Business and Society: Stakeholders, Ethics, and Public Policy 15th Edition Chapters 1,2,&3

Eight Strategic Radar Screens

customer environment competitor environment economic environment technological environment social environment political environment legal environment geophysical environment => seeking environmental intelligence

Corporate Power and Responsibility Negative:

disproportionate political system dominate public course divide markets squash competition

The External Environment of Business is _____

dynamic and ever changing

A successful business must meet both ____

its economic and social objectives.

External stakeholders

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

Internal stakeholders

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

Addressing public issues by:

working collaboratively with other businesses, concerned persons and organizations in stakeholder networks. Example: Nike

Social Audit

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

General System theory

A theory that holds that all organisms are open to, and interact with, their external environment Organisms do not exist in isolation but can only be understood in relationship to their surroundings. Businesses are embedded in a broader social environment with which they constantly interact.

Ownership theory of the firm

A theory that holds that the purpose of the firm is to maximize that long- term return for its shareholders (also known as the property or finance theory of the firm)

Six dynamic forces powerfully shape the business and society relationship:

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

Competitive Intelligence

The systematic and continuous process of gathering, analyzing, and managing external information about the organization's competitors that can affect the organization's plans, decisions, and operations. With the need to comply with all applicable laws, and to follow the professional standards of fairness and honesty.

Enlightened Self Interest

The view that holds it is in a company's self-interest in the long run to provide true value to its stakeholders

Corporate Citizenship

This term refers to the actions corporations take to put their commitments to corporate social responsibility into practice worldwide

Stakeholder

A person or group that affects, or is affected by, a corporation's decisions, policies, and operations.

Stakeholder Salience

A stakeholder's ability to stand out from the background, to be as important, or to draw attention to itself or its issue. Stakeholders are more salient when they possess power, legitimacy, and urgency

Forces that shape the business and society relationship

- evolving government regulation of business - globalization - explosion of new technology - dynamic natural environment - changing societal expectations - growing emphasis on ethical values

The Issue Management Process

1) Identify Issue 2) Analyze Issue 3) Generate Options 4) Take Action 5) Evaluate Results

B Corporation

A business that explicitly seeks to blend its social objectives with its financial goals Must meet rigorous, independent social and environmental performance standards. B Corporation must prove its socially responsible by meeting the B Lab standards

Environmental Analysis:

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

Stakeholder Expectations:

A mixture of people's opinions, attitudes, and beliefs about what constitutes reasonable business behavior.

The Meaning of Corporate Social Responsibility

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

Stakeholder Materiality

Adaptation of an accounting term to prioritize the relevance of the stakeholders and their issues to the company

The Role of Social Media in Stakeholder Engagement

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

Stakeholder organizations bring a number of distinct strengths:

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

Business

An organization that is engaged in making a product or providing a service for profit

The Issue Management Process: Identify Issue

Anticipating emerging concerns, or "horizon" issues

Public Issue:

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

Arguments for Corporate Social Responsibility

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

Stakeholder Dialogue

Business and its Stakeholders come to face-to-face conversations Core interest and concerns, common definition of a problem Understandings and concerns of all parties Invent innovative solutions and implement them Example: Pacific Power

Corporate Power:

Capability of corporations to influence government, the economy, and society, based on their organizational resources.

Transparency

Clear public reporting of an organization's performance to various stakeholders.

Nonmarket stakeholders

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

Reactive -

Companies act only when forced to do so, and then in a defensive manner

Interactive -

Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust

Inactive -

Companies ignore stakeholder concerns

Proactive -

Companies try to anticipate stakeholder concerns

4 Phases of Corporate Social Responsibility

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

Stakeholder Theory of the Firm

Corporations serve a broad public purpose: to create value for society. Profit is necessary for survival but other values drive the firm's purpose. Corporations have multiple obligations and need to consider all stakeholders

Boundary-spanning departments

Departments, or offices, within an organization that reach across the dividing line that separates a company from groups and people in society

Three arguments in support of the stakeholder theory of the firm:

Descriptive: realistic description of how companies really work Normative: Stakeholder management is the right thing to do Instrumental: stakeholder consideration key for effective corporate strategy

Stakeholder Analysis Question 1: Who are the relevant stakeholders?

Draw market and nonmarket stakeholder maps. Recognize not all groups are relevant to every situation. Examples: Some businesses sell directly to the public and will not have retailers. A certain stakeholder may not be relevant to a particular decision/action.

Multiple responsibilities of business include

Economic responsibilities Social responsibilities Legal responsibilities Challenge is to balance all three

Public Issues: Performance-Expectations Gap

Failure to understand stakeholder concerns and to respond appropriately will: Permit the performances-expectations gap to grow. The larger the gap, the greater the risk of stakeholder backlash or of missing business opportunity. Example: Human antibiotic in chicken

6 Benefit of Social audits by Simon Zadek:

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

The Origins of Corporate Social Responsibility

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

External Stakeholder

Individuals or groups that may have important transactions with a firm but are not directly employed by the firm, such as customers or suppliers

Internal Stakeholder

Individuals who are employed by the firm, such as employees and managers

_______ stakeholders are employed by the firm - ________ stakeholders are not

Internal external

Corporation

Legally, an artificial legal "person," created under the laws of a particular state or nation. Socially and organizationally, it is a complex system of people, technology, and resources generally devoted to carrying out a central economic mission as it interacts with a surrounding social and political environment.

