usually many people are affected by
Ethics
how we think and behave towards others and how we want them to think and behave towards us
Stakeholder Analysis
identify relevant stakeholders and understand both their interests and the power they may have to assert these interests
General Systems Theory
in business, systems theory provides a powerful tool to help managers conceptualize the relationship between their companies and their external environments
Iron Law of Responsibility
in the long run, those who do not use power in ways that society considers responsible will tend to lose it. Social responsibility has become a worldwide expectationq
Central State Control
in which economic power is concentrated in the hands of government officials and political authorities.
Benefits of Globalization
increases economic productivity, reduces prices for consumers, transfers technology, reduce military conflict
Example of public policy goals
increasing the number of female graduates in engineering schools (more specific goals are often described as policy objectives)
External Stakeholders
individuals or groups that have important transactions with the firm but are not directly employed by it. Like customers, suppliers, creditors, the local community, society, and the government
What are the elements of public policy?
inputs, goals, tools and effects
Bottom of the pyramid
refers to the poorest people in the world, this group represents an incredible business opportunities
Stages of Moral Development
Stage 1: Punishment avoidance (ego centered reasoning) Stage 2: Reward seeking: self-interest, own needs, reciprocity (ego centered reasoning) Stage 3: Social Groups: friends, school, coworkers, family (group-centered reasoning) Stage 4: Society at large: customs, traditions, laws(society and law centered reasoning) Stage 5: Moral beliefs above and beyond specific social custom: human rights, social contract, broad constitutional principles (principle-centered reasoning) Stage 6: Universal Principles: justice, fairness, universal human rights (principle-centered reasoning
Difference between stakeholder and stockholder?
Stakeholder - has an interest in the business but does NOT always own a part of the business (customers, suppliers, etc.) Stockholder - someone who DOES own a part of the business
Normative View of Stakeholder Theory
Stakeholder management is simply the right thing to do. Corporations have great power and control vast resources; these privileges carry with a duty toward all those affected by a corporations actions
What are the major drivers of the globalization?
Technological innovation Transportation systems The rise of major transnational corporations Cultural convergence Social and political reforms
Stakeholder Power
The ability to use resources to make an event happen or to secure a desired outcome
Business Ethics
The application of standard ethical ideas to business behavior in a company
Reputation
The desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders.
Globalization
The increasing movement of goods, services, and capital across national boarders. Trade and finance flows integrate the world economy
Ethical arguments
There is often an ethical rationale for regulation as well. There is fairness and justice arguments for government to set standards and develop regulations to protect employees
The arguements for and against business participation in the political process
Those in favor of business involvement in government affairs argue that since other affected groups (like special interest groups) are permitted to be involved, businesses should be allowed too. Those against it believe that business has a disproportionate inlfuence, based on its great power and financial resources
International Monetary Fund (IMF)
To make currency exchange easier for member countries so that they can participate in global trade
Why should businesses be ethical?
To meet demands of business stakeholders To enhance business performance "ethics pays" To comply with legal requirements To prevent or minimize harm To promote personal morality
Phases of Social Responsibility
1. Corporate Social Stewardship (1950's-1960's) - corporate philanthropy, managers as public Trustee-stewards 2. Corporate Social Responsiveness (1960's-1970's) - social impact analysis, organizational re-design and training for responsiveness 3. Corporate/Business Ethics (1980's-1990's) - foster an ethical corporate culture, establish an ethical organizational climate 4. Corporate/Global Citizenship (1990's-present) - stakeholder partnerships, integrate financial, social, and environmental performance
U.S. Corporate scentencing guidelines
1. Established standards and procedures to reduce criminal conduct 2. Assigned high level officers responsibility for compliance 3. Not assigned discretionary authority to "risky" individuals 4. Effectively communitcate standards and procedures through training 5. Taken reasonable steps to ensure compliance 6. Enforced standards and procedures through disciplinary mechanisms 7. Following detection of offense, responded appropriately and prevented reoccurrence
Sarbanes-Oxley Act of 2002
Seeks to ensure that firms maintain high ethical standards in how they conduct business.
Example of public policy Inputs
- a growing recognition of the dangers of cell phone use while driving, esepcially texting, has pressured many state and local government to ban or regulate their use by drivers
Arguements NOT in favor of CSR
-Lowers economic effiency and profit -Imposes unequal costs among competitors -Imposes hidden costs passed on to stakeholders -Requires skills businesses may lack -Places responsibility on business rather than individuals
Arguements IN FAVOR of CSR
-balances corporate power with responsibility -discourages government regulation -Promotes long term profits for businesses -Improves stakeholder relationships -Enhances business reputation
Why do ethical problems occur in business?
