MGMT 320 Final
Stages of corporate citizenship
Stage 1: Elementary Stage 2: Engaged Stage 3: Innovative Stage 4: Integrated Stage 5: Transforming
Why is honesty testing controversial?
Tests have significant potential to generate false positives
What is regulation?
The action of government to establish rules of conduct for citizens and organizations
What is the theory behind tragedy of the commons?
Theory that common areas, over which all have access, but none has responsibility to maintain, will deteriorate
Ethical arguments
consequences, fairness issues
What is the role of government in environmental sustainability? (2)
-set common standards to take cost of pollution control out of competition -provide economic incentives and offer systems for resolving disputes
What 3 major areas of environmental protection does the US government regulate?
1) Air pollution 2) Water pollution 3) Land pollution (including solid and hazardous waste) *Air, water, land
3 different ways companies can use social audit standards
1) Companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners 2) Companies within an industry can agree on a common industry-wide standard 3) Can be developed by global nongovernmental organizations or standard-setting organizations
4 methods of protecting consumers
1) Consumers 2) Government regulation 3) Industry "self-regulation" 4) Laws/courts
Competitive advantages of sustainability
1) Cost savings 2) Brand differentiation 3) Technological innovation 4) Reduction of regulatory risk 5) Strategic planning
The corporate citizenship efforts are an opportunity to:
1) Create value for their organization 2) Gain a competitive advantage 3) Help address some of the world's biggest challenges
Right to unionize (2 elements)
1) Employees have a fundamental legal right to organize labor unions and to bargain collectively with employers 2) Workers have a right to hold an election to decide which union will represent them.
4 major government agencies responsible for most recalls
1) Food and Drug Administration 2) National Highway Traffic Safety Administration 3) Environmental Protection Agency 4) Consumer Product Safety Commission
Reduction of regulatory risk
Companies that are proactive with respect to their environmental impacts are often better positioned than their competitors to respond to new government mandates
Benefit of strategic planning
Companies that culivate a vision of sustainability must adopt sophisicated strategic planning techniques
Brand differentiation
Companies that develop a reputation for environmental excellence distinguish their brand and attract like-minded customers
Explicit attitudes
Consciously endorsed preferences and beliefs
3 ways to protect consumers in the digital age (privacy)
Consumer self-help Industry self-regulation Privacy legislation
Consumerism
Consumers act to protect their own interests
What do employee assistance programs offer?
Counseling, rehabilitation programs, and follow up
Pay-for-performance objective
Create compensation plan that ties executive pay to company results
Key board issue
Executive compensation
Positive exemplars
Exposure to positive exemplars reduces implicit racial prejudice
Benefits of regulation
Fair treatment of employees Safer working conditions Safer products Cleaner air and water
How has the OSH Act affected workplace death rates?
Fallen by more than two-thirds since 1970
What does the Occupational Safety and Health Act do?
Gives workers the right to a job "free from recognized hazards that are causing or likely to cause death or serious physical harm."
Government regulation
Government regulates product safety
Where does air pollution result from?
Human activity, especially industrial processes and motor vehicle emissions.
Benefits of regulation
•Reduced discrimination •Protected minorities •Improved the environment •Freed competition •Reduced corruption •Banned dangerous products •Strengthened the banking system •Cut workplace fatalities •Controlled communicable diseases
Natural monopolies
without competition, firms could raise prices as much as they want
Benefits of behavioral advertising
• The buyer is more likely to receive messages that are relevant • The seller is more likely to reach prospective customers
Risks of behavioral advertising
• The consumer may be denied opportunities, such as credit, based on their online profiles • Information collected by behavioral advertisers may not be kept private and secure
Government rules on executive compensation (2)
• Under U.S. rules, corporations must disclose top five executives' compensation and the rationale for it • The say-on-pay provisions of the Dodd-Frank Act, which went into effect in 2011, require public companies to hold shareholder votes on executive compensation at least once every three years
2 main antitrust agencies
•Antitrust Division of the U.S. Department of Justice •Federal Trade Commission
Why choose corporate social responsibility? (4)
•Balances corporate power with responsibility •Promotes long-term profits for business •Improves stakeholder relationships •Assumes that firm has duties that go beyond its short-term economic functions
3 achievements of consumerism
•Better information about the goods and services they purchase •More aware of their rights when something goes wrong •Better protected against inflated advertising claims, hazardous or ineffective products, and unfair pricing
Objective information and standards
•Commitment to hiring criteria prior to knowing the social categories the applicant belongs to --> Reduces ambiguity
What kind of regulations are included in economic regulations? (5)
•Control prices or wages •Allocate public resources •Establish service territories •Set the number of participants •Ration resources
Balancing multiple responsibilities of businesses includes...
