MGT 4397 Exam #1

Eight Strategic Radar Screens

1. Customer Environment 2. Competitor Environment 3. Economic Environment 4. Technological Environment 5. Social Environment 6. Political Environment 7. Legal Environment 8. Geophysical Environment

The Issue Management Process1

1.Identify Issue - Anticipating emerging concerns, or "horizon" issues. 2.Analyze Issue - Organizations must understand how the issue is likely to evolve, and how it is likely to affect them. 3.Generate Options - Requires complex judgments that incorporate ethical considerations like the company's reputation. 4.Take Action - Once an option is chosen, the organization must design and implement a plan of action. 5.Evaluate Results - Must assess results of the program and make adjustments if necessary.

Transforming

According to Figure 3.5 in the text, at what stage of global corporate citizenship does Gravity Payments seem to be operating?

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.

The Role of Social Media inStakeholder 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.

Stakeholder Networks

Addressing public issues by: - working collaboratively with other businesses, concerned persons and organizations in stakeholder networks. Example: - Nike.

The Corporation's Boundary-Spanning Departments1

Boundary-spanning departments (shown graphically in the following slide): departments or offices within an organization that reach across the dividing line that separates the company from groups and people in society. Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management's role.

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.

Management Systems for Corporate Social Responsibility and Citizenship

Businesses for Social Responsibility (BSR) survey: - 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. One emerging trend is the consolidation of corporate citizenship efforts. - Example: Samsung. Citizenship as an opportunity to: - Create value for their organization. - Gain a competitive advantage. - Help address some of the world's biggest challenges.

Trends in Corporate Social Reporting

By 2017, a majority of the largest companies included information of corporate social responsibility in their annual financial reports. This reflected a dramatic rise in integrated reporting, from 8 percent in 2008 and 51 percent in 2013 to 78 percent by 2017. Ethical drivers replaced economic considerations (80 percent versus 50 percent) as the primary motivator for publishing reports over the past decade. Stakeholder engagement increased from about 33 percent to nearly 66 percent, with financial analysts and investors now getting involved.

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.

Corporate Citizenship

Corporate Citizenship: the actions they take to put their commitments to corporate social responsibility into practice. The term global corporate citizenship, similarly, refers to putting these commitments into practice worldwide. 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.

Corporate Power and Responsibility

Corporate Power: Capability of corporations to influence government, the economy, and society, based on their organizational resources. The tremendous power of the world's leading corporations has both positive and negative effects. Positive - More resources. - Lower cost production. - New products. - Technologies. Negative - Disproportionate political system. - Dominant public course. - Divide markets. - Squash competition. 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.

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

Enlightened Self-Interest

Economic and social goals come together in companies that practice enlightened self-interest. The company's self-interest in the long term to provide: - True value to its customers. - Help for its employees to grow and behave responsibility. Example: Nestlé.

Environmental Analysis and Intelligence

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

Public Issues:Performance-Expectations Gap

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

Phases of Corporate Social Responsibility

Frederick provides expanded framework for understanding the evolution of the CSR concept. Divided into 4 phases: 1. Corporate Social stewardship (1950s-1960s) 2. Corporate social responsiveness (1960s-1970s) 3. Corporate/business ethics (1980s - 1990s) 4. Corporate/global citizenship (1990s - 2000s)

Society

Human beings and the social structures they collectively create.

The Corporate Social Responsibility Question

In Support for Corporate Social Responsibility - Balances corporate power with responsibility. - Discourages government regulation. - Promotes long-term profits for business. - Improves stakeholder relationships. - Enhances business reputation. Concerns about Corporate Social Responsibility - Lowers economic efficiency and profit. - Imposes unequal costs among competitors. - Imposes hidden costs passed on to stakeholders. - Requires skills business may lack. - Places responsibility on business rather than individuals.

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. Priscilla Chen.

Balancing Multiple Responsibilities

Multiple responsibilities of business include: - Economic responsibilities. - Social responsibilities. - Legal responsibilities. Challenge is to balance all three. 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.

The B Corporation

Must meet rigorous, independent social and environmental performance standards. Focus on social responsibility and citizenship by blending their social objectives with financial goals. B Corporation must prove its socially responsible by meeting the B Lab standards. - B Lab is a non-profit organization that assesses a corporation's social and environmental performance standards.

General Systems Theory (GST)

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.

