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Milton Friedman would have agreed with which of the following statements about social responsibility?
A company will become distracted from its task to maximize profits when it practices social responsibility.
A U.S. paper mill purchases wood from a Canadian logging company to make wood pulp in its production of paper, so in this case the logging company is a
SUPPLIER
The economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs is known as
SUSTAINABILITY
Which of the following sparked renewed interest in corporate governance?
Scandals among CEOs who were eventually convicted of fraud.
Which of the following is an example of an external stakeholder for the department store chain Macy's?
A customer who purchases a mattress at Macy's.
What is the difference between a stakeholder and a stockholder? What type of stakeholder is a shareholder?
A stakeholder is a broad term for the people whose interests are affected by an organization's activities. It can be applied to both internal and external groups. For example, employees, owners, and the board of directors represent the internal stakeholders of an organization. Therefore, stockholders are just one of these internal stakeholders (owners)—those who have a financial interest in the organization. External stakeholders include customers, competitors, suppliers, distributors, strategic allies, employee organizations, local communities, financial institutions, government regulators, special-interest groups, and mass media.
Describe Carroll's global corporate social responsibility pyramid.
According to University of Georgia business scholar Archie B. Carroll, corporate social responsibility rests at the top of a pyramid of a corporation's obligations, right up there with economic, legal, and ethical obligations. That is, while some people might hold that a company's first duty is to make a profit, Carroll suggests the responsibilities of an organization in the global economy should take the following priorities: 1. Be a good global corporate citizen, as defined by the host country's expectations. (Top of pyramid, philanthropic responsibility) 2. Be ethical in its practices, taking host-country and global standards into consideration. (Ethical responsibility) 3. Obey the law of host countries as well as international law. (Legal responsibility) 4. Make a profit consistent with expectations for international business. (Pyramid base, economic responsibility)
The group important in setting the organization's overall strategic goals and for approving major decisions and salaries of top management is known as
BOARD OF DIRECTORS
Which of the following is considered a demographic force?
An increase in multigenerational households
A state government offered a German solar research company a tax break if it located its U.S. headquarters in that state because of the new jobs that would be created. Unfortunately, problems occurred, resulting in little company growth and few new jobs. As a result, the state instituted a ______ by rescinding the tax breaks.
CLAWBACK
An ethical _________ represents employee's perceptions about the extent to which work environments support ethical behavior.
CLIMATE
A florist should consider the grocery store chain Kroger to be a ________ because consumers are able to purchase the same products at Kroger stores as it sells in its own.
COMPETITOR
The system of governing a company so that the interests of corporate owners and other stakeholders are protected is known as
CORPORATE GOVERNANCE
Amazon.com maintains an easy-to-use website, has an accessible service phone number, and offers an inexpensive annual shipping fee primarily in an effort to serve which stakeholders?
CUSTOMERS
A __________ is a person or organization that helps another organization sell its goods and services to customers.
DISTRIBUTOR
For convenience, you purchase tickets to see the Black Keys through StubHub rather than from the venue itself. In this case, StubHub acts as a
DISTRIBUTOR
Which of the following forms the base of Carroll's global corporate social responsibility pyramid?
ECONOMIC RESPONSIBILITY
Which of these is a situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but that is unethical or even illegal?
ETHICAL DILEMMA
Shareholders at Chesapeake Energy were most concerned about what corporate governance issue when they sued the company?
EXECUTIVE COMPENSATION
Employees at Zachary's Chicago Pizza in California can purchase company stock and thus become owners through a device called
Employee Stock Ownership Plan, in which employees buy company stock in order to become owners.
Which of the following is recommended to improve corporate governance?
Ensuring that directors are clearly separated in their authority from the CEO.
A moral-rights approach to ethical behavior taken by a manager would often result in her performing a "cost-benefit" analysis.
F
A situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but that is unethical or even illegal is called a moral challenge.
F
Corporate social responsibility (CSR) is the notion that corporations are expected to create a positive and enriching environment for employees.
F
Customers have more faith in health insurance companies to handle complaints than they have in apparel outlets.
F
Ethical behavior is defined as a behavior that creates the greatest good for the greatest number of people.
F
Far East Chop House is an American restaurant that purchases beef from a Nebraska company that raises Japanese cattle. The Nebraska company would best be described as a distributor for the Far East.