•Economic responsibilities •Social responsibilities •Legal responsibilities
Corporate social responsibility is the idea that businesses should ACT in a way that...
•Enhances societal interests •Enhances stakeholder interests
Alternative Policy Approaches to Environmental Sustainability (4)
•Environmental Standards •Market-based Mechanisms •Information Disclosure •Civil and Criminal Enforcement
What regulations are included in social regulations?
•Equal employment opportunity •Protection of pension benefits •Health care for all citizens •Pollution control •Safety and health concerns
Proponents of ADR (2)
•Faster and less expensive way to resolve company-consumer disputes •Does not tie up the judicial system with minor issues
Origins of CSR
•In the United States, the idea 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 Examples: Steelmaker Andrew Carnegie, Henry Ford
Costs of regulation
•Limit the freedom of individuals and businesses •Shift resources from production to compliance •Add time and cost to products and services •Slow business growth and profitability •Expand the reach and power of government •Leave loopholes for exploitation
Positive effects of diversity
•More creativity and innovation •More adaptability •Less groupthink
2 differences of Europe's product liability system
•Punitive damages are not allowed •Victims' health expenses are not an issue as they are covered by national health insurance
Fiscal policy
patterns of government collecting and spending funds to stimulate or support the economy.
Monetary policy
policies that affect the supply, demand, and value of a nation's currency
How can companies obtain greater cost savings?
Companies obtain significant cost savings by reducing polluion and hazardous waste, recycling materials, and operating with greater energy efficiency
Why is government regulation needed?
Shareholders can be harmed by abusive practices
Definition of environmental standards
-Can be an environmental quality standard (amount of pollutants in local environment) OR -Emission standard (amount of pollutants discharged from paricular factory)
Costs of environmental regulation
-Companies spend large amounts of money to comply -Jobs may be lost, especially in "dirty" industries, or because of costs ("Job killing regulations") -Competitiveness of some capital intensive, dirty industries may be impaired -Consumers ultimately pay the cost
Arguments for CSR
-Corporations are "persons" for purposes of many rights and privileges -Corporations have special legal status that protects their owners' personal assets -Corporations enjoy many tax and other benefits -Corporations have many negative externalities on their communities for which they do not pay
Negative effects of world's leading corporations
-Disproportionate political system -Dominate public course -Divide markets -Squash competition
Benefits of environmental regulation
-Emissions and pollution drop -Nature benefits: Air and water quality improves; toxic sites are cleaned up; natural beauty is preserved or enhanced -People live longer and healthier lives in less polluted environments -Jobs are created in the clean economy sector
2 examples of market-based mechanisms
-Emissions charges or fees -Government incentives
How does management justify increase in employee monitoring? (2)
-Employee efficiency -Fear of lawsuits if employees act inappropriately
Arguments against current executive pay
-High executive pay causes mid- and lower-level employees to feel they are not receiving their fair share -Empirical evidence finds weak relationship between executive pay and company success -Inflated executive pay hurts the ability of U.S. firms to compete with foreign rivals
Arguments in favor of CSR
-Improves stakeholder relationships -Enhances organizations' reputations -Discourages government regulation -Improves employee engagement -Promotes long-term profits -Moral imperative
Shareholder trends
-In 2010, institutions accounted for 63% of the value of all U.S. stocks, worth $15 trillion -In 2013, slightly over half of all U.S. households own stocks -Older people are more likely to own stock; only about 24% of young households do so -Stock ownership is higher as income and education rise
Labor union statistics
-Influence of labor unions has varied during US history but is currently in decline -Unions confer benefits upon workers (people in unions are paid 27% more than those not in unions) -In the wake of the Great Recession, officials sought to weaken unions by limiting the rights of public sector workers
Arguments against employee drug testing
-Invades an employees' privacy -Violates an employees' right to due process -May be unrelated to job performance -May be used as a method of employee discrimination -Lowers employee morale -Conflicts with company values of honesty and trust -May yield unreliable test results -Ignores effects of prescription drugs, over-the-counter drugs, and alcohol -Drug use is an insignificant problem for some companies
Superfund or CERCLA
-Legislation passed in 1980 -Established fund to clean up the most dangerous toxic waste sites in the U.S.
