BA 400 Final Exam
Tragedy of the Commons
a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole "The commons" is a resource not privately owned and therefore available to anyone Tragedy: •The [Individual] Negative: An individual [or an individual business] reasonably follows his or her [or its] self-interest. •The Positive: The individual will gain all the benefits of having one more increment, including receipt of all its sale proceeds. •The [Commons] Negative: The extra increment will 'overgraze' a little more of the commons. However, that's not a cost the individual has to bear on his own, as it gets split over all the other people who use the commons (aka "external costs"). •Given this net benefit, one would continuously maximize his or her "enjoyment" of resources. Tragedy ends with the depletion (or at least degradation) of the commons, i.e., the "public" resources
Laws/Regulations to protect commons from pollution
-A governing authority can pass laws or regulations or impose taxes that make it cheaper for the polluter to treat its pollutants than to discharge them untreated into the "commons" (or even its privately owned property, with an intent to leave the remediation and its cost to future owners) -Significant U.S. environmental regulation/laws started in the 1970s •Environmental Protection Agency (EPA) organized in 1970 •Clean Air Act of 1970 •Endangered Species Act of 1973 •Toxic Substances Control Act of 1976 •Clean Water Act of 1977
•Shareholder Relations and Corporate Governance *
-Although there's no absolute "global" governing body controlling corporate governance / shareholder relations (CG / SR), there are several initiatives that reflect the fundamental beliefs about the purpose of business that impact shareholder model vs. stakeholder model issues
Employee Relations
-Issues: •Critical consideration for MNCs is how to manage global differences that exist in employment standards and expectations •These global differences lead to complexity in meeting the economic, legal, ethical and philanthropic expectations of employee [and other] stakeholders in different countries -Research shows that employee attitudes and perceptions about work vary from country to country -Examples: French value a work-life balance; Japanese focus on pay; Australians want managers who are coaches; Chinese want more training opportunities
Employment at Will
-Until early 1900s, U.S. employment was governed by the "common law" employment-at-will (E@W] doctrine (i.e., a key Ch. 7 concept): •Employer or employee can terminate the relationship at any time as long as it does not violate an employment contract or other limited employer responsibilities
Which of the following is not an accurate statement of the relationship between strategic philanthropy and cause-related marketing? -Cause-related marketing has a narrower focus than strategic philanthropy -All the other answers are accurate statements of the relationship -Because strategic philanthropy is more pervasive to stakeholders and impacts the firm's broader attributes and skills, it should have greater stakeholder recognition, appreciation and long-term value than cause-related marketing -Earliest attempts at philanthropic alignment with corporate goals were cause-related marketing
All the other answers are accurate statements of the relationship
Which of the following is a carbon emissions limits approach in which each business is assigned a certain level of carbon that it is allowed to emit, but to legally exceed that level the business must purchase carbon credits from another business that has not reached its permitted carbon limits? Cap and trade program, global climate change initiative, clean air act, atmospheric carbon control act
Cap and Trade Program
What is the main U.S. legislation that permits regulation of atmospheric emissions?
Clean air act
Given the many cultural and legal differences among most countries, the four responsibilities of Carroll's Pyramid are generally not relevant to global stakeholders.
False
The two primary types of sexual harassment are pro bono and hostile work environment.
False
Whereas Title VII of the Civil Rights Act grants legal protection to different types of employees, initiatives in workplace diversity are driven by business imperatives and ethical considerations, not legal requirements.
False
A strategic process involving stakeholder assessment to create meaningful long-term relationships with customers while maintaining, supporting, and enhancing the natural environment is called:
Green marketing
Which of the following is not one of the components of the Charter of Fair Trade Principles / Fair Trade Certified label requirements? -Sustainable and equitable trading relationships -Mandatory trade balancing between countries -Fair trade as a "social contract" -Market access for marginalized producers
Mandatory trade balancing between countries
Which of the following is not one of the key eco-friendly business processes of New Belgium Brewing (NBB)? - NBB advocates for "green" building techniques, including seeking "LEED" certifications via environmentally friendly renovations to existing buildings. -NBB strives for cost-efficient energy-saving alternatives for conducting its business and reducing its impact on the natural environment. -NBB takes pride in reducing waste through recycling and creative reuse strategies in its operations. -NBB limits its beer production to a single Colorado brewery to limit its environmental footprint, despite having national distribution of its products.,
NBB limits its beer production to a single Colorado brewery to limit its environmental footprint, despite having national distribution of its products.
An organization that builds and sustains trust with the community is called a
Neighbor of Choice
What three words reflect MVH's desired key takeaway for his students after they've read the Chapter 11 Outline?
Sustainable Business Practices
What is cultural intelligence?
The ability to interpret and adapt successfully to different national, organizational, and professional cultures.
What is the psychological contract between an employee and his or her employer? -The beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and their employing organizations -Formal contract between individuals and their employer that details the beliefs and obligations of both parties -Terms of employment including the salary and benefits associated with an employee's position -Contract an employee signs to verify that he or she is of sound mind to serve in the capacity outlined by his or her job title
The beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and their employing organizations
The employment-at-will concept is a U.S. common law doctrine that allows either the employee or employer to terminate the relationship at any time as long as it does not violate a contract or limited other legal constraints.
True
The Ratchet Effect
When food aid keeps people alive who otherwise would die in a famine, however that artificial support leads them to not just survive but also multiply under artificially improved conditions, making another crisis inevitable, since the food supply / infrastructure hasn't really been increased and/or improved -Three interrelated factors are typically at play [Three Es]: •Technological "efficiencies" •Ecological uncertainties •Socioeconomic implications
In global employee relations, which of the following is not one of the four drivers of employee engagement that are consistent from country to country? -Confidence and trust in leadership -Organizational communication -Work - life balance -Recognition and rewards
Work - life balance
Many businesses are adopting a triple bottom line approach, which includes consideration of each of the following types of performance except: economic, legal, environmental, social
legal
Picking the best answer from a strategic business perspective, the term "sustainability" focuses on the potential for long-term well-being of: -any ecological entity that has an impact on the way that organizations conduct their business. -the physical world, including all biological entities, as well as the interaction between nature and individuals, organizations, and business strategies. -plants, animals, human beings, oceans and other waterways, land, and the atmosphere. -any resource that is found in limited quantities and requires protection through global, national or state regulation.
the physical world, including all biological entities, as well as the interaction between nature and individuals, organizations, and business strategies.