F
For established companies, financial institutions are not external stakeholders.
F
Having a Board of Directors whose outside membership is chosen by the CEO or works closely with the company itself strengthens corporate governance.
F
In an organization's environment, internal stakeholders include the customers of an organization.
F
It is still unclear whether ethical behavior and social responsibility give an organization a competitive advantage.
F
Political-legal forces are changes in the economic, political, legal, and technological global system that may affect an organization.
F
Rafael sits on the board of directors for Pierson Fabrication, Inc., but he is not among the executive leadership of the organization. In fact, he works for an American carmaker. Therefore Rafael is an external stakeholder for Pierson.
F
The economic integration of the European Union can best be considered part of the economic forces.
F
The majority of American adults are likely to purchase from companies with ethical business practices only if their prices are not higher.
F
Using cash from newer investors to pay off older ones is known as a Kohlberg scheme.
F
When the independent, high-end U.S. Grant hotel in downtown San Diego joined Starwood's Luxury Collection of hotels to gain "worldwide exposure," it was an example of a distributor relationship.
F
The first stage of personal moral development is known as the conventional level.
F - That is pre conventional
The mass media is part of an organization's general environment.
F - it is part of the task environment
The approach to ethical behavior that is guided by respect for fairness and equity is the integrity approach.
F - that is the JUSTICE approach
Demographic forces are part of the __________ environment of organizations.
GENERAL
An organization's board of directors is part of its ______ environment.
INTERNAL
As part of his overall stock portfolio, Jason bought a few shares of Facebook. In this context, he would best be described as ______ of Facebook.
INTERNAL STAKEHOLDER
Which of the following statements about the mass media is true?
In a crisis, the media should be used to communicate frequently and honestly with the public.
Aaron is a manager at a local live music venue. He is developing a new online system for advance ticket sales. Some of the shows have been so popular that tickets sell out quickly and regular patrons have complained that with a slow Internet connection they have no chance to purchase. In an effort to be fair to all prospective customers, Aaron is using what approach to ethical behavior?
JUSTICE
______ are in an organization's external task environment.
LENDERS
________ are stakeholders of organizations because they rely on the tax base companies help create, as well as their employee payrolls, to thrive.
LOCAL COMMUNITIES
The individual approach is guided by what will result in the individual's ________ best interests, which ultimately are in everyone's self-interest.
LONGTERM
Issues like privacy, health and safety, and due process that are described as basic rights are typically tied to which of the following approaches to deciding ethical dilemmas?
MORAL RIGHTS
Summarize the debate for and against social responsibility. What is your opinion, and why?
Milton Friedman represents the view against social responsibility, as he said, "The social responsibility of business is to make profits." That is, unless a company focuses on maximizing profits, it will become distracted and fail to provide goods and services, benefit the stockholders, create jobs, and expand economic growth—the real social justification for the firm's existence. The argument in favor of corporate social responsibility includes the following: 1. Businesses have an ethical obligation to contribute to society's welfare. 2. Businesses create problems, and should help solve those problems. 3. Businesses have resources to solve problems that other entities do not have. 4. Socially responsible behavior can create a favorable public image, which in turn makes the business more profitable.
Which of the following statements about a code of ethics is most true?
Most codes of ethics offer guidance on how to treat stakeholders.
Google made a pledge to investors when it went public to reserve 1% of its profit and equity to "make the world a better place." This is an example of corporate
PHILANTHROPY
American companies may be more willing to sue competitors to gain competitive advantage than those in other countries, which is an example of which type of force?
POLITICAL-LEGAL
Only about a fifth of American managers reach which level of personal moral development?
POSTCONVENTIONAL
Eliza is a new manager, and she frequently feels it necessary to threaten her employees with a variety of punishments in order to get them to follow the rules. The level of personal moral development at which Eliza is operating is the ______ level according to Kohlberg.
PRECONVENTIONAL
The Sarbanes-Oxley Act of 2002 requires that a company's chief executive officer and chief financial officer must comply with which of the following?
Personally certify financial reports.
A manager's duty to take actions that will benefit the interests of society as well as of the organization is known as
SOCIAL RESPONSIBILITY
The American epidemic of obesity among U.S. youth is an example of which external force?