Familiarity and cooperative work teams
-Less stereotyping of people we are familiar with -Less stereotyping in cooperative work teams where the outcomes depend on each other
Different objectives of different shareholders
-Long-term appreciation -Short-term returns -Capital gains -Dividend income
Arguments against CSR
-Lowers economic efficiency -Imposes hidden costs -Businesses don't have the skills -Ignores individual responsibility -Creates needless distractions -Unclear impact on society
Positive effects of world's leading corporations
-More resources -Lower cost production -New products -Technologies
Employee Duties/Employers Rights
-No drug or alcohol abuse -No actions that would endanger others -Treat others with respect and without harassment of any kind -Honesty, appropriate disclosure -Loyalty and commitment -Respect for employers' property and intellectual capital
Corporate social responsibility is the idea that the business should be held accountable for any actions that affect...
-People -Communities -Environment
Employee Rights
-Right to organize and bargain -Right to safe and healthy workplace -Right to privacy -Right to blow the whistle -Right to equal employment opportunity -Right to be treated with respect for fundamental human rights -Right to fair and decent wages
Arguments for employee drug testing
-Supports US policy to reduce illegal drug use and availability -Improves employee productivity -Promotes safety in the workplace -Decreases employee theft and absenteeism -Reduces health and insurance costs
3 other types of economic policies
-Taxation policy -Industrial policy -Trade policy
Objectives of stock ownership
-To produce a greater return than they could receive from alternative investments -Some investors use stock ownership to achieve social or ethical objectives -Shareholders are not a uniform group and have different objectives
Microsoft's "License to Operate" (LTO)
-When opening a new facility, Microsoft attempts to establish buy in to its from local stakeholders -Not a formal license -Deliberate, planned process
6 benefits of social audits
1) Help businesses know what is happening within their firm 2) Understand what stakeholders think about and want from the business 3) Tell stakeholders what the business has achieved 4) Strengthen the loyalty and commitment of stakeholders 5) Enhance the organization's decision making 6) Improve the business's overall performance
2 forms of alternative dispute resolution
1) Mediation 2) Arbitration
3 main workplace rights for employees
1) Organize and bargain collectively 2) A safe and healthy workplace 3) Job security (in some instances)
3 different occasions where drug testing is used
1) Pre-employment screening 2) Random testing of employees 3) Testing for cause
Rights of labor unions
1) Right to negotiate wages, working conditions, and other terms of employment 2) Employers are required to bargain with unions in good faith 3) If agreement cannot be reached, a strike might occur
Characteristics of the SEC
1) The main government agency charged with protection of shareholder interests 2) Established in 1934 in the wake of the Great Depression 3) Mission: to protect shareholders' rights by making sure that the stock markets are run fairly 4) Unlike more government agencies, generates revenue to pay for its own operations
2 ways social investment can be done
1) Through selecting stocks according to various social criteria 2) By using the corporate governance process to raise issues of concern
SEC Act of 1934. It is against the law to...
1) Use nonpublic information to trade a stock 2) Trade a stock based on a tip from someone who had an obligation to keep quiet 3) Pass information to others with an expectation of gain
5 rights of consumers
1. The right to be informed 2. The right to safety 3. The right to choose 4. The right to be heard 5. The right to privacy
Average BOD size
12
The Christchurch call was signed by how many countries? What is a notable exception?
17 countries and all the large tech firms The US
What is an ecologically sustainable organization?
A business that could operate in a way that would use natural resources no faster than they could be replenished or subsitutes could be found
Employment-at-will
A legal doctrine that means employees are hired and retain their jobs "at the will of" (i.e. at the sole discretion of) the employer
Public policy
A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation's citizens
Social responsibility shareholder resolutions
A resolution on an issue of corporate social responsibility placed before shareholders for a vote at the company's annual meeting
Social audit
A systematic evaluation of an organization's social, ethical, and environmental performance.
Mediation
A voluntary process to settle disputes using a neutral third party
Environmental auditing and reporting definition
A way for leading companies to track their progress toward meeing sustainability goals
Corporate power
Ability of corporations to influence government and society based on their economic and organizational resources.
