CHAPTER 1 CHAPTER 1
Social Responsibility
Social Responsibility
Framework
Framework
SOCIAL RESPONSIBILITY AND
SOCIAL RESPONSIBILITY AND
BUSINESS
BUSINESS
FERRELL • THORNE • FERRELL
FERRELL • THORNE • FERRELL
4
Social Responsibility Defined
Social Responsibility Defined
•
•
Social responsibility
Social responsibility
–
– The adoption by a business of a strategic focusThe adoption by a business of a strategic focus for fulfilling the economic, legal, ethical and for fulfilling the economic, legal, ethical and philanthropic responsibilities expected
philanthropic responsibilities expected of it byof it by its stakeholders
its stakeholders
•
•
Businesses should look beyond their self-
Businesses should look beyond their
self-interests and recognize that they belong to
interests and recognize that they belong to
a larger group that expects responsible
a larger group that expects responsible
participation.
What do you believe organizations
What do you believe organizations
should be responsible for
should be responsible for
accomplishing?
accomplishing?
Social Responsibility Defined
(cont.)• Applies to all types of businesses
– Small businesses – Large businesses
– Sole proprietorships
Social Responsibility Defined
(cont.)• Fulfills societal expectations
– Provides a return on investment for owners – Obeys the law and regulatory agencies
– Acts in a just, fair, and correct manner – Promotes human welfare and good will
Social Responsibility Defined
(cont.)• Economic
– Maintain profitability
• Legal
– Abide by legal and regulatory influence
• Ethical
– Ensure just and fair behavior in the workplace
• Philanthropic
CHAPTER 2
Strategic Management of
Stakeholder Relationships
SOCIAL RESPONSIBILITY AND BUSINESS
FERRELL • THORNE • FERRELL
Stakeholders
• Those constituents who have a stake in, or
claim on, some aspect of a company’s
products, operations, markets, industry, and
outcomes
• Companies that operate with a stakeholder
orientation recognize that business and society
are interpenetrating systems, in that each
Primary Stakeholders
• Groups fundamental to a company’s operation and survival – Customers – Employees – Shareholders – Investors – Suppliers – Government – Community
• Balancing the needs and perspectives
Secondary Stakeholders
• Groups that may influence and/or be affected by the company, but are not engaged in economic exchanges with the firm:
– Media
– Special interest groups – General public
• These groups are not fundamental to an organization’s daily survival.
• They can place significant pressure on a business and therefore, cannot be ignored.
Development of
Stakeholder Relationships
• Relationships are founded on principles of: – Trust
– Commitment – Communication
• They are also associated with a degree of: – Time
– Interaction
– Shared expectations
• Companies are searching for ways to develop long-term and collaborative relationships with their customers and business partners.
Social Capital
• An asset, which resides in relationships,
that is characterized by mutual goals and
trust
• Facilitates smooth internal and external
transactions and processes
The
CHAPTER 3
Corporate Governance
SOCIAL RESPONSIBILITY AND BUSINESS
FERRELL • THORNE • FERRELL
Corporate Governance
• Corporate governance is the formal system of oversight, accountability, and control for organizational decisions and resources.
• Major issues:
– Shareholder rights
– Executive compensation
– Organizational ethics programs – Board composition and structure
– Auditing, control and risk management
Models of Corporate Governance
• Shareholder model
– Maximizes wealth for investors and owners – Develops and improves the formal system of
performance accountability between management and the firm’s shareholders
– Makes decisions based on what is ultimately best for investors
– Focuses on aligning investor and management interests
Models of Corporate Governance
(cont.)
• Stakeholder model
– Considers the interests of employees,
suppliers, government agencies, communities, and other groups with which the firm interacts
– Assumes a collaborative and relational approach to business
– Focuses on continuous improvement,
accountability, and engagement with internal and external constituents
Issues in Corporate Governance
Systems
• Boards of directors
– Independence
– Quality and experience – Performance
• Shareholders and investors
– Shareholder activism – Social investing
Issues in Corporate Governance
Systems
(cont.)• Internal control and risk management
– Internal and external audits – Control systems
– Risk management
• Financial misconduct
CHAPTER 4
Legal, Regulatory, and
Political Issues
SOCIAL RESPONSIBILITY AND BUSINESS
FERRELL • THORNE • FERRELL
Government’s Influence on Business
• Laws are enforced through the judicial system.
– Settles disputes and punishes criminals
• Corporations have the same legal status as a person.
– Can sue
– Can be sued
The Rationale for Regulation
• Preventing trusts and monopolies from using
their market dominance to negatively manipulate
output, pricing, and quality
• Eliminating unfair competition and
anti-competitive practices
• Supporting environmental initiatives, equality in
the workplace, and product safety
• Protecting consumers and business in
e-commerce activities
Global Regulation
• Import barriers
– Tariffs and quotas
– Minimum price levels – Port-of-entry taxes
• Product quality, safety, distribution, sales, and advertising regulation
• North American Free Trade Agreement (NAFTA)
– Eliminates virtually all tariffs on goods produced and traded between the U.S., Canada, and Mexico
• European Union (EU)
Benefits of Regulation
• Greater equality in the workplace • Safer workplaces
• Resources for disadvantaged societal members • Safer products
• More information about products • Greater product variety
• Cleaner air and water • Preservation of wildlife
Deregulation
• Removal of all regulatory authority
• Belief that less government intervention allows business markets to work more effectively
• Many industries have been deregulated.
– Trucking – Airlines
– Telecommunications – Electric utilities
• Critics of deregulation cite higher prices and poorer service/quality.
Corporate Approaches
to Influencing Government
• Lobbying
– Process of persuading public and/or government officials to favor a particular position in decision making
– Takes place directly or through trade organizations
• Political Action Committees
– Organizations that solicit donations from individuals and then contribute to candidates running for political office
• Campaign Contributions
Seven Steps to Effective Compliance
and Ethics Program
• Establish a code of ethics.
• Appoint a high-level compliance manager, usually an ethics officer.
• Take care in delegation of authority. • Institute a training program and
communication system.
• Monitor and audit for misconduct. • Enforce and discipline.
CHAPTER 5
Business Ethics and
Ethical Decision Making
SOCIAL RESPONSIBILITY AND BUSINESS
FERRELL • THORNE • FERRELL
Ethical Issues in Business
• An ethical issue is a problem, situation, or
opportunity requiring an individual, group, or
organization to choose among several actions that must be evaluated as right or wrong, ethical or
unethical.
• Ethical issues:
• Honesty and fairness • Conflict of interest • Fraud
• Discrimination
Personal Misconduct in the
Workplace
Moral Philosophies
• Consequentialism
– A decision is right or acceptable if it helps achieve the desired results
• Egoism
– Maximizing one’s own self -interest
• Utilitarianism
– Greatest good for the greatest number of people
• Ethical formalism
– Focuses on the rights of the individual
• Justice theory
Kohlberg’s Model
• People progress through the previous six stages.
• Cognitive moral development should be viewed
as a continuum.
• People’s moral beliefs and behavior change as
they gain education and experience.
• There are universal values by which
people in the highest level of moral
Social Needs that Motivate
Ethical/Unethical Behavior
• Need for achievement
– Preference for goals that are well defined and moderately challenging
• Need for affiliation
– Inclination to work with others in the organization rather than alone