-personal gain and selfish interest - competitive pressures on profits -conflicts of interest -cross cultural contradictions
What is the purpose of the modern corporation?
-to take responsibility for stakeholder benefits -to manage for the benefit of it's stakeholders, customers, suppliers, owners, employees -profit maximization (within acceptable social standards)
B corporation (benefit corporation)
An organization that seeks to blend it's social objectives with financial goals. To qualify an org must meet rigorous, independent social and environmental performance standards
Transnational corporation (TNC)
A large business organization operating in at least two separate national economies; a form of multinational corporation.
Ethical Egoist
A manager or an employee who puts his or her own self-interest above all other considerations
Stages of Moral Development
A sequential pattern beginning with a concern for the self and growing to a concern for others and broad-based principles.
Conflict of Interest
A situation in which a person in a position of responsibility or trust has competing professional or personal interests that make it difficult to fulfill his or her duties impartially.
What is a stakeholder?
A stakeholder is any individual or organisation who has a vested interest in the activities and decision making of a business.
Why do government and business sometimes collaborate and other times keep each other at arms length?
At times it may benefit them to work together to pursue common goals, or because of a crisis. Other times they may keep each other at a distance if it is driving costs up, limiting innovation, they are a small business,
Corporate Political Strategy
Activities taken by organizations to acquire, develop, and use power to obtain an advantage.
Negative Externalities
Also called spillover effect, result of when the manufacture or distribution of a product gives rise to unplanned or unintended costs borne by consumers, competitors, neighboring communities or other business stakeholders.
Ways modern corporations organize internally to interact with stakeholders
Changing societal expectations - modern businesses are increasingly exploring opportunities to act as social entrepreneurs often by focusing on those at the bottom of the pyramid Growing emphasis on ethical reason and actions - businesses have created ethics programs to help ensure employees are aware of these issues and act in accordance with ethical standards Globalization - challenges businesses to integrate their financial, social, and environmental performance
Costs and Benefits of Regulation on business and society
Costs of regulation on business and society are costly, especially so for societal business. The benefits are that for societal regulations are that it reflects growtn in such areas as enironmental health, occupational safety, and consumer protection
How can businesses work collaboratively with governments and the civil sector to address global social issues?
GAN global action networks draw on the unique capabilities of each sector and overcome particular weaknesses each sector has
What is the role of the managerial values in influencing ethical decision making?
Managers are key to a company's ethical tone. They have more opportunities than others to create an ethical workplace
International financial and trade institutions (IFTIs)
Institutions, such as the World Bank, International Monetary Fund, and World Trade Organization, that establish the rules by which international commerce is transacted.
Conduct remedy
Involves an agreement that the offering firl will change it's conduct, often under government supervision (most common)
World Trade Organization (WTO)
Is an international body that establishes the ground rules for trade among nations
Costs of Globalization
Job security, environmental and labor standards may be weakened, erosion of regional and national cultures and undermines cultural, linguistic and religious diversity
How do companies enter the global market?
Many countries first build a successful business in their home countries, then export their products or services to buyers in other countries. Develop global market channels. Sell, Make, Source
Nongovernmental organizations (NGOs)
Organizations independent of governments that monitor and improve political, economic, and social conditions throughout the world.
Internal Stakeholders
People who are employed by the firm. Like employees, board members, company owners, donors and volunteers
Free Enterprise Systems
People with goods and services to sell take them voluntarily to the marketplace, seeking to exchange them for money or other goods or services
World Bank
Provides economic development loans to it's member nations. Largest source of economic development assistance
Social Enterprise
Refers to an organization that uses business strategies for the purpose of improving human and environmental well-being
Legitimacy
Refers to the extent to which a stakeholder's actions are seen as proper or appropriate by the broader society
Urgency
Refers to the time-sensitivity of a stakeholder's claim, that is, the extent to which it demands immediate action.
Stakeholder Theory
Says company leaders must understand and account for all of their company's stakeholders - the constituencies that impact it's operations and are impacted by it's operations
Descriptive View of Stakeholder Theory
Says stakeholder view is simply a more realistic description of how companies really work
Instrumental View of Stakeholder Theory
Says that stakeholder management is more effective as a corporate strategy
Spirituality in the workplace
Scholars have found that spirituality positively affects employee and organizational performance by increasing personal growth, employee commitment and responsibility
Intellectual property Remedy
Used in some kinds of high technology businesses; it involves disclosure of information to com
Five different kinds of Stakeholder Power? What do they mean?