Special problem of air pollution
Acid rain
Corporate citizenship
Actions companies take to put CSR into action
Behavioral advertising
Advertising that is targeted to particular customers, based on their observed online behavior; intended to be tailored to a user's interests and preferences.
Social regulations
Aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions
Cap-and-trade
Allows businesses to buy and sell the right to pollute, a process
Board of directors
An elected group of individuals who have a legal duty to establish corporate objectives, develop broad policies, and select top-level personnel to carry out these objectives and policies.
Diversity
Any attribute people use to identify another person or idea as different
Agency problem
As hired agents, managers might act to benefit themselves, rather than owners
Right to choose
Assurance of access to a variety of products and services at competitive prices
Right to be heard
Assurance that consumer interests will receive fair consideraion in government policy and courts
Right to privacy
Assurance that information disclosed in a commercial transacion is not shared with others
Implicit attitudes
Automatic mental associations conditioned by our culture from an early age
Industry "self-regulation"
Businesses and industries protect their customers through product recalls, quality programs, and voluntary codes
What was the first significant product liability form in many years?
Class Action Fairness Act
What kind of stakeholders are what kind of stakeholders? Why?
Co-dependent market stakeholders -They are dependent on employer for livelihood -Responsible for carrying out work of the company
Environmental standards are also called...
Command-and-control regulation
Critics of pay-for-performance
Danger of equity-based compensation is that executives fixate on stock price --> can lead to unethical acts
Business reputation
Desirable or undesirable qualities of an organization or its actors that may influence the organization's relationships with its stakeholders
Employer Duties
Duty to discipline fairly and justly
What happens with companies that practice enlightened self-interest?
Economic and social goals come together
What is modern racism/sexism?
Implicit negative treatment towards a group (vs. traditional, where is was explicit)
When was the Occupational Safety and Health Act passed? Who administers it?
In 1970 Administered by OSHA
What is the Christchurch call?
Initiative by Jacinda Ardern, PM of New Zealand, to reduce online extremism Non-binding
What are consumer protection laws?
Laws that are safeguards that reflect the goals of government policymakers and regulators in the context of the 5 rights of consumers
What can technological innovation lead to?
Leads to imaginative new methods for reducing pollution and increasing efficiency
What is the EPA?
Main agency charged with pollution control, was established in 1970.
Trend of information disclosure in recent years
Management has tended to disclose more information to shareholders and interested people
Strict (product) liability
Manufacturers are responsible for injuries resulting from use of their products, whether or not they were negligent or breached a warranty
What countries have laws that extend "just cause" protections to all workers?
Many European countries and Japan
Unions and the right to a secure job
Many union contracts say employees can be fired only "for just cause," and workers have a right to appeal the employer's decision through the union grievance procedure
Reasons for regulation (4)
Market failure Negative externalities Natural monopolies Ethical arguments
What does the Reputation Index measure?
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 parties
What do economic regulations aim to do?
Modify the normal operation of the free market and the forces of supply and demand; the oldest form of regulation
2 key elements of class action fairness act
Most class-action lawsuits moved from state to federal courts Attorneys in some kinds of cases were paid based on: 1) How much plaintiffs actually received or 2) How much time the attorney spent on the case
Is the process of electing a BOD democratic?
No, often self-perpetuating
The Christchurch call is ______.
Non-binding A cooperative agreement between tech industry players
When does water pollution occur?
Occurs when more wastes are dumped into waterways than can be naturally diluted and carried away
Labor union
Organizations that represent workers on the job
Law/courts
People sue when they are injured by a product
Social assistance policies
Policies that concern social services for citizens such as health care and education
Strategies to reduce implicit stereotyping and prejudice
Positive exemplars Bias blockers: Familiarity and cooperative teams Bias blockers: Objective information and standards Bias blockers: Blind auditions Bias blocker: Conscious correction
What do equal employment opportunity and other laws do?
Prevent discriminatory terminations
What do antitrust laws do?
Prohibit unfair, anticompetitive practices by business
Right to be informed
Protecion against misleading adverising, labeling and to be given the facts to make an informed purchasing decision
Right to safety
Protecion against the marketing of good that are hazardous to health or life
Global corporate citizenship
Refers to putting an organization's commitment to social and environmental responsibility into practice worldwide
Primary way of accomplishing public policy
Regulation
Information disclosure is also known as...
Regulation by publicity or regulation by embarrassment
Drug-Free Workplace Act (1988)
Required federal contractors to establish and maintain a workplace free of drugs
Goal of Clean Water Act
Restore or maintain the integrity of all surface water in the United States
How does the employment relationship convey rights and duties on both sides?