Community
those members of society who are aware of, concerned with, or in some way affected by, the operations and output of an organization
Marketing, Advertising, and Packaging
-Abuses range from exaggerated claims, concealed facts and deception, to outright lying -Although a certain amount of exaggeration and puffery is tolerated, deceptive or unsubstantiated claims are likely to draw legal action by the FTC While Federal Trade Commission Act of 1914 is still the basis of protecting consumers against many types of unfair, deceptive, and fraudulent practices, more specialized laws also address specific industries/practices
The Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention (officially "Convention on Combating Bribery of Foreign Public Officials in International Business Transactions") -
-Aimed at reducing corruption in developing countries by encouraging sanctions against bribery in international business transactions carried out by companies based in the OECD Convention's member countries -Goal is to create a level playing field in today's international business environment -Countries that sign the Anti-Bribery Convention are required to enact legislation that criminalizes the act of bribing a foreign public official The OECD has no authority to force the Anti-Bribery Convention on a particular country, but instead monitors and publicizes implementation by participating countries (and thereby indirectly publicly "outing" countries that don't participate
Global Environmental Issues
-Atmospheric Issues -Coal and Carbon Emissions -Water Issues -Land Issues -Biodiversity -Genetically Modified Organisms (GMOs)
Environmental Legislation
-Clean Air Act (1970) •Defined: A comprehensive federal law that regulates atmospheric emissions from a variety of sources. •The [EPA] establishes national air quality standards as well as standards for significant new pollution sources and for all facilities emitting hazardous substances. •Act delegates to individual states the responsibility for developing implementation plans to reach national standards by restricting emissions from stationary sources (industries) within the state -Endangered Species Act (1973) •Protects endangered and threatened species as well as the habitats in which they live; prohibits any action that results in harm to or death of a listed species or that adversely affects an endangered species habitat -Endangered: in danger of extinction -Threatened: a species that may become endangered without protection -Toxic Substances Control Act (1976) •EPA empowered to track 75,000 industrial chemicals •EPA can ban the manufacture and import of chemicals that pose an unreasonable risk -Clean Water Act (1977) •EPA has the authority to establish effluent standards on an industry-wide basis and set water quality limits for all contaminants in surface waters •Made it unlawful for any person to discharge any pollutant from a point source into navigable waters without a permit -Energy Policy Act (2005) •Focus nation's priorities on alternative forms of energy (tax breaks and loan guarantees to alternative energy companies; tax breaks to consumers for buying hybrid cars and other energy-saving measures)
Coal and Carbon Emissions
-Coal is considered to be one of the dirtiest forms of energy -Cap-and-trade programs set carbon emission limits (i.e., "caps") for businesses, countries, [or individuals], and allow "trade" in emission credits •E.U. uses and U.S. is debating/regions experimenting -Rewards those with a smaller carbon "footprint" and allows those with a larger need permission to continue to operate -Progressively smaller caps come into play over the years; incentivizes companies to become more efficient as the market values of the emission credits increase
Consumerism
-Consumerism defined: "The movement to protect consumers from an imbalance of power on the side of business and to maximize consumer welfare in the marketplace." -Although the consumer rights detailed on following slides are primarily ethical issues, in some instances there may be legal "right to seek redress" for businesses' violations of such rights -Companies that are able to address these basic consumer rights best are those most likely to build a competitive advantage
Responsibilities to Consumers- Economic Issues
-Consumers are primary stakeholders "because their awareness, purchase, use, and repurchase of products are vital to a company's existence." -One significant economic responsibility business has to consumers: •"following through on promises made in [i.e., the terms of] the exchange process" -When a consumer does not act as a fair participant in that exchange process, it could be consumer fraud [note this is not fraud by business]: •A consumer's intentional deception to derive an unfair economic advantage over a business (e.g., shoplifting, employee-collusion fraud) -"Right to seek recourse" if consumer believes terms of exchange are not fulfilled by the business: •Refund; tell others about bad experience; discontinue patronage; complain on a website; contact a consumer agency; or even seek legal 'redress'
Genetically Modified Organisms (GMOs)
-Created through manipulating plant and animal genes so as to produce a desired effect like resistance to pests and viruses, drought resistance, or high crop yield •Transferring one gene to another in a way that does not occur naturally, thereby creating a new life form
Product Liability
-Definition: "A business's legal responsibility for the performance of its products." -Usually includes a legal responsibility to provide some form of financial compensation (monetary award / $$; replacement product; etc.) to a consumer harmed by a defective product »For $$, consumer must prove that product was defective, defect made the product unreasonably dangerous, and the defect caused his/her injury »Strict liability: any firm in the supply chain is responsible -Due to potential product liability, businesses may voluntarily recall defective products; governmental and legal authorities can require recalls as well under defined circumstances •Product liability lawsuits have increased dramatically in recent years, with potentially huge damage awards •Product liability issues (including access to legal redress / damage award amounts) cause political controversy
Biodiversity
-Deforestation, pollution, development, and urban sprawl have put increasing pressure on wildlife, plants, and their habitats •Many animal and plant species have become extinct, and many more are threatened with extinction -Ecosystems' imbalance risk irreversible changes •Because each species play a unique role in its ecosystem, the loss of any one of them threatens the entire ecosystem -Experts are increasingly concerned that humans' overuse of natural resources, thereby harming entire ecosystems, are causing catastrophic imbalances to environment conditions
•Strategic Philanthropy vs. Cause-Related Marketing