SOCIOCULTURAL
________ forces are influences and trends originating in human relationships and values that may affect an organization.
SOCIOCULTURAL
Two organizations who join forces to achieve advantages neither can perform as well alone would be called
STRATEGIC ALLIES
According to Milton Friedman, the social justification of a business's existence is in its benefit to stockholders, creation of jobs, and expansion of the economy.
T
An interest in health and fitness leading to a boost in sales of athletic shoes demonstrates a sociocultural force.
T
An organization's value system stressing financial performance may conflict with its value system stressing cohesion among employees.
T
Competitors are people or organizations that compete for customers or resources. Among these resources are raw materials and also talented employees.
T
Demographic forces include influences on an organization arising from changes in the characteristics of a population, such as age or ethnic origin.
T
Distributors have been hurt by the rise in popularity of the Internet.
T
Ethical behavior in the moral-rights approach is guided by respect for the fundamental rights of human beings, such as those expressed in the U.S. Constitution's Bill of Rights.
T
Ethics training can enhance high ethical standards in the workplace, even when a company has of a strong code of ethics.
T
External stakeholders include labor unions.
T
Government regulators are regulatory agencies that establish ground rules under which organizations may operate.
T
Herman Miller, maker of office furniture, practices corporate social responsibility through sustainability efforts.
T
In recent years, the percentage of the labor force represented by unions has steadily declined (from 35% in the 1950s to 11.8% in 2011).
T
In some cases, the IRS financially rewards whistle-blowers.
T
Personality tests can be used to identify potentially dishonest people before they are hired.
T
Philanthropic responsibility is at the top of the Carroll's corporate social responsibility pyramid
T
Shareholders of Chesapeake Energy sued the company, demanding corporate governance reforms.
T
Strategic allies may be organizations that are traditional rivals but combine their efforts to overcome a new competitor or other threat in the environment.
T
The external environment consists of the task environment and the general environment.
T
The flaw in the individual approach is that what results in the individual's best interests is not always what is in everyone's interest long term.
T
The general environment is also called the macroenvironment.
T
The standards of right and wrong that influence behavior are called ethics.
T
The task environment consists of groups that present workers with daily tasks to handle.
T
To a commercial airline, the Federal Aviation Agency (FAA) is an example of a stakeholder.
T
Values are the relatively permanent and deeply held underlying beliefs and attitudes that help determine a person's behavior.
T
Distributors are part of the ______ environment of organizations.
TASK
Identify and define the approaches to deciding ethical dilemmas.
The four approaches are utilitarian, individual, moral-rights, and justice. The utilitarian approach seeks to maximize the greatest good for the greatest number of people. The individual approach is guided by what will result in the individual's best long-term interests. The moral-rights approach is focused on respecting the fundamental rights of human beings. The justice approach is guided by impartial standards of fairness and equity.
Identify at least four forces in the general environment of organizations and provide an example of each for an industry or business. How do these forces differ from the external stakeholders in the task environment?
The general environment forces are economic, technological, sociocultural, demographic, political- legal, and international. Economic forces consist of the general economic conditions and trends—unemployment, inflation, interest rates, economic growth—that may affect an organization's performance. Technological forces are new developments in methods for transforming resources into goods or services. For example, biotechnology may well turn health and medicine upside down in the coming decades. Sociocultural forces are influences and trends originating in a country's, a society's, or a culture's human relationships and values that may affect an organization. The interest in health and fitness, for instance, led to a decline in sales of cigarettes, whiskey, red meat, and eggs. Demographic forces are influences on an organization arising from changes in the characteristics of a population, such as age, gender, or ethnic origin. The birthrate is up for all racial and ethnic groups, but the increase for Hispanics is the largest. Political-legal forces are changes in the way politics shape laws and laws shape the opportunities for and threats to an organization. In the United States, whatever political view tends to be dominant at the moment may be reflected in how the government handles antitrust issues, in which one company tends to monopolize a particular industry. International forces are changes in the economic, political, legal, and technological global system that may affect an organization. For example, economic integration of the European Union is creating threats and opportunities for American companies. These forces differ from external stakeholders in the task environment because an organization may be able to influence or control elements in its task environment, but rarely in its general environment.
Which of the following is an example of an internal stakeholder of an organization?
The largest stockholder of the company.
Identify at least five of the external stakeholders of organizations that lie in the task environment. Explain why each of these is important to the organization.