Rights: Someone is entitled to be treated a certain way Duties: They confer duties on others
What act is insider trading illegal under?
SEC Act of 1934
Employee Polygraph Protection Act (1988)
Severely limited polygraph testing for employers and prohibited approximately 85 percent of all such test previously administered in the U.S.
Board members are elected by _____.
Shareholders
One emerging trend in CSR
The consolidation of corporate citizenship efforts
What is land pollution?
The contamination of land by both solid and hazardous waste.
Businesses for Social Responsibility
The goal of a global citizenship management system is to integrate corporate responsibility and citizenship concerns into a company's values, culture, operations and decisions at all organizational levels.
Public policy sets...
The goals, plans, and actions that each national government follows in achieving its purposes
Example of information disclosure - pollutants
The government encourages companies to pollute less by publishing informaion about the amount of pollutants individual companies emit each year
Social contract
The implied understanding between an organization and its stakeholders. This is not a legal contract, but rather a set of shared expectations.
What is an integrated report?
The integration of legally required financial information with social and environmental information into a single integrated report
Product liability
The legal responsibility of a firm for injuries caused by something it made or sold.
What idea are market-based mechanisms based on?
The market is a better control than specific standards
Predatory pricing
The practice of selling below cost to drive rivals out of business
What is corporate governance?
The process by which a company is controlled, or governed
Problem with product recalls
The public may not be aware of them, so dangerous products continue to be used
Civil and criminal enforcement definition
The threat of ines or even prison to deter companies from doing environmental damage
Arbitration
The use of an impartial individual to hear and decide a case outside of the judicial system
Controversial aspect of ADR
The use of mandatory arbitration clauses that limit consumers' right to sue
Social investment
The use of stock ownership as a strategy for promoting social, environmental, and governance objectives
Who has established guidelines for sentencing environmental wrongdoers?
U.S. Sentencing Commission
Business has a ______ view
Utilitarian
Main law governing water pollution
Water Pollution Control Act (aka Clean Water Act)
Single sustainability report
What firms have moved to integrate their social and environmental reporting into
When do product recalls occur?
When a company, either voluntarily or under an agreement with a government agency, takes back or fixes items found to be defective
Transparency
When companies clearly and openly report their performance—financial, social, and environmental
Triple botom line reporting
When companies report to stakeholders on not just their financial results but also their environmental and social impacts
When does air pollution occur?
When more pollutants are emitted into the atmosphere than can safely be absorbed and diluted by natural processes.
Men/women pay gap
Women still earn 80% of what men make
Ergonomics
adapting the job to the worker, rather than forcing the worker to adapt to the job
Public policy goals
can be broad and high-minded or narrow and self-serving
Public policy inputs
external pressures that shape a government's policy decisions and strategies to address problems
Public policy tools
incentives and penalties that government uses to achieve policy goals
Market failure
marketplace fails to adjust prices for the true costs of a firm's behavior
Negative externalities
the manufacture or distribution of a product gives rise to unplanned or unintended costs (spillover effects)
Public policy effects
the outcomes arising from government regulation
Principles of good governance (5)
•Select outside directors to fill most positions •Hold more open elections for members of the board •Appoint an independent lead director •Align director compensation with corporate performance •Evaluate the Board's performance on a regular basis
Rights of shareholders
•To share in the profits of the enterprise if directors declare dividends •To receive annual reports of company earnings and company activities •To inspect the corporate books •To elect members of the board of directors •To hold the directors and officers of the corporation responsible for their actions •To vote on mergers, some acquisitions, and changes in the charter and bylaws •To bring other business-related proposals before the stockholders •To sell their stock
3 ways to characterize cost of regulation
•Total dollar cost •The cost of administering the regulatory process •Other costs of regulation are large but are indirect and much more difficult to quantify
With enlightened self-interest, the company's self-interest in the long term is to provide:
•True value to its customers •To help its employees grow and behave responsibility
Arguments for current executive pay
•Well-paid managers are simply being rewarded for outstanding performance •High salaries provide an incentive for innovation and risk-taking •High compensation reflects a shortage of labor; necessary to attract top talent •Not many individuals are capable of running today's large, complex organizations
Negative effects of diversity
•Worse communication •Less group cohesion •Increased conflict •Increased turnover