-Earliest attempts at philanthropic coordination with corporate goals involved cause-related marketing -Cause-related marketing has narrower focus than strategic philanthropy; it ties an organization's product directly to a social concern through a marketing program (e.g., Avon's Breast Cancer Crusade - appeals to a target audience) •Typically a percentage sales donated to tied-in cause •Linked to specific product and marketing program -Cause-related marketing first used in the U.S., but now gaining widespread use as a marketing tool around world -To be successful, cause-related marketing requires that: •Consumers must have awareness of and affinity for the cause •Brand and cause must be perceived as a good fit •Consumers should be able to transfer feelings from the cause to the brand itself and want to make a product purchase -Surveys show that if price and quality are similar, a majority of consumers will purchase a product associated with a charitable cause; such cause association creates more positive impression of business -One main potential weakness: consumers may have difficulty recalling philanthropic relationships if cause-related marketing campaigns are of short duration and don't correlate to the firm's core business -Because strategic philanthropy is more pervasive to stakeholders and impacts the firm's broader attributes and skills, it should have greater stakeholder recognition, appreciation and long-term value than cause-related marketing
Global Stakeholders
-Economic Issues: As manufacturing and customer service operations are moved overseas, another layer of complexity is added (e.g., loss of jobs in "home country", pay and working conditions in "offshore" [aka "host country"] operations) •Consider distinct Legal and Regulatory Environments -MNCs need to know the "host country" laws / reg's, as well as the nuances to their implementation and enforcement •Note one prominent global issue is generally called "bribery", e.g., some forms of bribery are illegal for U.S.-nexus companies under the Foreign Corrupt Practices Act •Be aware of possible differing Ethical Standards -Code of conduct from home country may not provide sufficient guidance for foreign operations •MNCs may find that different code versions, incorporating cultural differences yet that do not override key [host country] corporate values / ethical culture, may be needed
Employee Engagement
-Employee engagement defined: the psychological state in which employees feel a vested interest in the company's success and are motivated to perform at levels that exceed job requirements -Four drivers of employee engagement that are consistent from country to country (per Mercer study) •Work itself, including opportunities for development •Confidence and trust in leadership •Recognition and rewards •Organizational communication
Employee-Employer Contract
-Employee-Employer Contract •Psychological contract: largely unwritten beliefs, perceptions, expectations, and obligations that make up the agreement between individuals and the organizations that employ them -If "contract" maintained: increased employee loyalty; lower turnover; positive interaction with stakeholders -If "contract" broken: employees become less loyal / more likely to leave; less trusting; inattentive to work; or otherwise dissatisfied »But if information regarding psychological contract breach is presented in a credible, competent and trustworthy manner, employees generally remain committed to the organization
philanthropy
-Employees and employers benefit from participating in volunteerism and other philanthropic projects •Employers: increase employee productivity and build teamwork, positive press coverage •Employees: feel they are part of a team
•The Foreign Corrupt Practices Act (FCPA)
-Far-reaching U.S. law and regulatory enforcement -Prohibits issuers* ... and any person from making use of interstate commerce* corruptly, in furtherance of an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office, for the purpose of influencing any act of that foreign official in violation of the duty of that official, or to secure any improper advantage in order to obtain or retain business * Also contains the "books and records" and internal accounting controls provisions supplemented by SOx •A federal "securities" law so civil enforcement is by the U.S. Securities & Exchange Commission (SEC), with criminal enforcement support from the U.S. Department of Justice (DOJ)
Federal Trade Commission
-Federal Trade Commission, or FTC (primarily through its Bureau of Consumer Protection) is key regulator for consumer issues, but other federal and state regulatory agencies also play more specialized roles
Consumer Relations
-From some consumer perspectives, conventional international trade may interfere with the ability of many people, especially those in poorer nations, to secure basic, sustainable livelihoods -By contrast, fair trade is a trading partnership based on dialogue, transparency and respect that seeks greater equity in international trade and contributes to sustainable development -Consumers are increasingly concerned with the origins of products they purchase, including the working conditions, ethical standards, and related social responsibility practices of manufacturers -The Fair Trade Certified label recognized by 73% of U.S. consumers and a trusted symbol among them -There is a high level of durability among fair trade certified products even during times of economic downturns, given high standards of Fair Trade org.
Implementation of Strategy Philanthropy
-Fully effective implementation of strategic philanthropy requires organizational resources and strategic attention (e.g., top management support, as well as planning and evaluation practices just like with any other business process) •Top Management Support -Without senior management buy-in, there will be no resources -Need to view strategic philanthropy as a long-term investment •Planning and Evaluating Strategic Philanthropy [SP] -Like any strategic initiative, SP must prove relevance/importance -To be strategic, a performance benefit must be evident -To make the best stakeholder management decisions, needs to be a workable strategy to ensure every donation [whether of money, time or other business assets] is wisely spent -Philanthropy can only be strategic if it is fully aligned with the business's values, core competencies and long-term plans -One consultant's "process for ensuring effective planning and implementation" •Research: look at those things that will intersect with the interest and competencies of the organization •Organize and Design: Research should be classified into relevant categories by need and alignment with organizational competencies •Engage: engage management early on to get buy-in; with senior management buy-in, they will have interest in seeing plan accomplished •Spend: deciding what resources should be spent and where
Sweatshops
-In general, a sweatshop is a workplace that has low wages, long hours, minimal work breaks, frequently includes relatively unsafe conditions and/or child labor, as well as limited "freedom of association" (e.g., no unions) -Depending on local laws/regulations, sweatshops are not necessarily illegal (but their use may raise ethical issues) -Sweatshops also sometimes can lead to conditions of slavery when workers have become trapped by employer through debt bondage, mental duress, physical coercion, etc., which may be seen in the prior Nike video •The risks of "slavery" happening are more likely if the workforce is drawn from children, uneducated, very poor segments of society
Atmospheric Issues
