Social Responsibility Framework Social Responsibility and Business FERRELL • THORNE • FERRELL 4TH EDITION CHAPTER 1 Social Responsibility Framework

Social Responsibility Defined The adoption by a business of a strategic focus for fulfilling the economic, legal, ethical and philanthropic responsibilities expected of it by its stakeholders Businesses should look beyond their self-interests and recognize that they belong to a larger group that expects responsible participation.

What do you believe organizations should be responsible for accomplishing?

Social Responsibility Defined (cont.) Applies to all types of businesses Small businesses Large businesses Sole proprietorships Multinational corporations

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

Pyramid of Social Responsibility

Social Responsibility Defined (cont.) Economic Maintain profitability Legal Abide by legal and regulatory influence Ethical Ensure just and fair behavior in the workplace Philanthropic Promote human welfare and goodwill

Strategic Management of Stakeholder Relationships Social Responsibility and Business FERRELL • THORNE • FERRELL 4TH EDITION CHAPTER 2 Strategic Management of Stakeholder Relationships

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 affects and is affected by the other.

Primary Stakeholders Groups fundamental to a company’s operation and survival Customers Employees Shareholders Investors Suppliers Government Community Balancing the needs and perspectives of primary stakeholders is a strategic imperative.

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 Reactive-Defensive-Accommodative-Proactive Scale

Corporate Governance Social Responsibility and Business CHAPTER 3 FERRELL • THORNE • FERRELL 4TH EDITION CHAPTER 3 Corporate Governance

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 CEO selection and executive succession plans

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 Investor confidence

Issues in Corporate Governance Systems (cont.) Internal control and risk management Internal and external audits Control systems Risk management Financial misconduct Executive compensation

Legal, Regulatory, and Political Issues Social Responsibility and Business FERRELL • THORNE • FERRELL 4TH EDITION CHAPTER 4 Legal, Regulatory, and Political Issues

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 Can be held liable for debt

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) Promotes free trade between member nations

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 Corporate donations

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. Revise program as needed.

Business Ethics and Ethical Decision Making Social Responsibility and Business FERRELL • THORNE • FERRELL 4TH EDITION CHAPTER 5 Business Ethics and Ethical Decision Making

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 Information technology

Personal Misconduct in the Workplace

Moral Philosophies Consequentialism Egoism Utilitarianism 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 Evaluations of fairness

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 development abide.

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 Need for power Desire to influence and control others

Creating an Ethical Climate Top managers, employees, and stakeholders must support the philosophy that all organizations have responsibilities that extend beyond legal and economic obligations. Members of the organization must be willing to share their values about workplace ethics.

Creating an Ethical Climate (cont.) Ethical concerns should be incorporated into strategic planning. Management must develop a mechanism for assessing its progress in making ethical decisions that contribute to social responsibility.