Arguments against Corporate Social Responsibility

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

Two Kinds of Stakeholders:

Market and Nonmarket

The Issue Management Process: Evaluate Results

Must assess results of the program and make adjustments if necessary

The Issue Management Process: Take Action

Once an option is chosen, the organization must design and implement a plan of action

The Issue Management Process: Analyze Issue

Organizations must understand how the issue is likely to evolve, and how it is likely to affect them

Stages in the Business-Stakeholder Relationship

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

Ownership Purpose

Owner's Needs and Wants Share Value

Organizing for Effective Issue Management

Part of the organization is mobilized to address a particular emerging issue, it often depends on the nature of the issue itself. Involve the board of directors and top management levels Effective global leadership on public issues requires three basic capabilities: Understanding of the changing business context Ability to lead in the face of complexity Connectedness: the ability to engage with external stakeholders in dialogue and partnership

Society

Refers to human being and to the social structures they collectively create; specifically refers to segments of humankind, such as members of a particular community, nation, or interest group.

The Issue Management Process: Generate Options

Requires complex judgments that incorporate ethical considerations like the company's reputation

Stakeholder Salience and Mapping

Salient - stands out from a background, is seen as important, or draws attention. Stakeholders stand out (i.e., are salient) to managers when they have power, legitimacy, and urgency. Managers can use the salience concept to develop a stakeholder map - a graphical representation of the relationship of stakeholder salience to a particular issue. A stakeholder map is a useful tool, because it enables managers to see quickly how stakeholders feel about an issue.

Market stakeholders

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

Drivers of Stakeholder Engagement

Stakeholder engagement is, at its core, a relationship. The participation of a business organization and at least one stakeholder organization is necessary. Engagement: both the company and its stakeholders both have: An urgent and important goal The motivation to participate The organizational capacity to engage with one another

Stakeholder Analysis Question 4: How are stakeholder coalitions likely to form?

Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests. Coalitions are very dynamic (can change at any time). Coalitions are increasing international. Internet has enabled coalitions to form quickly, across political boundaries.

Stakeholder Analysis Question 3: What is the power of each stakeholder?

Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome. There are 5 types of stakeholder power: Voting power Economic power Political power Legal power Informational power

Stakeholder Purpose

Stakeholders' Needs and Wants

Issue Management

The active management of public issues once they come to the attention of a business organization

Iron Law of Responsibility

The belief that those who do not use their power in ways that society considers responsible will tend to lose their power in the long run

Interactive social system

The closely intertwined relationships between business and society

Integrated Reporting

The combining of legally required financial information with social and environmental information into a single report

Enlightened Self-Interest

The company's self-interest in the long term to provide: true value to its customers to help its employees grow and behave responsibility Example: Nestle

Reputation

The desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders

Corporate Social Responsibility

The idea that businesses should act in a way that enhances society and their stakeholders and should be held accountable for any of its actions that affect people, their communities, and their environment.

Focal Organization

The organization from whose perspective a stakeholder analysis is conducted

Performance- Expectations gap

The perceived distance between what a firm wants to do or is doing and what the stakeholder expects

Stakeholder Analysis Question 2: What are interests of each stakeholder?

What are the groups' concerns? What does the group want/expect from their relationship with the firm? Examples: Shareholders have an ownership interest; they expect to receive dividends and capital appreciation. Customers are interested in gaining fair value and quality in goods and services they purchase. Public interest groups advance broad social interests

Social Reporting

When a company decides to publicize information collected in a social audit.

Transparency:

When companies clearly and openly report their performance—financial, social, and environmental. Example: Australia New Zealand

Social audit:

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

Business and society together ______

form an interactive social system

The term _______, similarly, refers to putting these commitments into practice worldwide.

global corporate citizenship

Stakeholder analysis includes:

identification of relevant stakeholders and analysis of their interests and power

Iron law of responsibility says ___

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

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

integrated report

The Reputation Index

measures a company's social reputation. It evaluates critical intangible assets that constitute corporate reputation. Rating Research, a British firm, distributes the index and ratings to interested partie

Corporate Power and Responsibility Positive:

more resources lower cost production new products technologies

Successful firm is _____

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

Companies demonstrate their corporate citizenship by:

proactively building stakeholder partnerships discovering business opportunities in serving society transforming a concern for financial performance into a vision of integrated financial and social performance

Business reputation

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

Environmental Intelligence:

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

Corporate Citizenship:

the actions they take to put their commitments to corporate social responsibility into practice.

The purpose of the firm is not simply to make a profit, but ____

to create value for all its stakeholders