-Issues related to the air that we breathe; climate change -Air Pollution: •Consists of greenhouse gases and particulate matters. •Three primary sources: stationary sources (e.g., factories and power plants); mobile sources (e.g., vehicles of all sorts, including planes and trains); and natural sources (e.g., windblown dust and volcanic eruptions) [and other man-made sources] •Human impacts: causes shorter life spans, birth defects, cancer, as well as brain, nerve, and respiratory system damage •Broader environmental impacts: Harms plants, animals, and water bodies; Haze caused by air pollution reduces visibility, interfering with aviation, driving, etc. -Acid Rain •Has and continues to cause deaths of many "valuable" forests and lakes around the world [consider why the authors characterize as "valuable"] •While significant progress has been made since passage of U.S. 1963* Clean Air Act and similar laws in other developed countries, significant challenges remain, particularly to limit emissions from factories/vehicles -Global Warming ("climate change") •When CO2 and other gases collect in Earth's atmosphere, they trap the sun's heat "like a greenhouse" •GHG prevent another "ice age", but increasing GHG coincides with the warming of the Earth's atmosphere beyond historic norms, GHG significantly caused by humans burning "fossil fuels" •Global Warming is the accelerated warming of the planet's atmosphere, and therefore of the Earth's surface. It has multiple effects: 1. -Melting "polar ice caps" results in rising sea levels and coastal flooding. 2. With less snow and ice cover to reflect sun's rays away from its surface, the Earth absorbs more solar heat, further accelerating the warming process. 3. "Global warming" may be altering long-term weather patterns, causing drought and/or extreme heat in some areas of the world (which may contribute, e.g., to the rise in California wildfires), while bringing floods and very high winds to others (e.g., hurricanes, tsunamis) •Kyoto Protocol: an international treaty among industrialized nations with measures intended to slow global warming. U.S. did not sign treaty; concern that treaty jeopardizes U.S. businesses and economy; polluting multinationals critical »U.S. pursued the Global Climate Change Initiative •Many U.S. businesses are responding to stakeholder pressure and self-regulating with respect to global warming and related areas, even in the absence of federal mandates
Responsibilities to the Community
-It is important for a company to view its community stakeholders in a trusting manner, recognizing the potential mutual benefit to the company and community -Because of the visibility of business activities and the desire for strategic social responsibility, successful companies strive to build long-term mutually beneficial relationships with relevant communities •Economic Issues -Companies play a major role in community economic development: bring jobs to community; buy goods and services from area firms and utilities; pay taxes to various governmental entities, supporting infrastructure build-out •These activities generate secondary economic activity, particularly if the companies use local sourcing of suppliers, vendors, etc. -Contagion effect: some companies, by virtue of their prestige or business relationships, signal to other firms that the community is a viable and attractive area for new business activity [consider auto suppliers following OEMs] -Contributions to local health, education and recreation projects benefit employees and employee satisfaction •Benefit local residents, may increase tourism, quality of life -Companies need to be proactive with negative effects of their actions on relevant community stakeholders •Legal Issues -To conduct business, a company must be granted a "license to operate" [by "society" with its specific responsibility delegated to government, often at multiple levels including "municipal" government] -Community controls (e.g., zoning codes) are a subset of the general corporate responsibility to meet all legal and regulatory requirements •Ethical Issues -Level of community support often tied to the "ethical leadership" of a company's management (e.g., pay a "living wage" to employees even if it's not legally required) •Philanthropic Issues -Historically handled through community relations function -Volunteerism is increasing •Benefits to employees: lower mortality rates and [later?] levels of depression; greater motivation, enjoyment and satisfaction •Benefits to company: employee satisfaction leads to increased productivity and retention •Benefits to community: application of new skills/initiatives to community issues; better relations with business; greater supply of volunteers; assistance to stretch limited resources
Land Issues
-Land Pollution •Causes health problems, jeopardizes wildlife habitats, causes erosion, alters watercourses (leading to flooding) and can eventually poison groundwater -Waste Management •How to dispose of waste in an environmentally friendly manner -Landfills biggest producer of methane gas -Electronics release harmful toxins -Plastics take up to a thousand years to break down -Deforestation •Rainforests help absorb 2 billion metric tons of carbon dioxide [CO2] each year; but rainforests are being destroyed at a rate of nearly 5000 square miles/year •Logging of rainforests leads to short-term profitability, but poor soil makes it difficult to cultivate thereafter •Forest Stewardship Council (FSC): nonprofit combining interests of environmentalists, loggers, and sociologists -develops uniform standards to preserve forest resources via reasonable management of logging and other uses -FSC-certification reinforces to stakeholders that company is responsible steward of long-term environmental resources -Urban Sprawl •Causes people to spend more time in cars (pollution) •Consumes wildlife habitats, wetlands, and farmlands •Contributes to land, water and air pollution •Living closer to work can be convenient, cheaper, and better for your health, while preserving natural spaces •Some urban areas are fighting urban sprawl through legislation and buying land to convert to open spaces
Sales and Warranties
-Magnuson-Moss Warranty Act of 1975: established rules for consumer product warranties, including minimum content and standards for disclosure -All states have "lemon laws" for automobile sales to include appropriate warranties and remedies for defects that impair the safety, use, or value of the vehicle
Many companies attempted to prohibit their employees from creating or joining labor organizations before which of the following laws was passed by the U.S. Congress? -Right-to-work Laws -National Labor Relations Act -Occupational Safety and Health Act pFair Labor Standards Act
-National Labor Relations Act
Solutions for the Tragedy of the Commons
-No single solution/all have limitations •Privatization / Manager -Not everything can be privatized (e.g., ocean, air), and there's no effective global manager. •If the private owner does not act responsibly, any resulting damage may well spread to "nearby" property (privately or publicly owned). •Some geographies / natural resources do not lend themselves to being privatized. •Regulation / Laws / Treaties -Race to the Bottom •Carbon Tax or other form of "Green" Tax -No political will •Global Challenges -National interests and short-term thinking make it hard to "play in a global sandbox" •Market / economic initiatives -Systemic pushback (and Irreversible damage in interim): -No physical separation (oceans and flowing waters generally; free-flowing air) -Psychological aversion to separation (public access; socioeconomic implications; etc.)
Philanthropic Issues
-Research shows that most consumers would like to switch to brands associated with good causes, as long as price and quality are equal -Companies can turn philanthropy into a differentiated advantage over competition •As a result, many companies are investigating ways to link philanthropic efforts with consumer interests -From a strategic perspective, a company's ability to link consumer interests to philanthropy should lead to stronger /ongoing economic relationships.