VOTING power - legitimate right to cast a vote, ex: stockholders usually vote on major decisions like a merger or acquisition ECONOMIC power - customers, suppliers and retailers can refuse to work with or refuse service if the company is not behaving responsibly POLITICAL power - government, stakeholders, citizens can exercise rights through legislation, regulations, lawsuits LEGAL power-
Four Methods of Ethical Reasoning
Virtue ethics - values and character Utilitarian- comparing benefits and costs Rights- respecting entitlements Justice- distributing fair shares
Natural monopolies
When a market is monopolized by naturally filled niches. For example, the electric utility industry. Once a company has built a system of poles and wires or laid miles of underground cable to supply local customers with electricity, it would be inefficient for a second company to build another system.
Market Failure
When a marketplace fails to adjust prices for the true costs of a firms behavior. The market fails to incorporate the cost of environmental harm into the business's economic equation, causing the gov to step in and regulate it
Social Entrepreneurship
When a person or group of people identify a social need and use their entrepreneurial skills to address this need
Example of Public Policy effects
When health risks to pregnant women were associated with exposure to lead in the workplace, some companies removed women from those jobs. This action was seen as a form of discrimination against women that conflicted with the goal of equal employment opportunity
Salience
When something stands out from the background, is seen as important, or draws attention. Stakeholders stand out to managers as being salient when they have power, legitimacy, and urgency
Constructive engagement
When transnational corporations operate according to strong moral principles, they can become a force for positive change in other nations where they operate
Constituency-building Strategy
Where businesses seek to gain support from other affected organizations to better influence government policymakers to act in a way that helps them
Information strategy
Where businesses seek to provide government policymakers with information to influence their actions, such as lobbying
Corporate Social Responsibility (CSR)
a corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment
Public policy
a plan of action undertaken by government officials to achieve some broad purpose affecting a substaintial segment of a nation's citizens
Nonmarket Stakeholders
people and groups who - although they do not engage in direct economic exchange with the firm - are nonetheless affected by or can affect its actions. Like: political groups, media outlets, general public
Interactive Social System
business and society cannot survive without each other. Any action taken by either one affects the other
Antitrust laws
prohibit unfair, anticompetitive practices by business
Public policy goals
can be broad and high-minded or narrow and self-serving
Boundry-Spanning Departments
departments or offices within an organization that reach across the dividing line that separates the company from groups and people in society
Public policy inputs
external pressures that shape a government's policy decisions and strategies to address problems
Example of Public policy tools
government creating an advisory committee of select citizens or experts to aid in its policy deliberations and decision-making in contentious issue areas, such as local housing development, or public inquiry commissions (Stark, 2019; Yates, 2019) or citizen juries (Smith & Wales, 2000) or the creation of a freedom of information or access to information legislation to make it easier for citizens to gain access to government records, information and documents.
Ethical Principles
guides to moral behavior
Deregulation
is the removal or scaling down of regulatory authority and regulatory activities of government
enlightened self-interest
it is in a companies self-interest to provide true value to it's customers, help it's employees grow, and to behave responsibly as a global corporate citizen
Dodd Frank Act
legislation passed in 2010 aimed at reforming the banking industry and offering consumers greater protection
Structural remedy
may require the breakup of a monopolistic firm. ex like AT&T was broken up by government order
Ethical Relativism
suggests that what is ethical in one culture and time period is not necessarily the same as in another culture and time period
Stakeholder power
the ability to use resources to make an event happen or to secure a desired outcome
Corporate Power
the capability of corporations to influence government, the economy, and society, based on their organizational resources. Influence on people's wants and needs.
Global Action Networks (GANs)
the development of collaborative, multi-sector partnerships focused on particular social issues or problems in the global economy
Integrity Capital
the financial benefit a company reaps from promoting a culture of integrity among its workforce
Ownership Theory of the Firm
the firm is seen as the property of its owners. The purpose of the firm is to maximize its long-term market value, that is, to make the most money it can for shareholders who own stock in the company.
Stakeholder Interests
the nature of each stakeholder group, its concerns, and what it wants from its relationship with the firm
Stakeholder interests
the nature of each stakeholder group, its concerns, and what it wants from its relationship with the firm
Microfinance
the practice of offering small, collateral-free loans to individuals who otherwise would not have access to the capital necessary to begin small businesses or other income-generating activities
Public policy tools
the tools of public policy involve combinations of incentives and penalties that government uses to prompt citizens, including businesses, to act in ways that achieve public policy
Lobbying
their job is to represent the business before the people and agencies involved in determining lesislative and regulatory outcomes. Lobbying involves direct contact with a government official to influence the thinking and or actions of that person on a public policy
Market Stakeholders
those that engage in economic transactions with the company as it carries out its purpose of providing society with goods and services. Like: employees, suppliers, customers, owners, and competitors.
Financial-incentives Strategy
where businesses provide incentives to influence government policymakers to act in a certain way