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 - Companies ignore stakeholder concerns. - Reactive - Companies act only when forced to do so, and then in a defensive manner. - Proactive - Companies try to anticipate stakeholder concerns. - Interactive -Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust.

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.

Public Issues

Public Issue: Any issue that is of mutual concern to an organization and one or more of its stakeholders. Stakeholder Expectations: A mixture of people's opinions, attitudes, and beliefs about what constitutes reasonable business behavior.

Who are the relevant stakeholders?

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

Business Reputation

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

Stakeholder Salience

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.

Shareholder Theory of the Firm1

Sees the firm as property of owners (shareholders). Owners' interests take precedence over interests of others. The purpose of the firm is to maximize its long-term market value and money for its shareholders. Corporations serve a broad public purpose: to create value for society. Profit is necessary for survival, but is not the only purpose of the firm. Corporations have multiple obligations and need to consider all stakeholders.

What are the interests of each stakeholder?

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.

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.

Assessing and Reporting Social Performance

Social audit: a systematic evaluation of an organization's social, ethical, and environmental performance. Six Benefits 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.

Social Entrepreneurs

Social entrepreneurs are driven by a core mission to create and sustain social rather than economic value. Social entrepreneurship is the process of identifying a social need and using their entrepreneurial skills to address this need. Social ventures are the organizations founded by social entrepreneurs.

company profits would be reduced.

Some people expressed concern with Price's decision to increase employee salaries, stating that

Stakeholder Analysis

Stakeholder analysis includes the identification of relevant stakeholders and an analysis of their interests and power.

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.

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 have: - An urgent and important goal. - The motivation to participate. - The organizational capacity to engage with one another. (Goal) Company - To improve corporate reputation; to earn a license to operate; to win approval of society. Stakeholder(s) - To change corporate behavior on an issue of concern. (Motivation) Company - Needs stakeholder involvement because of their expertise or control of critical resources. Stakeholder(s) - Governmental campaigns, protest perceived as inadequate to change corporate behavior. (Organizational capacity) Company - Top leaders committed to engagement; well-funded department of external (stakeholder) affairs. Stakeholder(s) - Experienced staff; core group of activists committed to dialogue with business.

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 increasingly international. Internet has enabled coalitions to form quickly, across political boundaries.

Stakeholder Mapping

Stakeholder map - a visual representation of the relationships among stakeholder interests, power, and coalitions with respect to a particular issue. A stakeholder map is a useful tool, because it enables managers to quickly see how stakeholders feel about an issue, how coalitions are likely to form, how powerful these coalitions are, and what outcomes are likely.

The Benefits of Engagement

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.

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.

Stakeholders

Stakeholders are persons or groups that affect, or are affected by, a firm's decisions, policies, and operations. A stake is an interest in-or claim on-a business. Stakeholder is NOT the same as stockholder (or shareholder). Shareholders are just one of several kinds of stakeholders.

The External Environment of Business is Dynamic and Ever Changing

The purpose of the firm is not simply to make a profit, but to create value for all its stakeholders - a successful business must meet both its economic and social objectives. 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.

Social Audit Standards

Three different ways: 1. Companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners. Example: Apple. 2. Companies within an industry can agree on a common industry-wide standard. Example: Responsible Business Alliance (RBA). 3. Can be developed by global nongovernmental organizations or standard-setting organizations. Example: International Organisation for Standards, Social Accountability 8000, AccountAbility (AA), United Nations Global Compact, The Global Reporting Initiative and others.

Stakeholder Power Defined

Voting Power - The legal right to cast a shareholder vote. Economic Power - The ability to grant or withhold transactions with the focal company. Political Power - Actions taken through legislation, regulations, or lawsuits. Legal Power - Lawsuits filed against the focal company for harm caused by the firm. Informational Power - Having access to valuable data, facts, or details.

To reduce income inequality within society.

What appears to be Price's motivation in giving all his employees a minimum salary of $70,000?

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. Examples: Australia. New Zealand. An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single integrated report.

External stakeholders

may have important transactions with the firm, but are not on its payroll. - Suppliers - Society - Government - Creditors - Shareholders - Customers

Business

organizations engaged in making a product or providing a service for profit.

Internal stakeholders

work "inside" the firm and contribute their effort and skill to everyday operations. Company - Employees - Managers

Shareholder Purpose

✓Owners'Needs and Wants ✓Share Value

Stakeholder Purpose

✓Stakeholders' Needs and Wants