Benefits of SBP
-SBP* can result in competitive advantages w/ stakeholders -As consumers become more environmentally aware, their power over businesses as to enviro concerns increases -Sustainable businesses more likely to have positive brand association with social value [trust] and product quality -SBP may help market / differentiate goods and services -SBP increasingly considered a "best practice" for business S issues an increasing concern of government stakeholders
Strategic Implementation of Environmental Responsibility
-Strategic Approaches to Enviro Issues • Low Commitment ("Deals only with existing problems" [a reactive/defensive approach using the RDAP Scale]) through Medium Commitment ("attempts to comply with environmental laws" [a defensive/accommodative approach]) to High Commitment ("Has strategic programs to address environmental issues" [a proactive approach]) •Recycling Initiatives -Defined: The reprocessing of materials by organizations for reuse -Stakeholder Assessment [High Commitment] •Stakeholder analysis: Acknowledging and actively monitoring enviro concerns of all legitimate stakeholders •Process to prioritize claims and determine how to deal with trade-offs related to impact on different stakeholders •Not all stakeholders are equal -Government requirements (e.g., air, water quality) may control -Extreme views of some special-interest groups if adopted by a business may cause economic or other harm to other stakeholders -Risk Analysis [High Commitment] •Possible to assess enviro risk but hard to measure costs and benefits of enviro decisions -Particularly as it impacts stakeholders differently -Strategic Environmental Audit [High Commitment] •Such high-commitment orgs periodically audit their enviro efforts and report results to all interested stakeholders •Given wide variety of national enviro laws and regulations, many MNCs focus on the few globally accepted groups providing standards used as benchmarks in such audits -ISO 14000: A comprehensive set of enviro standards that encourage a cleaner, safer, and healthier world •developed by the International Organization for Standardization -CERES' Certification of Environmental Standards -Green Globe Standard •"a structured assessment of the sustainability performance of travel and tourism businesses and their supply chain partners"
Can we tax polluters?
-The U.S. has very few national "green" or environmental taxes: •A "gas guzzler" tax on new cars that exceed CAFE standards; a tax on ozone-depleting substances; some state laws like bottle deposits; etc. •Proponents often cite the gasoline tax as a "green" tax, but in fact it typically funds highway repair, resulting in increased vehicle use and therefore increased pollution •Significant controversy over "carbon" taxes -i.e., an excise levy on the carbon-based content of fossil fuels as a means of reducing greenhouse gas emissions that contribute to climate change -Basic constraint: there's been little U.S. political support for any new taxes, but at least some regions are testing mechanisms like "cap and trade" as steps toward addressing growing GHG risks
Environmental Protection Agency (EPA)
-The most influential regulatory agency that deals with environmental issues / enforcement in U.S.; founded 1970 -Purposes: •Establish and enforce environmental protection standards •Conduct environmental research •Provide assistance in fighting pollution •Assist in developing and recommending new policies for environmental protection
Credit and Ownership
-Various laws (you don't need to know these "Acts" by name): prohibit discrimination in the extension of credit; require creditors to disclose all finance charges and related aspects of credit transactions; give consumers the right to dispute and correct inaccurate information on their credit reports
Water Issues
-Water Pollution •Fertilizers upset algae balance causing fish to die; mercury gets into food supply; overuse of water can lead to shortages; more than 1.2 billion people do not have access to clean water which causes 80% of infectious diseases •U.S. government protection of fresh water has decreased over the last decade •Wide range of antibiotics and pharmaceuticals in the drinking supply of 46 million Americans -Water Quantity •Over the past two decades, water use has soared -Creates excessive demand on finite global water supply -Creates issues particularly for those businesses that consume large amounts of water in their operations •Changing global weather patterns are creating more areas with drought and longer-lasting drought conditions that directly impact water availability -U.S. supply of accessible fresh water decreasing dramatically -Are many small things businesses and individuals can do to slow down ever-increasing water consumption rates
Workforce Reduction
-Workforce reduction (aka downsizing, etc.) ends the loyalty and commitment that employees historically had for their employers •Definition: Process of eliminating employment positions •Places pressure on [senior] management; causes speculation and tension among employees; "public ire" •It is one common type of response to an employer's perceived need to cut costs, but it is type that creates the most anxiety and criticism •Implications for welfare of employees and families, as well as the local community / geographic area •Offering job assistance / severance benefits at least shows company's commitment to CSResponsibilities -Workforce Reductions (WR) (continued) •Costs of WR: -Loss of intellectual capital; strained customer relationships; negative media attention; possible "chill" on future hiring needs; and other issues that drain company resources -Survivor's guilt / reduced productivity •WR significantly changed employers' psychological contract with their employees, who now demand career growth, work/life balance, etc. •Employees possibly can mitigate WR risk/impacts, e.g., find ways to cut costs, cross-train, flexible work rules
What experiences effectively ended the psychological contract between most employees and employers?
Employers took steps to cut costs through workforce reduction as the demands for global competitiveness increased.