The task environment consists of competitors, customers, suppliers, distributors, strategic allies, employee organizations, local communities, financial institutions, government regulators, special- interest groups, and mass media. These are all important to the organization because they are the source of some input the organization needs. For example, customers bring in money when they buy a product, suppliers bring in needed materials, and distributors help to sell products.
Discuss at least three ways that an organization can promote ethics.
There are several ways an organization may promote high ethical standards on the job, as follows: Create a strong ethical climate: An ethical climate represents employees' perceptions about the extent to which work environments support ethical behavior. It is important for managers to foster ethical climates because they significantly affect the frequency of ethical behavior. Screen prospective employees: Companies try to screen out dishonest, irresponsible employees by checking applicants' résumés and references. Some also use personality tests and integrity testing to identify potentially dishonest people. Institute an ethics code and training program: A code of ethics consists of a formal written set of ethical standards guiding an organization's actions. Most codes offer guidance on how to treat customers, suppliers, competitors, and other stakeholders. The purpose is to clearly state top management's expectations for all employees. Reward ethical behavior and protect whistle-blowers: It's not enough to simply punish bad behavior; managers must also reward good ethical behavior, as in encouraging (or at least not discouraging) whistle-blowers. A whistle-blower is an employee who reports organizational misconduct to the public, such as health and safety matters, waste, corruption, or overcharging of customers.
In considering a large-scale layoff, a manager performs a cost-benefit analysis and determines that profits will be greatest if she proceeds. She is using the ______ approach to guide her decision regarding an ethical dilemma.
UTILITARIAN
Fairness in hiring practices is an example of an organization's
VALUES
Jessica is an employee in a manufacturing plant who works the graveyard shift, midnight to 8 a.m. One night, she saw one of her managers dumping some chemicals down a storm drain in the parking lot. When she confronted him, he said this was standard procedure for some waste materials to avoid other costly disposal measures. When Jessica wrote a letter about it to the local newspaper she was a(n)
WHISTLEBLOWER
Why has there recently been renewed interest in corporate governance? How can it be improved?
When the CEOs of firms such as Enron, WorldCom, Tyco, and Adelphia were doing the things that got them convicted for fraud, their directors did not seem to be protecting the stockholders and other stakeholders by keeping an eye on senior management. Indeed, after the Enron and other scandals, there was a resumed interest in what is known as corporate governance, the system of governing a company so that the interests of corporate owners and other stakeholders are protected. Perhaps the biggest problem in corporate governance concerns the independence of the directors. Inside directors may be members of the firm, outside directors are supposed to be elected from outside the firm. But in some companies, the outside directors have been handpicked by the CEO because they are friends, because they have a business relationship with the firm, or because they supposedly "know the industry." In such instances, the board of directors may be too lenient on the CEO when he or she asks for leeway to pursue certain policies. Now more attention is being paid to strengthening corporate governance so that directors are clearly separated in their authority from the CEO. While directors are not supposed to get involved with day-to-day management issues, they are now feeling more pressure from stockholders and others to have stronger financial reporting systems and more accountability.
Omar is a human resources manager for a large landscaping and exterior construction company called Northwest Patios. A local news station has just done a story on several dissatisfied customers and their complaints of shoddy work. Omar has had two other media outlets contact him this morning too. Based on research on the effects of such publicity, Omar should expect that
both rates of candidates accepting job offers and employee retention will slide.
Kelly runs a growing business in Birmingham and wants to do more than lead a successful and law- abiding company. She intends to make a difference in her community by helping with issues like poverty and high unemployment. Kelly believes in
corporate social responsibility
Last summer a representative of OSHA, the agency responsible for enforcing health and safety regulations, visited one of Emilio's construction sites and his company, Gutierrez Construction, was fined for several violations. To this company, OSHA represents a ______, part of an organizations' ______.
government regulator; task environment
After the disastrous oil spill in the gulf, many consumers decided to avoid BP products, many even joining a popular "Boycott BP" Facebook page. Stuart runs an independent BP gas station in Louisiana and his business suffered from this consumer response. In this instance, boycotters would be considered a ______, part of the gas station's ______ environment.
special-interest group; task
A supplier is a person or an organization that provides materials or labor to consumers.
t
The music industry has been changed dramatically by consumers' ability to download songs from the Internet. This is an example of ______ forces in an organization's ______ environment.
technological; general