Which of the following is not considered one of the key benefits of strategic philanthropy? -Fulfillment of business responsibility to government -Rewards in the workplace: stronger employee commitment and loyalty to employer, etc. -Improve overall reputation in community and ease government and community relations -Enhanced customer loyalty: synergies between customers and use of core competencies
Fulfillment of business responsibility to government
Which of the following "global initiatives" are most influential on multinational corporations' shareholder relations and corporate governance practices in the current environment? -Sullivan Principles and Caux Round Table initiatives -Global Reporting Initiative and UN Global Compact -Social Economy Partnerships and Corporate Social Responsibility Partnerships -Foreign Corrupt Practices Act and Environmental Protection Agency Act
Global Reporting Initiative and UN Global Compact
Business Response to Sustainability Issues
Many businesses have adopted a "triple bottom line" (TBL) approach, which considers each of social, environmental and economic performance aka "The Three P's of Sustainability": People, Planet and Profits. They have learned that being environmentally friendly and sustainable has numerous benefits: •Increased stakeholder goodwill (including primaries) •Money savings from increased efficiency/reduced waste •Studies suggest that improving business's enviro performance can increase revenues and reduce costs •Better environmental (enviro) performance can increase business revenue in three ways: 1. Better access to certain consumer markets that want to buy from companies who believe in environmental stewardship 2. Differentiation of "green" products 3. Sale of pollution-control technology •Improving reputation for enviro stewardship may help capture growing "green" markets •Supply Chain Issues -Corporate reputation raises the need to ensure the sustainability of a business's supply chain -Improved enviro performance reduces costs by: •Improved risk management (as to enviro liabilities) •Improved stakeholder relationships (esp. if e-disaster) •Reduced materials and energy usage (former fka lean manufacturing; latter aka energy efficiency) •Reduced capital and labor costs •Reduced compliance costs/fines •Green Marketing -A strategic process involving stakeholder assessment to create meaningful long-term relationships with customers, while maintaining, supporting, and enhancing natural environment -Product certification as "green" by enviro orgs (e.g., the E.U.'s Eco-label) -Consumer confusion due to "greenwashing" •Misleading a consumer into thinking that a product or service is more environmentally friendly than it is
Which of the following provides the best description of the community stakeholder for an organization? -The community includes those members of society who are aware of, concerned by, or in some way affected by the operations and outputs of the organization. -The entire city in which the organization operates will be affected by the organization, and therefore this defines the community stakeholder. -The community to be concerned with is the immediate neighborhood where most of the organization's patrons live and work. -The entire metropolitan area in which the organization is located is the community stakeholder because the organization's impact reaches beyond the city to that entire area.
The community includes those members of society who are aware of, concerned by, or in some way affected by the operations and outputs of the organization.`
Sustainability
The potential for long-term well-being of the natural environment, including all biological entities, as well as the interaction among nature and individuals, organizations, and business strategies
Which of the following is not part of the four-stage process that social entrepreneurs typically follow, as described in the Chapter 9 Earth in the Balance special feature? -Identify a clear need, gap, and opportunity -encouraging the "Aha! moment" via a contemplative work environment -engaging in the opportunity and doing something about it -enacting and leading the project to completion
encouraging the "Aha! moment" via a contemplative work environment
Culture of Corruption
•A country culture of corruption scares away trade and foreign investment, continuing the cycle of keeping corrupt countries' population in poverty •Known as "clean and repeat" demands: evidence that if a company/employee takes a principled stand, it/(s)he is less likely to be asked for bribes thereafter •the opposite is true as well, so if a company/employee is known to pay bribes, it/(s)he will be asked again and again
Cultural Intelligence
•Any culturally diverse work group will have: -a set of common experiences (e.g., awareness of employee turnover, new business development, environmental protocols, and product innovation plans); and -a diverse set of experiences based on the area of the world in which they live and work. •The potential of this diverse group to achieve positive outcomes is largely based on each member's level of cultural intelligence (CQ). Contemplate how even "local" workplaces / work groups may require individuals' CQ •Cultural Intelligence is the ability to interpret and adapt successfully to different national, organizational, and professional cultures •Consider how this may impact "first generation" or even students who may come from non-traditional socio-economic backgrounds •Three components to CQs development and use: •Cognitive: Knowledge of differing cultures' economic, legal, ethical and social systems •Motivational: Intrinsic desire to learn about & confidence to function effectively where cultural differences •Behavioral: Ability to use appropriate verbal / nonverbal interactions where cultural differences exist •A person with high CQ is skilled at recognizing how an individual or group is influenced by national, professional and organizational cultures.
Benefits of Strategic Philanthropy
•Businesses must do cost-benefit analysis in pursuit of strategic philanthropy -They're not just writing checks but rather they're investing in solutions to stakeholders' problems and businesses' needs -Strategic philanthropy involves real costs that need to be justified (staff to manage projects, time / energy of employees more generally, etc.) •Most scholars / practitioners agree that its benefits outweigh its costs (similar to CSR) •Benefits [note some similarity to general CSR benefits] -In U.S., companies can deduct up to 10% of pretax profits for qualifying tax-deductible charitable contributions -Rewards in the workplace: employees refine skills and build a stronger loyalty and commitment to employer (satisfied employees mean lower turnover, more productivity, etc.), recommend employer as a place to work, recommend employers' products / services -Enhanced customer loyalty: synergies between customers and use of core competences in strategic philanthropy -Improve biz's overall reputation in community and ease government and community relations •Note "social asset" of trust / reputation can mitigate negative acts
Work-Life Balance
•Definition: Assist employees in balancing work responsibilities with personal and family responsibilities •Socially responsible companies provide support for employees in balancing their multiple roles within and outside the organization •Types of programs: e.g., telecommuting, assistance with child and elder care, flexible scheduling •Benefits of programs: e.g., reduce turnover, attract employees, reduce illness cost associated with stress
Diversity
•Distinguish Title VII as "Legal Issue" that basically protects employees from employer discrimination; this subsection focuses on voluntary management approaches to pursue work place diversity while cultivating and appreciating employee talent of all types of people •Socially responsible initiative often improves performance, e.g., may better reflect stakeholder (e.g., community, customer, supplier) diversity thus enhancing relationships •Generational and other diversity-based risks: programs to deal with conflict and communication issues caused by generational and other diversity differences in employees
Wages and Benefits
•Fair Labor Standards Act (1938): minimum wage and overtime, recordkeeping, and child labor standards; non-exempt employee 1.5x overtime; under 14 only allowed to do certain types of work (e.g., work in parents' business - thus, it was legal for your parents to essentially treat you like indentured servants in teens!) •The Employee Retirement Income Security Act (1974) or ERISA, as it's almost always called: benefit plans, if established, must be maintained in a fair and financially sound manner, but such plans are gen'ly not required
Strategic Implementation of Responsibilities to Employees
•Goal is to retain top talent and maintain employee satisfaction generally for reasons previously noted -Market (to current and prospective employees) those practices that individual companies have created to enhance and maintain employee satisfaction •Value business's "human capital": engage employees in meaningful work; stimulate intellectual curiosity; develop strong training programs; [share power and] delegate authority [combined with accountability]; recognize link between employee morale, customer satisfaction and performance measures -One traditional approach to strengthen trust is to give employees a direct stake in the company through an Employee Stock Ownership Plan •ESOPs are associated with strong employee loyalty and lower employee turnover
laws / regulation / regulators:
•Health and Safety: -Pure Food and Drug Act (1906): Outlaws adulterated or misbranded food and drug products; established Food and Drug Administration (FDA) -Consumer Product Safety Act (1972): Protects consumers from unreasonable risk of injury from consumer products; established Consumer Product Safety Commission (CPSC)
Costs of FCPA
•In addition to the FCPA enforcement fines and settlement payments to SEC and/or DOJ, there are significant other FCPA-related costs to business, even if case settles (as typically do) -Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny by U.S. regulators (and private lawsuits) Significant diversion of management time / focus
International Legal Issues
•Most developed nations have similar types of laws and regulatory agencies, some more or less stringent •These laws and regulations frequently change, so it's important for multinational companies to monitor •Ethical considerations also may vary significantly
Global Development
•Multinational corporations have partnered with other [than U.N.] non-business organizations to advance global development, partnering with local government, nonprofit agencies and other nongovernmental organizations (NGOs) -Each such partnership must confront two elements: •The level of social control via stakeholder influence they maintain •the challenges they pose to conventional business management and goals
Labor Unions
•National Labor Relations Act (1935): A landmark law that legitimized the rights of employees to engage in collective bargaining and strike against employers •Later legislation has limited the rights of unions (especially Labor - Management Relations Act of 1947)
-Primary Consumer "Right to Redress" Options:
•Negotiate directly with the business (first course of action that resolves a majority of consumer concerns) •Seek third-party intervention (e.g., BBB and other types of self-regulation) or legal action against the company •Create company / stakeholder awareness of consumer concerns using symbolic, utilitarian, and coercive power (i.e., use stakeholder attributes detailed in Chapter 2) •Boycott: consumers abstain from using, purchasing or dealing with a business (a form of utilitarian power)
Health and Safety
•Occupational Safety and Health Act (1970): ensure safe and healthy working conditions by providing specific standards for the workplace
Philanthropy
•Philanthropy generally involves acts of "goodwill and benevolence" such as donations to charitable organizations, volunteering for community projects and otherwise acting to benefit others, and it typically provides four societal benefits: -Improves quality of life; easier to attract employees -Reduces government involvement by providing support to business's stakeholders (often also community residents) -Develops employee leadership [and other "soft"] skills -Helps create an ethical culture which can act as a buffer to organizational misconduct (e.g., in a crisis) •Traditional approaches for businesses to fulfil their philanthropic responsibilities: -Organization and employee donations to local and national charitable organizations •This remains the most common approach despite recent trend to use more strategic philanthropic activities -Employees volunteering for community projects (e.g., park cleanup days) -Employees taking actions to benefit third parties (e.g., volunteer at homeless shelter / soup kitchen) =Indirect support through funding of nonprofit activities
Corporate Social Responsibility Partnership
•Potential benefits alone compel individual businesses to enter into these partnerships •Provide resources for social initiatives, such as job training and entrepreneurial development, that contribute to a citizen's livelihood (and business benefits like stronger work force and economic contagion •Microcredit programs allow borrowers to directly improve their income by supporting small businesses, typically improving community quality of life as a result
Social Economy Partnership
•Pursue alternatives to conventional corporations and profit maximization •Have a distinctly social purpose, use democratic governance, and cooperate with other social economy partnerships •Include nonprofits, community economic development corporations, cooperatives and cooperative development organizations •Philosophy emphasizes cooperation and assistance rather than traditional business logic •The preceding four models of business development partnerships allow almost any firm the opportunity to engage in partnerships that improve health, education, economic and other prospects for people around the world -In addition to corporate efforts, individual (generally developed) countries are also engaged with development efforts in other (generally lesser developed) countries
Strategic Implementation of Responsibilities to Consumers
•Relationship must be managed, nurtured, and continuously assessed -Resources devoted to this effort may include programs for education and listening to consumers, surveys to discover strengths and weaknesses, hiring consumer affairs professionals, development of a community relations office, etc. -Understanding consumer and stakeholder issues can be especially complex in global environment
Whistle Blowing
•Reporting wrongdoing either internally or externally •Many companies have confidential methods to report individual or company wrongdoing •The federal government and most states have enacted measures to protect whistle-blowers from retaliation
Basic Consumer Rights
•Right to Choose: -Select from a variety products at competitive prices -Competitive markets should lead to increased product / service quality and lower prices •Right to Safety: -All products should be safe for their intended use, include instructions for proper and safe use, and have been sufficiently tested to ensure reliability -Warning labels should take into account the consumer's ability to understand and respond to the information -Product liability lawsuits may result if a company fails to honor this right to safety •Right to be Informed: -Any company-provided information, whether in writing or verbal, should be accurate, adequate, and free of deception so that consumers can make a sound decision -The degree of complexity in product marketing is another concern related to consumers' rights to information •Right to be Heard: -Consumers' opportunities to communicate or voice their concerns in the public policy process (FTC and state consumer affairs offices, congressional hearings, etc.) •Right to Seek Redress: -The right to express dissatisfaction and seek restitution from a business when a good or service does not meet consumer expectations (also see following slide for details) •Right to Privacy: -The right relates to consumers' awareness of how personal data are collected and used, and it places a burden on firms to protect this information -Many websites do not meet the FTC's criteria for fair information practices, including notice, choice, access, and security
-Conventional Business Partnership
•Role of business is to increase efficiency, while the role of government is to make sure that the benefits of increased efficiency are delivered to consumers; generally the partnership is for infrastructure, including previously "public" utilities (e.g., electric, gas, water) •Public - private partnerships often reflect partial privatization -Full privatization occurs when public operations are sold to private entities
social entrepreneurship
•Social entrepreneurship [SE] occurs when an entrepreneur founds a "business" with the purpose of creating social value. -This emerging type of operation can be structured as a nonprofit, business or governmental organization, or some combination of those three. -In general, the "main" purpose of SE is to provide a solution to a social problem rather than to earn a profit.
Corporate Accountability Partnership
•Spring from the idea that corporate social responsibility partnerships are neither accountable nor effective and are only really interested in public relations •Focus on accountability and the setting or requirements and standards based on what society expects (e.g., Fair Labor Association) •Seek to achieve corporate recognition of standards deemed appropriate by society and utilize third-party audits and other checks on the partnership
Sexual Harassment
•Starting in mid-80s, courts decided sexual harassment is prohibited by Title VII (although it's not referenced) •Definition: unwelcome sexual advances, requests for sexual favors, and other verbal or physical contact of a sexual nature when submission to or rejection of this conduct explicitly or implicitly affects an individual's employment, unreasonably interferes with an individual's work performance, or creates an intimidating, hostile or offensive work environment •Two types: -quid pro quo: a type of sexual extortion, where there is a proposed or explicit exchange of job benefits for sexual favors; one incident may be enough for a legal claim -hostile work environment: conduct that shows hostility toward an individual or group in a work environment; it can involve epithets, slurs, negative stereotyping, intimidating acts, or graphic materials; typically requires a pattern •Uses "reasonable person" standard •U.S. Supreme Court decisions: -Employers liable for improper acts of supervisors; sexual harassment by supervisors that culminates in a tangible employment action (e.g., demotion) -Employers liable for hostile environment permitted by a supervisor but may escape liability if they exercised reasonable care and promptly corrected the behavior upon notice and the employee unreasonably failed to take advantage of preventive or corrective measures »Hostile environment must be severe and pervasive to be viewed as actionable •Socially responsible training programs educate on: -A company's zero tolerance policy -The behavior that constitutes sexual harassment -How offenders will be punished -What employees should do if harassed -Assurance of confidentiality and no retaliation for those who report sexual harassment
FCPA as a shield
•The FCPA gives particularly* U.S. corporate representatives a "shield" when operating in corrupt markets or in situations where business typically is contingent on bribery, as those representatives can respond to such illicit demands by explaining those practices are illegal under U.S. law and regulation
Global Reporting Initiative
•The GRI provides a framework for businesses and other organizations to assess their performance across an array of social responsibility indicators -One of the benefits of the GRI [and UNGC] is that it [they] make[s] comparisons across MNCs and countries possible by using "a globally applicable and vetted framework" -GRI Sustainability Reporting Framework seeks to provide transparency and accountability in sustainability reporting similar to financial reporting (i.e., accounting statements) •The GRI Sustainability Framework includes 3 categories of core indicators: economic, environmental and social performance
Strategic Philanthropy
•The synergistic use of a business's core competencies and resources to address key stakeholders' interests and to achieve both organizational and social benefits -Goes well beyond traditional approaches of organizational / employee donations and generic employee volunteerism -Can involve employees (utilizing core skills), organizational resources / expertise (equipment, knowledge and money) and the ability to link community and other stakeholders with these human and other resources for mutual benefit -Involves both financial and non-financial contributions to stakeholders, but while also providing benefits to the company -Growing research is evidencing that a more businesslike approach to [strategic] philanthropy leads to better reputation management, as well as increased employee loyalty and improved customer ties
Equal Opportunity
•Title VII of the Civil Rights Act of 1964: prohibits employment discrimination based on race, national origin, color, religion, and gender •Additional laws in the 1970s, 1980s and 1990s designed to prohibit discrimination related to pregnancy, disabilities, age, and other factors •Above and other laws require companies to have formal employment practices to ensure that no discrimination is occurring in hiring, firing, ongoing employee relations
Distinction of Bribery (FCPA)
•Under political pressure to make FCPA enforcement efforts more "transparent", after two years of staff preparation and management review / approval, the SEC and DOJ together issued a 120-page "Resource Guide" in November 2012 to help companies comply with the FCPA, providing numerous examples of prohibited transactions -Unfortunately there is still some confusion on key issue of how SEC / DOJ distinguishes bribery (obviously illegal) from facilitating or "grease" payments (which are legal under the FCPA, although they may violate some local laws) •The primary distinction is that bribery intends to corruptly influence a foreign official's discretionary decisions, while facilitating or grease payments are made to an official to expedite her/his performance of the duties s/he is already bound to perform (i.e., to "grease the wheels"; no discretion)
Training and Development
•Valued as an individual; fund initiatives to develop employees' skills, knowledge, and other personal characteristics •Link between investments in employees and the amount of commitment, job satisfaction, and productivity demonstrated by them •Leadership training limits turnover`
Alternative Energy
•Wind Power -Fast growing form of renewable energy worldwide -Problems: expensive to restructure nation's power grid to efficiently transmit wind, solar and other forms of renewable energy •Geothermal Power -Natural heat from inside the earth, which is extracted by drilling into steam beds -Geothermal uses less water than coal plants and provides a steady flow of electricity (unlike wind) •Nuclear Power -Controversial: threat of accidents/nuclear meltdowns; disposal of radioactive waste •Solar Power -Uses light/heat from sun to generate electricity -Disadvantages: expensive/inefficient technology; infrastructure challenges for mass production -Slow but steady growth as global energy source •Biofuels -Derived from organic material (e.g., corn, sugarcane) -Controversial: uses food sources; deforestation •Hydropower -Long history of relatively stable use as "renewable" energy -Benefits of minimal pollution/low maintenance but downsides include destruction of natural/human habitats
Neighbor of Choice
•an organization that builds and sustains trust with the community -Strive for positive and sustainable relationships with key individuals, groups and organizations -Demonstrate sensitivity to community concerns and issues -Design and implement programs that improve the quality of community life while promoting the company's long-term business strategies / goals
Community Relations
•organizational function dedicated to building and maintaining relationships and trust with the community -Increasing importance of community relations function and its activities in developing a strategic approach to philanthropic efforts, in large part due to a rise in stakeholder power and globalization -The function needs to link to overall business goals -Community relations also assist in short-term crisis situations, such as disaster relief -As stakeholder needs and concerns change, company's community relations efforts need to adapt as well